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Example research essay topic: Federal Reserve System Bank Of England - 1,263 words

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... al Reserve System maintains a more diverse structure than the older Banks of England or Japan to accomplish similar goals for national economic stability. The relationship between each nations government and her central bank holds infinite significance. The Bank of England, the earliest form, was a model for central banks to follow.

However, later establishments, particularly the U. S. Federal Reserve System, corrected the errors of the English system and implemented new ideas for a progressive banking structure. Through experience and periods of economic decline, the current organizations of England's and Japans central banks follow the path paved by the U. S. After understanding each banks history and organization, one can analyze the changes made and why the U.

S. system proves its superiority. Since the United States declared independence from England, a common American theme has been the separation of powers. Thus, the Federal Reserve System formulates a quasi-public structure: Each governor is appointed by the president of the United States and confirmed by the Senate. To limit the presidents control over the Fed and insulate the Fed from other political pressures, the governors serve one nonrenewable 14 -year term, with one governors term expiring every January.

The governors (many are professional economists) are required to come from different Federal Reserve districts to prevent the interests of one region of the country from being over-represented (Mishcin 395). The terms above illustrate the dual effects of government influence on the Fed and vice-versa. While no one segment maintains any more power than another, each segment an focus on its responsibilities. The form applies ideas from government structure to the central bank to ensure a prosperous national economy. The separation of powers results in multiple effects. The executive and legislative branches determine some of the officers of the Federal Reserve.

However, the length of the Board of Governors terms do not coincide with the Presidents. Therefore, the political influence of each presidential office does not necessarily affect the duration of a governors term. While the President in office indirectly suggests economic policies, the Fed is essentially independent of the government. The Fed also operates internally on a sort of checks and balances system. Each subdivision of the Fed cooperates in determining and implementing the facets of monetary policy issues. As described beforehand in the Federal Reserve System, the sectors of the Fed agree on any changes needed within the policy tools.

Thus, the unique structure of the U. S. central banking system provides a model for other nations banks. The U. S.

system proves to be the most efficient one as current changes in the English and Japanese banks adapt. The Bank of England recognized its faults and the U. S. Feds advantages in 1946 as Parliament instigated the division of the Bank from the government. Time and experience exposed the need for further improvements in the Bank of England's structure: The Bank of England Act 1998, which came into force on 1 June 1998, changed the constitution and duties of the Court of Directors from that set out in the previous Act of 1946, strengthening the Banks governance and accountability, as well as formalizing the banks responsibility for the conduct of monetary policy (Bank of England). The new act imitates the facets of the U.

S. Fed by allowing the Bank to operate autonomously. Like the U. S.

system, the Bank of England associates itself with the government while acting exclusively. Concerning monetary policy, the Bank now controls interest rate changes, but Parliament does hold substantial influence: The legislation will provide that if, in extreme circumstances, the national interest demands it, the Government will have the power to give instructions to the Bank on interest rates for a limited period (Bank of England). The stipulation mirrors the checks and balances idea originated by the U. S. While the government determines some members of the Court, the Bank is a self-entity.

The government can also dictate any interest rate changes subject to limitation. Thus, the Bank of England Act 1998 recognizes the need for the Banks independence and the governments overall influence on the Bank. The necessary changes noted by the Bank of England relate to those of the Bank of Japan. The new Bank of Japan Law mirrors the organizational process described by the U. S.

and new English systems. Article 3 of the Law reads, "The Bank of Japans autonomy regarding currency and monetary control shall be respected" (The Bank of Japan Law). The Japanese government establishes the Bank as a separate body. The Bank possesses ultimate control over its duties. However, while the Bank is independent, the government and bank retain the necessary cooperation between the two. As with the U.

S. and English bank structures, the Bank of Japan realizes that neither the government nor the Bank may exercise too much power. Article 4 of the Law notes this point: In recognition of the fact that currency and monetary control is a component of overall economic policy, the Bank of Japan shall always maintain close contact with the government and exchange views sufficiently, so that its currency and monetary control on the basic stance of the governments economic policy shall be mutually harmonious (The Bank of Japan Law). To ensure this "harmony" between the two bodies, following articles allow the government to express its views in Board meetings. The Minister of Finance and the Minister of Economic Planning Agency may make suggestions or postpone the Boards vote on a particular issue. Again, the government and the central bank complement each other on economic subjects.

The recent changes in the English and Japanese central banks illustrate the need for each banks autonomy. The founders of U. S. independence originated the idea of separation powers with constraints. A central bank is similar to any government; to achieve success as a whole, no one body can indulge in total power. The U.

S. Federal Reserve Chairman, Alan Greenspan, concurs with this idea regarding the current Asian economic crisis: My sense is that one consequence of this Asian crisis is an increasing awareness in the region that market capitalism, as practiced in the West especially in the United States, is the superior model; that is, it provides greater promise of producing rising standards of living and continuous growth... As a consequence, many of the leaders of these countries and their economic advisors are endeavoring to move their economies much more rapidly toward the type of economic system that we have in the United States (Greenspan 2). Greenspan was correct in the above testimony made on March 3, 1998. National economic awareness identifies the advantages of the U. S.

Federal Reserve System and the prosperity those advantages bode. As shown above, The Bank of Japan Law and The Bank of England Act 1998 have conformed to the U. S. system to apply such advantages.

The various changes in each central bank illustrate the evolution of central banks and the differences in the law structures of the countries discussed. England initially established its central bank subjective to its government. Once the United States became its own nation, her founding fathers stressed the importance of separate powers and applied that importance to the Federal Reserve System. As time reveals, the Feds structure proved to be the successful one for economic stability. After critical economic periods, England and Japan recently installed structures mirroring the Feds to promote their economic stability. Thus, central banks have evolved from the original Bank of England to the U.

S. Federal Reserve System and the current Banks of England and Japan. Bibliography:


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Research essay sample on Federal Reserve System Bank Of England

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