9Preface The book tries to explain the framework of the money, liquidity and monetary policy in major countries (the USA, the Eurozone, Japan and the United King- dom). Even if the book is based on the contemporary banking practice, it comes from careful examination of historical development of opinions on money, li- quidity and monetary policy. The authors are of the view that the best way how to demonstrate the money and liquidity (and the financial system as a whole) is through financial statements (balance sheet and income statement) which are based on accounting. Thus any operation is clarified through double-entry record. The first part of the book concentrates on money, namely on money aggregates, creation and extinction of money, decision-making of banks/clients about whether or not to grant/accept loans, issue of debt and equity securities by com- mercial banks and clients and flow of money as a result of cross-border invest- ments. The second part focuses on liquidity and reserve requirements. Further, two ex- amples of the banking system (without and including central bank) are shown. These examples help to understand the effects of the currency and of the reserve requirements on the financial positions of economic sectors (commercial banks, enterprises, government, households and central bank). Consequently, the atten- tion is devoted to the basics of financial statements, three structures of central bank’s balance sheet, examples of the central bank’s financial statements, ad- ministration of the international reserves and seigniorage. The third part concentrates on the practice of monetary...
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