There is always the potential for a central bank to engage…
“There is always the potential for a central bank to engage in discretionary monetary policy and to break the one-to-one link between changes in foreign reserves and changes in the money supply.”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Central banks can intervene beyond reserve changes, breaking the fixed link between reserves and money supply.
In simple terms: Central banks can act independently of reserves.
Key Takeaway
Recognize policy flexibility.
Themes
monetary policy
central banking
exchange rates
Mood
analytical
cautious
Type
economic
policy
theoretical
When to use this quote
- emerging markets
- currency crises
- financial stability
- policy design
Key Concepts
discretionary policy
reserve management
Questions to Reflect On
- How does discretionary power affect inflation expectations?
- When should a bank break the reserve‑money link?
A Different Perspective
Policy may be limited by political pressures and credibility concerns.