Monetary authority

In finance and economics, 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.[1]

Public finance
Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix
Fiscal policy Budget policy Debt internal Deficit / surplus Finance ministry Fiscal union Revenue Spending deficit Tax
Monetary policy Bank reserves requirements Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary (currency) union Money supply
Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / commerce ministry
Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending
Optimum Balanced budget Economic growth Price stability
Reform Fiscal adjustment Monetary reform
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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.