Central banks are commonly have various objectives, e.g. low inflation rate, price stability, low unemployment rate, financial stability, economic growth, exchange rate stability. But do we have a untility function for a central bank?
Utility functions do not assign a numerical value to our preferences. They simply indicate order and magnitude of preference, that is, what we like more and by how much. The utility functions of commercial banking
comprise actions, such as undertaking foreign exchange transactions, providing safe custody of valuables, issuing letter of credit to promote the foreign trade, etc. In this sense, central banking does influence the utility function of money indirectly via economic policy formulation, i.e. in controlling and conducting money-market operations and also controlling bank credit.
Conclusion: The primary utility function of central banking is to assist governments in formulating economic policy. Hope that this is of some help for you, dear Guizhou Wang
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