![]() ![]() On the other hand, if a central bank emphasizes gold too much, it could destabilize Plan A.Ĭentral banks have a hard time finding a balance in how transparent to be about gold. Especially central banks that issue reserve currencies. On one hand, a central bank needs gold reserves to underpin confidence in its balance sheet. ![]() As monetary instability has been mounting for years, central banks are forced to become more transparent.Ī central bank’s monetary gold can be viewed as its “Plan B.” If, for example, a central bank fails to control price stability through monetary policy (“Plan A”), it can peg its currency to gold to restore stability. Transparency is one of the means for a central bank to gain credibility. If credibility is lost, a central bank can close shop. ![]() Central Banks, Credibility, and TransparencyĬredibility is a central bank’s most valuable asset. ![]()
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