Coordination among central banks is crucial for maintaining financial stability from "summary" of International Money and Finance by Michael Melvin
The stability of the financial system is of utmost importance for the functioning of the global economy. Central banks play a key role in maintaining this stability by implementing monetary policies that aim to promote economic growth while keeping inflation in check. However, the actions of one central bank can have spillover effects on other countries, especially in today's interconnected world. When central banks do not coordinate their policies, it can lead to unintended consequences that may destabilize the financial system. For example, if one central bank decides to raise interest rates in order to combat inflation, it may attract foreign investments seeking higher returns. This influx of capital can lead to an appreciation of the country's currency, making its exports more expensive and potentially hurting its ec...
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