Central bank asset purchase programmes: how is money created and then destroyed?

Bulletin No. 248, article 1. Over the last decade, central banks have made extensive use of asset purchase programmes to tackle a number of crises. In addition to their impact on interest rates, these programmes have led to a mechanical and temporary increase in the amount of money in circulation in the economy. This article explains how the creation of central bank money, i.e. money exchanged in a closed circuit between the government, the central bank and commercial banks, is combined with the creation of commercial bank money held by businesses and households. …