Central Bank of Egypt and the United States - Compare and Contrast Essay

Compare and contrast when, why and how each central bank was established.

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The Central Bank of Egypt was started in 1961 with its headquarters in Cairo. It operates as an independent legal and public entity. The bank was established to make sure that prices were stable and the banking system functions properly as well as deciding on the monetary policy. On the other hand, the United States Central Bank was established in 1889. It was established to regulate all the bank practices by creating a system for the national banks. The reason why the two banks were established differs because in Egypt the need for a common currency for trading in gold and oil mines was essential while in United it was being used to finance a war. The Central Bank of Egypt was founded by the United Bank that was focused on activating banking reform policy to maintain strong banking entities. The United States was formed in the era of the American revolutionary war, as a monetary control policy. However, it is clear that both Central banks serve the same role - for monetary control.

Compare and contrast two mandates of each central bank.

Both Central Bank of Egypt and the United States focuses on monetary policy objective that is aimed at creating monetary stability while restricting inflation rates. It is used to maintain high levels of investor confidence. (L. Awad, 2008) The Central Bank of Egypt is governed by Law no. 88 of 2003 that ensures regular publication of their annual reports and economic reports. The United States, however, is governed by a Federal Reserve System.

Compare and contrast the degree of autonomy and transparency of each central bank.

The Central Bank has indicated high levels of independence because analysis indicates that on average helped the country to maintain low inflation levels. The transparency of its operations, on the other hand, have been greatly founded on the law ensuring the periodic release of financial reports. The United States has been at the forefront of development. The accountability for its policies and activities indicate high levels of democratic control over its operations (Jurksas, 2017). Democratic legitimacy has allowed the country to exercise strong decisions. The strong indices of the central bank autonomy are directed to improvements in the economic and political fields. It allows for the country's development and emerging market which is common for both nations.

Compare and contrast the role of each central bank in the market for domestic interest rate

The Central Bank of Egypt seems to be facing difficulties in playing the role of social and economic development for the country. The interest rates of the country seem to fluctuate due to the increase in the inflation rates. The high inflation rates have slowed down due to devaluation (L. Awad, 2008). However, the country has focused its reserves on the neighboring countries which are aimed at stabilizing the economy of the country as well as supporting reforms in Fiscal and Institutional reforms. The United States Central Bank has managed to establish macroeconomic stability (Jurksas, 2017). The Federal Reserve has the mandate of ensuring that there is stability in the country financial system. Stable interest rates ensure that the country's economy remains stable.

References

(2019). Retrieved from http://ec.europa.eu/economy_finance/publications/pages/publication9495_en.pdf

Jurksas, L. (2017). AN IMPACT ASSESSMENT OF NEGATIVE INTEREST RATES OF CENTRAL BANKS. Ekonomika, 96(1), 25. doi: 10.15388/ekon.2017.1.10662

L. Awad, I. (2008). Towards measurement of political pressure on central banks: the case of the central bank of Egypt. Prague Economic Papers, 17(3), 254-275. doi: 10.18267/j.pep.333