2025 https://phaidrabg.bg.ac.rs/o:36291 cobiss:170350089 ISBN: 978-86-403-1879-2 http://creativecommons.org/licenses/by-nc-nd/4.0/legalcode Popović, Svetlana, Lukić, Velimir Krstić, Miloš The influence of monetary policy on the financial sector info:eu-repo/semantics/bookPart application/pdf 594371 bytes Innovations in insurance : from traditional to modern market startpage: 155 endpage: 180 Central banks represent the backbone of the economy of a country. They are responsible for maintaining liquidity in the market and ensuring the smooth functioning of the financial system. They regulate and monitor the amount of money in circulation, in order to ensure sufficient liquidity for the normal development of economic activities, without inflation or deflation. With its tools, such as open market operations, key interest rates, regulation of required reserves, central banks ensure an adequate amount of money in circulation, affect the availability of capital, price stability, and the functioning of the financial sector, they prevent financial crises and enable the smooth operating of the economy. The money market, as the main channel for the implementation of monetary policy, enables quick and efficient distribution of liquidity among the participants in the financial system. Central banks affect important parameters of this market, such as overnight and other interest rates, closely related to the key monetary policy rates. In addition, central banks regulate and supervise financial institutions that participate in this market, which contributes to its stability and smooth functioning. Central Banks also manage national payment systems, which efficient functioning is a prerequisite for the normal and smooth conducting of financial transactions and circulation of liquidity in the economy. Management of foreign exchange reserves and implementation of foreign exchange policy enables maintaining the stability of the national currency and the balance of payments. Key words: monetary policy, insurance, financial sector, central banks University of Belgrade, Faculty of economics and business, Publishing centre eng