chapter  9
47 Pages

Global money and banking—where central banks fit into the world economy

ByJoseph P. Daniels, David D. VanHoose

The first central banking institution was established in 1668. It is the Swedish Sveriges Riksbank, which before 1867 was called the Risens Standers Bank. Governments often argue that they "need" central banks. For instance, a primary motivation for the founding of the Bank of England in 1694 was the desire for the bank to raise government funds to finance one of Britain's wars with France. National governments may hold unused funds on deposit at a single central bank office or in various regional branch offices of central banks. To measure money, central banks tabulate sums of groupings of financial assets, which they call monetary aggregates. Since the 2007–2009 global financial meltdown, central banks have undertaken several new types of policies, which, because they do not accord with traditional policymaking, often are referred to collectively as unconventional monetary policies. Locomotive effects arise when a policy-induced effect on the domestic economy generates an improvement in economic performance in another country.