Monetary Base

REFERENCES

Monetary aggregates

The money issued by a central bank is called the monetary base. Every time the central bank purchases financial assets or makes other payments, primary money creation takes place.

This is reflected in two components:

  1. Banknotes and coins in circulation: includes those held by the public and at the financial system’s cashiers and ATMs.
  2. Deposits at the central bank, in particular those of financial institutions with which the central bank carries out transactions for the purchase and sale of financial assets, and which such institutions hold as part of the resources that enable them to comply with the banking reserve requirement and with payments among themselves.  

The sum of these two components is the monetary base.