Advanced Search
MyIDEAS: Login to save this article or follow this journal

The effect of the monetary base on money supply – Does the quantity of central bank money carry any information?


Author Info

  • András Komáromi

    (Magyar Nemzeti Bank (central bank of Hungary))


In discussing the transmission mechanism, basic macroeconomics textbooks focus on changes in money supply, which the central bank can control by manipulating the monetary base. Modern central banks, however, take a considerably more complex view of the transmission mechanism, and the operational target of most central banks is to set a short-term interest rate. Under such circumstances, the direction of the mutual effect of the monetary base and money supply is rather the reverse in today’s practice, i.e. the results of the portfolio decisions of economic agents are reflected in the central bank’s balance sheet, determining the size of the monetary base. The article explains the direction of the actual mechanism and argues the point that, contrary to the view still widely held in academic circles, a great deal of the factors affecting the monetary base are exogenous for the central bank. Accordingly, the growth rate of M0 (monetary base or base money) carries no direct information on either the intentions of the central bank or the outlook for inflation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

Volume (Year): 2 (2007)
Issue (Month): 1 (June)
Pages: 31-37

as in new window
Handle: RePEc:mnb:bullet:v:2:y:2007:i:1:p:31-37

Contact details of provider:
Web page:
More information through EDIRC

Related research

Keywords: monetary base; monetary aggregates; operational target; money multiplier model.;

Find related papers by JEL classification:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mihály Hoffmann & Zsuzsa Kékesi & Péter Koroknai, 2013. "Changes in central bank profit/loss and their determinants," MNB Bulletin, Magyar Nemzeti Bank (the central bank of Hungary), vol. 8(3), pages 36-48, October.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:2:y:2007:i:1:p:31-37. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.