This chapter gives a general overview of the nuts and bolts of monetary policy and presents the low financial development countries that are the focus of this book. It discusses, with some historical background, the special role of money in the financial system, the functions of central banks, and the mandates society has entrusted them with. It also shows how monetary policy is structured within a specific framework of targets and instruments that guides the central bank’s interventions. Finally, it presents the main features that characterize the selection of developing countries that the book aims to address and that raise specific challenges for the design and implementation of their monetary policy: low per capita income, low financial depth, and weak integration with international financial markets.
Monetary Policy Coordination and the Role of Central Banks