Still, the world over currency counterfeiting and design concerns prevail irrespective of modern technology. Second, it attempts to protect the real value of currency by maintaining inflation at low levels through monetary policy. If prices or inflation rise day by day, the value of currency in terms of goods and services it can buy gets less and less and people will tend to dispense with currency as money and tend to use other international currencies as their preferred media of exchange. In such events, the currency system will collapse and the existence of the Central Bank will be questioned. This happened in Germany in 1920 and Zimbabwe in recent years. Second, the conduct of monetary policy Monetary Policy contains measures to regulate the supply, availability, cost and international exchange of the country’s money. Accordingly, levels of interest rates, exchange rate and credit in the economy are under the control of the Central Bank. These economic variables determine almost all economic activities of the public such as investments, savings, international transactions, production and employment. Their changes first affect our expenditure (what is called aggregate demand) its impact on production, income and employment. This course of effects is termed the monetary policy transmission mechanism. As these variables are part and parcel of our day-to-day life and their effects vary on different segments of people, the world over Central Banks get their fair share of praise or blame for whatever ensues in the economy.
Such payments services  4  BIS central bankers’ speeches  make the payments safer and faster. Payments are the circulation of money which is the life blood of the economy. Sixth, agent of the government This is the function that leads to a lot of criticism on the independence of the Central Bank. Six most important agency functions are the management of public debt, fiscal agent, official depository, financial adviser, management of Employees’ Provident Fund and Administration of Exchange Control Act. The most important agency function of the Central Bank is the financial/economic adviser to the Government. In this regard, as the Central Bank is responsible for the monetary policy in its entire scope and escalation. Conventionally central banks have had the responsibility to advise the Government on fiscal and other operations to the extent that they impinge on the economy and advise as to what should be the best course of policy action for the economy. Given the nature of the central banks’ functions, advance access to macroeconomic and financial information and their expertise, central banks are the closest economic advisers to the Government. The Central Bank statutorily submits a number of reports such as the Central Bank Annual Report as part of this advice. In addition, the Central Bank provides advice on various policy matters on an on-going basis to the Government. However, central banks world over are blamed for not providing constructive and impartial advice because of the independence issue. I will talk on central bank independence in a moment.