Monetary base
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In economics, the monetary base (also base money, money base, high-powered money, reserve money, or, in the UK, narrow money) is a term relating to the money supply, the amount of money in the economy. The monetary base comprises only coins, paper money, and commercial banks' reserves with the central bank. Broader measures of the money supply include the public's bank deposits (checking, saving, etc.). These measures of money are typically classified as levels of M, where the monetary base is smallest and lowest M-level: M0. Base money can be described as the most acceptable (or liquid) form of final payment.
"Open market operations" are monetary policy tools that affect directly the monetary base; the monetary base can be expanded or contracted using an expansionary policy or a contractionary policy, but not without risk.
[edit] See also
[edit] References
- Karl Brunner (1987). "high-powered money and the monetary base," The New Palgrave: A Dictionary of Economics, v. 2, pp. 654-55. Reprinted in Eatwell et al. Money: New Palgrave, pp. 75-78.
- Phillip Cagan (1965). Determinants and Effects of Changes in the Stock of Money, 1875-1960. NBER. Chapter 3 (link), "High-Powered Money," pp. 45-117.
- Charles Goodhart (1987). "monetary base," The New Palgrave: A Dictionary of Economics, v. 2, pp. 654-55.
