can make to the promotion of economic growth and development in the interest of all the people of the country. in pursuing its strictly defined financial objectives, the central bank should have some autonomy from government and should be enabled to take quick and objective decisions on the implementation of monetary policy. there must, however, always be close co - operation with the minister of finance, and monetary and fiscal policy should be closely co - ordinated. in the final situation, the minister of finance and the governor of the reserve bank are jointly responsible for maintaining overall financial stability in the country.

mr. stals looks at the role of central banks in today ’ s economies and discusses the experience of south africa address by the governor of the south african reserve bank, dr. chris stals, given at a conference on current economic policy issues arranged by the economics department of the university of durban - westville and the mercury in durban on 25 / 4 / 97. 1. the objective of monetary policy there is fairly general consensus in the world of central banking today that the objective of monetary policy should be to protect the value of the currency. there was a time up to the late ’ seventies when economists and central bankers advocated a much wider role for monetary policy in the management of the macroeconomy. under the influence of the keynesian demand management approach, monetary policy was seen as a useful instrument to be used by the authorities to depress demand in times of an excessive rise in total real expenditure on goods and services, or to stimulate real demand in times of recessionary conditions. monetary policy may have been an effective instrument for the purpose of demand management in the global system of fixed par values, or in the times of keynes ’ general theory of employment, interest and money, ( 1936 ), when a lack of overall demand caused production resources to remain under - utilised. during the 1970 ’ s, however, the bretton woods system of fixed par values was replaced with the global system of floating exchange rates and over - stimulation with expansionary monetary and fiscal policies created inflationary pressures and persistent balance of payments crisis situations. the emphasis in macroeconomic policy gradually shifted from demand - side management to supply - side expansion in which monetary policy was assigned a different role. monetary policy was no longer accepted as a useful short - term anti - cyclical policy instrument, but was tasked with the responsibility of creating on a continuous basis a financial environment that will be conducive to sustainable optimum economic growth in the longer term. this environment can be characterised by stable overall financial conditions in which the rate of inflation will at all times be low. in this new approach, central banks focused their attention on major financial developments such as changes in the money supply and in bank credit extension, the level and the structure of interest rates, changes in the official foreign reserves of the country, and movements in the exchange rate. the ultimate objective of monetary policy became the value of the currency, and whatever strategies were followed with the implementation of monetary policy, the success or failure of the policy was measured by the level