, a monetary authority
is the entity that manages a country’s currency
and money supply
, often with the objective of controlling inflation
, interest rates
, real GDP
or unemployment rate
. With its monetary tools, a monetary authority is able to effectively influence the development of short-term interest rates, but can also influence other parameters which control the cost and availability of money.
Generally, a monetary authority is a central bank
or currency board
. Most central banks have a certain degree of independence from the government and its political targets and decisions. But depending on the political set-up, governments can have as much as a de facto control over monetary policy if they are allowed to influence or control their central bank. A currency board may restrict the supply of currency to the amount of another currency. In some cases there may be free banking
where a broad range of entities (such as banks) can issue notes or coin.
Commonly, there is one monetary authority for one country with its currency. However, there are also other arrangements in place, such as in the case of the eurozone
where the so-called Eurosystem
, consisting of the European Central Bank
and the 19 European Union member states that have adopted the euro
as their sole official currency, is the sole monetary authority. Some countries do not have a central bank or other monetary authority, such as Panama
Last edited on 1 February 2021, at 07:14
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