Chapter 8 Central Bank Operations
Changes in some components of the central bank’s balance sheet influence the amount of resources available to the banking system. Although central banks have limited direct influence over commercial banking operations, central banks can change the volume of reserves held by commercial banks. This is done through central bank operations. A record is made on the asset side of the central bank if the operation provides reserves to commercial banks, while an operation that results in a reduction in the quantity of commercial bank reserves is reflected on its liability side. This chapter explains central bank operations and various policy instruments that support central banking operations.