Financial base" and "liquidity"; correcting a common perception.
In the memorandum, the Governor of the Central Bank saw the analysis of the relationship between the monetary base and liquidity as requiring reference to the factors that influence the creation of liquidity and the way in which reserves are secured, and said: liquidity is not the result of the mechanical doubling of the monetary base with a fixed "growth factor". The multiplier simply shows the ratio between the liquidity and the financial base; But this is not a sufficient explanation for the mechanism of creating liquidity.
Click the link below to read more.