1
$\begingroup$

This may seem like an extremely simple question, but I have been unable to find any satisfactory information on this.

How, practically, does the central bank generate the funds to purchases securities? I don't suppose it literally prints cash in this case, as I think it's unlikely they'll pay banks and other institutions in physical cash. Does it print the amount in cash, and then wire it payment through transfer?

$\endgroup$
  • 1
    $\begingroup$ It can purchase securities in exchange for crediting the seller or the seller's bank with reserves at the central bank. Those reserves, like other reserves at the central bank, can then be exchanged for bank notes or transferred to somebody else's account or used to repay borrowing from the central bank, or even used to buy securities from the central bank $\endgroup$ – Henry Feb 2 at 19:24

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.