Central Bank Balance Sheet and Real Business Cycles

Chapter 1 Global Genesis of the Central Bank

1.1Origin of the Central Bank

The pioneering central banks were established to boost the financial capacity of governments. For instance, the Sveriges Riksbank was created in 1668 as an instrument of managing Swedish financial resources. The Bank of England was set up in 1694 by William III during a war against France. The European Central Bank (ECB) came on board in January 1999 as a result of the creation of the Eurozone. The U.S. financial crisis of 1907 led the U.S. Congress to pass the Federal Reserve Act of 1913, which mandated the creation of the Federal Reserve. The Federal Reserve was established with the understanding that the Fed would explore its balance sheet to support a currency that ...