The Impact of Relying Solely On the Central Bank to Print New Money

Abstract

Taxation is a compulsory contribution to state fiscal revenue. Money-printing, technically known as monetization or "money-financed fiscal programs," occurs when the government finances itself by issuing non-interest-bearing liabilities in the forms of currencies or reserves held at the central bank. These two concepts align with the government's two approaches to influencing economic activity: monetary policy, which pertains to money supply and interest rates level, and fiscal policy, primarily centered around taxation. Therefore, the purpose of this topic is to discuss why governments should be regulated by legal prohibitions against monetary financing and why countries have instituted the independence of the central bank. This study will analyze the advantages and disadvantages in question and provide insights into the ideal role of the government and the appropriate approaches to fulfilling its responsibility in economic regulation.