What Is Base Currency?

The base currency, also known as the Monetary Base, strong currency, and original currency, because it has the ability to double or expand the total supply of money, is also known as High-powered Money, which refers to circulation The sum of cash held by the public outside the banking system and the deposit reserve (including statutory deposit reserve and excess reserve) held by the commercial banking system. It is a certificate of debt issued by the central bank, which is represented by the reserve reserve (R) of commercial banks and the currency (C) held by the public. In the International Monetary Fund's report, the base currency is called Reserve Money and includes the central bank's currency issuance (M) and bank debt (deposit reserve, R) guaranteed by the central bank. The base currency is the basis on which the entire commercial banking system creates deposit currency, and it is the source of the multiple expansion of deposits in the entire commercial banking system.

base currency

Base currency, also known as

Because in the past economists did not understand the nature of money and could not give a precise definition of money, people often confused money with deposit money.

For example, the People's Bank of China, the International Monetary Fund, and academia generally attribute M1, M2 and other monetary statistics to the "supply" of the central bank. In fact, the non-issued part of M1 and M2 is due to currency circulation in the market. The statistics reflected in the banking system are the "apparent currency" endogenous to the market, not the "supply" of the central bank. ^[2]

Base currency is the entire

From the perspective of use, the base currency is expressed as cash in circulation and

As mentioned earlier, the base currency is the cash and

Claim on government A1

Correct

To calculate the amount of base currency, two methods are usually used. One is to calculate according to the definition of base currency.

Base currency

Controllability is the currency that the central bank can control;

The base currency is an unrealizable liability of the central bank

The application of non-cash currency cannot be separated from early use

McClumum Rule (McCallum Rule) The McClumum Rule is also known as the base currency-the nominal GDP target rule. Like the Taylor Rule, it is also an adaptive policy equation, but with different policy tools and different monetary policy transmission mechanisms behind it. The policy tool of McClum's rule is the base currency, not the nominal interest rate of the federal funds. According to this rule, the growth rate of the base currency changes according to the deviation between the nominal GDP growth rate (or level value) and the set target. This rule also includes changes in the growth rate of the base currency. When the growth rate of the base currency does not change very much, the nominal GDP target and the base currency target can be said to be equivalent.

The McClum rule contains three main parts: (1) the target for nominal GDP growth; (2) the moving average of changes in the velocity of money circulation (that is, changes in money demand relative to nominal GDP); and (3) nominal and real GDP Difference.