The monetary base (i.e. the reserve money) includes currency in circulation and reserves which
commercial banks hold in their accounts with the central bank. Both the items represent the use of
the monetary base.
– Currency in circulation includes cash held by households and companies and cash in bank vaults.
– Reserves of banks include required minimum reserves and excess reserves in the accounts of the central bank.
The monetary base expresses the relations of the central bank towards the other sectors of the economy. Therefore, the counterparts of the monetary base represent the external sector, the government sector, the banking sector and the private sector. These factors influencing the level of the monetary base are designated as the sources of the monetary base.
The methodology of compilation of the monetary base is unified on the international level within the framework of the member countries of the International Monetary Fund. The compiling and publishing of the monetary base serves mainly for statistical and comparative purposes.
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