In the report of the International Monetary Fund, the base currency is called ReserveMoney, including the central bank's currency issuance (M) and the bank debt (deposit reserve, R) guaranteed by the central bank. The base currency is the basis for the entire commercial banking system to create deposit currency, and it is the source of the multiple expansion of deposits in the entire commercial banking system.
In order to support the liabilities of commercial banks, commercial banks cannot create credit without holding the base currency; Modern commercial banks can create a lot of monetary credit by issuing contingent credit derivatives without relying on the base currency; In the process of financial cycle, by issuing financial innovation tools, the credit creation ability of commercial banks is actually not restricted by monetary policy and money supply, and the final debt scale of commercial banks depends on the net asset scale and risk management ability of commercial banks.
Extended data:
Influencing factors of base currency:
1. Changes of central bank's creditor's rights to commercial banks and other financial institutions.
Generally speaking, the increase of central bank's creditor's rights means that the central bank will increase its rediscount or re-loan assets to commercial banks, and it also shows that the base money injected into circulation through commercial banks will increase, which will inevitably lead to the increase of excess reserves of commercial banks and the doubling of money supply.
2. Amount of foreign net assets
Foreign net assets include foreign exchange, gold and the net assets of the central bank in international financial institutions. Among them, foreign exchange and gold are purchased by the central bank with the base currency.
3. Net debt to the government
First, directly subscribe for government bonds; The second is to lend money to finance to make up for the fiscal deficit. Either way, it means that the central bank injected the base money into the circulation field through the financial sector. For example, the stock of financial loans from 1995 in China is160 billion yuan, which has had a certain impact on the mass production of base currency in recent years.
4. Other projects
This mainly refers to the increase and decrease of fixed assets and accounts receivable and payable in the settlement of funds by the central bank. Both will have an impact on the amount of base money.
Baidu Encyclopedia-Base Currency