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rate. Interest rates are set by the reserve bank to maintain an inflation rate which is considered neither too high or too low. This is usually determined using a Taylor Rule. The quantity of reserves in the banking system is supported by the open market operations performed by the reserve banks, involving the purchase and sale of various financial instruments, commonly government debt (bonds), usually using "repos". Banks only require enough reserves to facilitate interbank settlement processes. In some countries, reserve banks now pay interest on reserves. This adds another lever to the interest rate control mechanisms available to the reserve bank. Following the 2008 financial crisis, quantitative easing raised the amount of reserves in the banking system, as reserve banks purchased bad debt from the banks, paying for it with reserves. This has left the banking system with an oversupply of reserves. This increase in reserves has had no effect on the level of interest rates. Reserves are never lent out by banks.
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or the central bank. These institutions change the monetary base through open market operations: the buying and selling of government bonds. For example, if they buy government bonds from commercial banks, they pay for them by adding new amounts to the banks’ reserve deposits at the central bank, the
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Following IFRS standards, base money is registered as a liability of the central banks' balance sheet, implying base money is by nature a debt from the central bank. However, given the special nature of central bank money – which cannot be redeemed in anything other than base money – numerous
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Do not translate text that appears unreliable or low-quality. If possible, verify the text with references provided in the foreign-language article.
753:. However, for those that do not agree with the theory of the money multiplier, the monetary base can be thought of as high powered because of the
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1013:(1987). "High-powered money and the monetary base". In Newman, Peter K.; Eatwell, John; Palgrave, Robert Harry Inglis; Milgate, Murray (eds.).
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Content in this edit is translated from the existing German
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Kumhof, Michael; Allen, Jason G.; Bateman, Will; Lastra, Rosa M.; Gleeson, Simon; Omarova, Saule T. (14 November 2020).
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1052:(1987). "Monetary base". In Newman, Peter K.; Eatwell, John; Palgrave, Robert Harry Inglis; Milgate, Murray (eds.).
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Base money of the Euro zone and money supplies M1, M2 and M3, and euro zone GDP from 1980–2021. Logarithmic scale.
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See, e.g., U.S. Federal
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circulating in the public plus certain types of non-bank deposits with
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to the source of your translation. A model attribution edit summary is
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Determinants and
Effects of Changes in the Stock of Money, 1875-1960
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926:Archer, David; Moser-Boehm, Paul (29 April 2013).
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1091:(1965). "High-Powered Money".
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