Central Bank Balance Sheet and Real Business Cycles

Chapter 4 Analytical Framework of Central Bank Balance Sheets

4.1Structure of Central Bank Balance Sheets

Analyzing the evolution of the central bank’s balance sheet has important practical applications when evaluating the performance of the central bank in meeting policy goals. The structure of central bank balance sheets differs from those of private sector firms. A simplified structure of central bank balance sheet is portrayed in Figure 4.1.

Figure 4.1: A simplified structure of central bank balance sheets

As illustrated in Figure 4.1, the foreign assets category covers assets denominated in foreign currency and assets issued by foreign ...