Some Comments on the Role of Central Banks in Less Developed Countries
Posted: 20 Jun 2005
Aims, functions and usefulness of central banks in less developed countries have been the topic of a widespread debate started in the 60s following the process of decolonization. The paper attempts to contribute to clarify some relevant points of the subject under discussion. Prior to the turn of the century there had been no clear definition of central banking. The concept of central bank, its functions and the theory of central banking had were originally based on experience of the Bank of England, which was considered by far the finest embodiment of this type of financial institution. Given this background, outstanding authors have been doubtful on usefulness of most newly established central banks contending that these institutions were set up in a number of African countries mainly by the desire to produce a tangible symbol of the independence they have achieved. The study deals with functions and objectives of central banks in developing countries and analyses targets and tools of monetary policy as well as measures of selective credit control. In addition, it was observed that central banks operating in an underdeveloped economic context have been sometimes involved also in ordinary banking business. The latter function, has to be considered, however, an exception, to be performed temporarily, aiming at filling the void caused by the absence or insufficient activity on the part of commercial banks. In fact available banking services are one of preconditions to economic take-off of a backward area. Eventually the paper concludes that central banks operating in less developed countries were called upon to undertake wider and more demanding tasks than those normally assigned to these institutions of industrialised countries. Published in Annali della Facolta di Scienze Politiche dell'Universita degli Studi di Milano, Vol. II, 1982.
Keywords: Central banking, monetary policy, developing countries
JEL Classification: E58, G21
Suggested Citation: Suggested Citation