Redefining roles of Central Bank: case study of Bank of Mongolia

Abstract

In the last two decades, the monetary policy development and implementation in advanced economies are very much connected to the process of integration to the financial market. Banking sector experienced intense securitization of assets process, which evolutioned to the paradoxical situation when new credits were collaterized by the securities for already issued loans, which deteriorated the quality of the loans. This mechanism was behind the greatest financial crises in the modern history that obliged central banks and governments to see the financial, economic and fiscal stability and integration in the new perspective. In connection to that, central banks in all countries had to restructure their model of functioning, and acquire preventive measures for financial fluctuations. In other words, central banking is experiencing revolutionary time of invention of new tools and mechanisms for a better function in the globalised world.