Monetary base

Public finance
Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix
Fiscal policy Budget policy Debt external internal Deficit / Surplus Finance ministry Fiscal union Revenue Spending deficit Tax
Monetary policy Bank reserves (requirements) Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary (currency) union Money supply
Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / Commerce ministry
Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending
Optimum Balanced budget (fiscal) Growth (trade and investment) Price stability (monetary)
Reform Fiscal adjustment Monetary reform

Euro monetary base

In economics, the monetary base (also base money, money base, high-powered money, reserve money, outside money, central bank money or, in the UK, narrow money) in a country is defined as the portion of a commercial bank's reserves that consist of the commercial bank's accounts with its central bank^[1] plus the total currency circulating in the public, plus the currency, also known as vault cash, that is physically held in the bank's vault.^[2]

The monetary base should not be confused with the money supply which consists of the total currency circulating in the public plus the non-bank deposits with commercial banks.

Management

U.S. Monetary base

Open market operations are monetary policy tools which directly expand or contract the monetary base.

The monetary base and monetary policy are typically controlled by the same national institution, usually either the finance ministry or the central bank. These institutions change the monetary base through open market transactions: the buying and selling of government bonds. Typically, they can also influence banking activities by manipulating interest rates and setting reserve requirements (how much money banks must keep on hand instead of loaning out to borrowers).

The monetary base (MB) is called high-powered because its increase will typically result in a much larger increase in the supply of demand deposits through banks' loan-making; a ratio called the money multiplier.^[3]

United States

As of 8 June 2016, the monetary base in the United States was USD 3,869,723,000,000.^[4]

See also

• Money creation
• Monetary reform

References

External links

• Brunner, Karl (1987). "High-powered money and the monetary base". In Newman, Peter K.; Eatwell, John; Palgrave, Robert Harry Inglis; Milgate, Murray. The New Palgrave Dictionary of Economics. New York: Macmillan. ISBN 0-935859-10-1. doi:10.1057/9780230226203.2726. Retrieved 8 February 2011. 
• Goodhart, Charles (1987). "Monetary base". In Newman, Peter K.; Eatwell, John; Palgrave, Robert Harry Inglis; Milgate, Murray. The New Palgrave Dictionary of Economics. New York: Macmillan. ISBN 0-935859-10-1. doi:10.1057/9780230226203.3102. Retrieved 8 February 2011. 
• Cagan, Phillip (1965). "High-Powered Money". Determinants and Effects of Changes in the Stock of Money, 1875-1960 (PDF). Cambridge, Massachusetts: National Bureau of Economic Research. pp. 45–117. ISBN 0-87014-097-3. Retrieved 8 February 2011. 
• Aggregate Reserves Of Depository Institutions And The Monetary Base (H.3)