Central Bank

A central bank is responsible for the stability of a country's currency and it's supply. It does so by controlling interest rates, conducting open market operations by buying bonds and setting the required reserve ratio for banks. A central bank also acts as a borrower for banks as a final option. Governments on some countries have direct control of their central banks allowing them to set their currency at a rate they desire but a majority of the central banks are independent keeping political interests at bay.

Central banks assume whether their country uses fiat currency, currency union, gold-backed currency or a currency board. Most currencies today are not backed up by anything so that "promise to pay" is basic trust that the currency they're holding could be exchanged to the same currency which is worth the same or a foreign currency carrying the same value. A central bank is also responsible for issuing out a standard form of currency and can literally print out money to back it's liabilities.

Central Bank

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