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Chapter 8 - Chapter 8 The Central Bank's Balance Sheet...

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The Central Bank’s Balance Sheet: Assets Securities Fed holds only U.S. Treasury securities controlled through purchases and sales known as “open market operations.” Foreign Exchange Reserves bonds issued by foreign governments Loans Discount Loans The Central Bank’s Balance Sheet: Liabilities Currency Government Accounts Reserves Commercial Bank’s Checking Accounts 17-1 Chapter 8
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Importance of Disclosure Central banks have to publish their balance sheets. Fed and ECB do it weekly. Misrepresentation is a sign of impending disaster. The Size of the Central Bank’s Balance Sheet: The central bank controls the size of its balance sheet. When it buys a security, it can create reserves to pay for them. 17-2
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Monetary Base Equals currency plus reserves Also known as high-powered money Money and credit in the economy is based on this.
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