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Central Banking & Monetary Policy: An Introduction

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Language:  English
This book presents an introduction to central banking and monetary policy.
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This book presents an introduction to central banking and monetary policy. We, the public, accept the following as money (M) (that is, the means of payments / medium of exchange): notes and coins (N&C) and bank deposits (BD). Because we do, we place banks in a unique situation: the major part of their liabilities is BD; therefore they are able to create BD simply by making loans. Because banks are aggressive competitors and their creditworthiness checks on customers are therefore not always sober, they are inherently unstable. This means the public needs an entity to monitor the banks and to curb excessive money creation: a central bank. Excessive money creation causes inflation and inflation management by the public (ie hedging) diverts attention away from productive behaviour; this is not conducive for economic output and welfare. Central banking is not just about monetary policy. It is also about being banker and advisor to government and managing the money and banking system.

  1. Essence of central banking
    1. Learning outcomes
    2. Introduction
    3. Milieu of the central bank: the financial system
    4. Context of central banking: financial stability
    5. Balance sheet of a central bank
    6. Money creation
    7. Functions of central banks
    8. Bibliography
  2. Banker & advisor to government
    1. Learning outcomes
    2. Introduction
    3. The interbank markets
    4. Bank liquidity management
    5. Banker to government
    6. Tax and loan accounts
    7. Public debt management
    8. Administration of exchange controls
    9. Bibliography
  3. Management of money & banking system
    1. Learning outcomes
    2. Introduction
    3. Banker to private sector banks
    4. Settlement of interbank claims
    5. Supervision of payments system
    6. Lender of last resort
    7. Currency (notes and coins) management
    8. Bank supervision
    9. Management of foreign assets
    10. Development of the debt market
    11. Bibliography
  4. Money creation & framework of monetary policy
    1. Learning outcomes
    2. Introduction
    3. Measuring money
    4. Money identity: sources of money creation
    5. Example: government issues bonds
    6. Statutory environment
    7. Objectives of monetary policy
    8. Price stability
    9. Inflation targeting monetary policy framework
    10. Monetary policy accountability and transparency
    11. Limitations of monetary policy
    12. Instruments of monetary policy
    13. Independence of central banks
    14. Bibliography
  5. Monetary policy: models & transmission
    1. Learning outcomes
    2. Introduction
    3. Models of monetary policy
    4. Path of monetary policy: from interest to inflation
    5. Bibliography
  6. Endnotes
A very insightful book
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About the Author

Prof. Dr AP Faure

Alexander Pierre Faure graduated from Elsenburg Agricultural College after school and went on to Stellenbosch University where he graduated with BA (Commerce), Hons BA (Economics), MA (Economics), and PhD (Economics).

He also successfully completed the Stockbroker Examination Requirements at Witwatersrand University (and is a registered Stockbroker - presently non-broking status).

He first worked for the central bank, where he was involved in compiling the monetary statistics (money stock and sources of change, and money market liquidity analysis) and later in the execution of monetary policy.

His career after central banking included private sector banking (the recipient of monetary policy), stockbroking (influenced by monetary policy) and interest rate analysis (reading monetary policy).

After his private sector experience, he became an academic and held the positions Investec Chair in Money and Banking (at Rhodes University and the University of Fort Hare) and Foord Chair in Investments (at Rhodes University).

After retirement he was appointed Professor Emeritus at Rhodes University, and remains engaged in research.  

He has published widely, including books and papers.

He also served on a number of boards of directors, holding the positions of Non-executive Director and Managing Director.