What model is used to determine the volume of notes to be printed by central banks?
- Steve BLv 71 decade agoFavorite Answer
Most Western countries came off the Gold Standard years ago.
Printing extra notes allows Governments to spend more without Taxing or Borrowing. So that is one demand.
However printing notes is a direct cause of Inflation. So if the central bank wants to keep down inflation they must resist Government pressure to print more.
But some extra notes must be printed to ensure 'liquidity' (i.e. enough free notes in circulation).
So, yes the central banks do employ a formula - however I bet only their Computers understand what that is :-)
I suggest you research this via Google ... (look for 'Money Supply')Source(s): http://www.gold-eagle.com/editorials_04/lerner0523... http://en.wikipedia.org/wiki/Money_supply
- Anonymous1 decade ago
Number of currency bill or notes printed is always proportion to the gold reserve one country has in it treasure or reserves or central bank.
Any how if a country tries to print more currency for circulation the currency is devalued or has less value in the world market. Good example is China and Japan. Yes, these countries do so to cover up the costs of productions and have an edge when it comes to the world market competition. Thought there currency has less purchasing power in international market but still there population can live comfortably.
And if country had high gold reserve and nominal currency circulation like Kuwait there currencies are highly valued. More ever it has been seen that export based economies like china India and Japan have low currency and import base economies like Kuwait and tourism based economies like France and Cyprus, and other European countries has highly currency values.