What Is a Monetary Base?

Monetary base is also called monetary base, base currency, and high-energy currency. Based on it, it can make the money supply of commercial banks expand money several times. The expression of the base currency in western countries is: the sum of the statutory deposit reserve of a commercial bank in the central bank and the cash held by the public. It is a variable directly controlled by the central bank, and it is also the basis for deposit expansion and currency creation in the banking system. The amount will affect the increase or decrease in the money supply. In China, the understanding of the base currency by the theoretical community is very inconsistent. Most people believe that the base currency should include the four liabilities of the central bank, namely, cash issuance, professional banks' statutory reserves in the central bank, excess reserves and fiscal deposits. These currencies form the basis of China's money stock and credit scale, and the central bank can control it and control the money supply through its control. [1]

Currency base

Monetary base
Monetary base is also called monetary base, base currency, and high-energy currency. Based on it, it can make the money supply of commercial banks expand money several times. The expression of the base currency in western countries is: the sum of the statutory deposit reserve of a commercial bank in the central bank and the cash held by the public. It is a variable directly controlled by the central bank, and it is also the basis for deposit expansion and currency creation in the banking system. The amount will affect the increase or decrease in the money supply. In China, the understanding of the base currency by the theoretical community is very inconsistent. Most people believe that the base currency should include the four liabilities of the central bank, namely, cash issuance, professional banks' statutory reserves in the central bank, excess reserves and fiscal deposits. These currencies form the basis of China's money stock and credit scale, and the central bank can control it and control the money supply through its control. [1]
Chinese name
Currency base
Foreign name
Monetary Base
Also known as
High-energy currency
Including
Deposit reserve, etc.
feature
First, it is the net monetary liability of the monetary authority;
Second, it is the basis for the liabilities of commercial banks and other deposit institutions and the restrictive power of money supply;
Third, its application can create deposit currencies that are more than their own amount;
Fourth, it can be controlled directly by the monetary authorities.
According to the above characteristics, the base currency includes currency held by the public and deposit reserves of commercial banks and other deposit institutions, which in turn includes statutory reserves and excess reserves.

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