Archive of Journal - Financing

Financing – scientific magazine for economy

ISSUE 2021, No. 3, Article 1, Year of publication: 12, September, 2021
Monetary policy and creation of liquidity


Dragan Kovačević, PhD*

*PhD Assistant Professor, University Vitez Vitez, Faculty of Faculty of Business Economics, Department of Finance 



This article analises,on one side, main source of the liquidity in monetary system and balance sheet of central bank in developed market economy as net foreign liabilities (own foreign money and gold and securities in foreign currencies) and net government credits and cash (domestic currencies) in circulation and other assets item. On another side,when central bank in Currency board arangement (CBA) has sole right to provide domestic currency it can be done with creating level of money in circulation with determination quantity or price of reserve as a instrument of creation the liquidity. The most diferencies which are important for creation the liquidity between two mentonied monetary systems are conected with impossibility of giving the credits to komercial banks from central bank in Currency board monetary arrangement with respect to absence function central bank as lender of last resort.

Keywords: monetary policy, central bank, liquidity, money reserve

DOI: 10.7251/FIN2103003K

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