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Very interesting. So historically, it appears that the FED balance sheet reserves is 25% of GDP. I wonder what it is for other countries. Especially rapidly dev
by nine_zeros 4y ago
Very interesting. So historically, it appears that the FED balance sheet reserves is 25% of GDP. I wonder what it is for other countries. Especially rapidly developing ones.
- JumpCrisscross 4y ago> wonder what it is for other countries It varies pretty widely. I don't think there is good macroeconomic theory for its correct value, or even if there is a correct value. https://tradingeconomics.com/country-list/central-bank-assets-to-gdp-wb-data.html https://tradingeconomics.com/country-list/central-bank-asset...
- nine_zeros 4y agoIt doesn't seem 100% accurate (see: UK balance sheet). But the pattern is evident. The older/more developed an economy, the larger the central bank balance sheet. Which also seems like a correct line of thinking to me. In younger developing countries, more money is created by individuals/businesses via credit. Central banks don't need a large balance sheet to encourage more lending, banks already have a high demand for loans and have very high interest rates for credit. In older/developed countries, less money is created by individuals/businesses via credit. So central banks are forced to increase the size of their balance sheet which allows banks to offer more money for lending by reducing the interest rates because without low interest rates, there will be no credit growth.