1. Changes in the bank’s claims on commercial banks and other financial institutions

This is the most important factor affecting the base currency. Generally speaking, an increase in the central bank's claims means an increase in the central bank's rediscount or re-lending assets to commercial banks. It also means an increase in the base currency injected into circulation through commercial banks, which will inevitably lead to an increase in excess reserves of commercial banks. Allowing the money supply to expand multiple times.

2. Amount of foreign net assets

Foreign net assets consist of foreign exchange, gold holdings and the central bank’s net assets in international financial institutions. Among them, foreign exchange and gold accounts are purchased by the central bank using base currency. Under normal circumstances, if the central bank does not take stabilizing the exchange rate as a policy goal, it will have greater initiative over the base currency injected through this asset business;

Otherwise, the central bank will have to maintain exchange rate stability. To stabilize the exchange rate, the central bank passively enters the foreign exchange market to intervene to stabilize the exchange rate. In this way, the supply and demand situation in the foreign exchange market has a great impact on the central bank's foreign exchange holdings, causing the base currency released through this channel to be quite passive.

3. Net claims on the government

The increase in the central bank’s net claims on the government is usually formed through two channels:

(1) Direct subscription of government bonds ;

(2) Loan to the finance to make up for the fiscal deficit. No matter which channel is used, it means that the central bank injects base currency into the circulation through the fiscal department.

4. Other items (net)

This mainly refers to the increase or decrease in fixed assets and the increase or decrease in accounts receivable and payable by the central bank during the fund settlement process. They all have an impact on the amount of base money.

Extended information

Base money has several basic characteristics:

1. The monetary liabilities of the central bank, rather than the assets or non-monetary assets of the central bank. Sexual liabilities are provided by the central bank through its own asset business; (the establishment of a modern central bank does not rely on fiscal capital injection and asset guarantees. Neither the currency issuing agency nor the government provides asset guarantees for the currency.

Currency issuance It actually does not have the characteristics of a letter of credit, so the operation of the central bank is actually equal to the operation of liabilities. The scale of liabilities of the central bank actually depends on the scale required to perform the circulation function. The asset business of the central bank is actually a derivative of the liability business of the central bank)

2. Through the influence of variables directly controlled and regulated by the central bank, the purpose of regulating and controlling supply is achieved;

3. The basis for supporting the liabilities of commercial banks, commercial banks do not maintain If there is base currency, credit cannot be created; (Modern commercial banks can create a large amount of monetary credit by issuing contingent letters of credit derivatives without relying on base currency; in the financial cycle circulation process,

By issuing financial innovative instruments, commercial banks’ credit creation capabilities are not actually restricted by monetary policy and money supply. The final liability scale of commercial banks depends on the commercial bank’s net asset size and risk management capabilities)

4. Under the reserve system, the base currency used by the entire banking system can produce an amount several times its own. From a source point of view, the base currency is supplied by the central bank through its asset business.

Baidu Encyclopedia - Base Currency