Similarities Between Central Bank And Central Bank

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Central Banks have served as governments' personal banks since their creation, beginning with Sweden's Riksbank in 1668. However, as central banks have developed in the modern world, their goals as well as their tools have also evolved. When the Federal Reserve was created as the United States’ central bank in 1913, its purpose was simply to promote economic stability after the economic crisis of 1907. Then, when the European Central Bank, or the ECB, was created in 1998, their main purpose was to establish monetary policy. While the European Central Bank and the United States Federal Reserve were created with different intentions, current economic situations and an increasingly global economy are forcing the organizations to become more and more alike as they face similar challenges. However, while these banks have similar goals, their approach to the same problem often differs.
The first difference between the United States Federal Reserve and the European Central Bank lies in their creation, due to the different events surrounding each country at the time. In the United States, "the Federal Reserve was spawned by the Crisis of 1907;" while in Europe, "the ECB sprung from the minds of European policy makers over decades" (Payden and Rygel 1). The Maastricht Treaty "provides the legal basis for the formation of the European System of Central Banks (ESCB), which comprises the European Central Bank and the national central banks (NCBs) of the 25 Member States of the European Union (EU)" (Gerdesmeier et al. 8). The ECB follows the German model of central banking, where the most important goal is to ensure price stability, while the Federal Reserve follows the Anglo-French model, where the central bank has many goals, including busi...

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...pean Central Bank and the United States' Federal Reserve arose from different economic problems, with different goals, but they have evolved to have a similar structure that maximizes their use of monetary policy for the common goal of economic stability and prosperity. Both institutions have different levels of independence, but have become increasingly involved in politics in today's world of media and news coverage. While at first glance the European Central Bank and the Federal Reserve might seem extremely similar, these institutions are very distinct in their economic goals, as well as the tools they use to carry them out. Insight is gained not only into the economic policies and political workings of these two nations, but also into the idea of central banking as a whole, simply by examining these two similar, yet distinctly different, central banking systems.
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