monetary base

The monetary base refers to the total amount of a currency that is either in general circulation or in the commercial bank deposits held by the central bank. It includes physical currency (coins and paper money) and the reserves held by commercial banks at the central bank.1

Central banks manage the monetary base through various tools, such as open-market operations (buying and selling government securities), loans to commercial banks, and foreign asset transactions. By controlling the monetary base, central banks can influence the overall money supply, credit availability, interest rates, and ultimately, economic stability, including inflation and employment levels. The size of the monetary base was historically limited by the amount of gold or silver reserves, but today, central banks can create money through bookkeeping entries.21