Currency sterilization is divided into two types: broad sterilization and narrow sterilization:

Broad currency sterilization refers to the central bank that implements fixed exchange rates. In order to maintain the established exchange rate target, through open market Hedging operations, or comprehensive measures such as recycling re-lending, controlling the scale of credit, and increasing the reserve ratio, can be used to offset the expansion of the total money supply caused by maintaining the exchange rate target.

The narrow sterilization policy, also known as hedging operations, specifically refers to the issuance of bills by the central bank in the open market to recover the excess base currency. The implementation method and intensity of monetary sterilization policy are key variables that affect a country's monetary policy control, and deserve careful study and understanding by the monetary authorities of countries in economic transition.

Sterilization measures:

(1) Increase the issuance of central bank bills and increase the intensity of forward repurchase operations;

(2) Reduce the central bank’s repurchase of financial institutions Loans and rediscounts;

(3) Increase the statutory reserve ratio or reduce the excess reserve interest rate to reduce the base money multiplier;

(4) Strictly control the scale of credit;

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(5) Control fiscal deficit and reduce government bond issuance, etc.

The above five methods directly affect the money supply and can theoretically offset the expansion effect of foreign exchange holdings on the money supply.