The Central Bank Balance Sheet
A central bank is a kind of special financial institution, so its balance sheet is different from those of other financial institutions. A central bank is an institution that is not intended to make a profit, so the changes in its balance sheet are not the asset allocation made by the central bank based on market returns and risk expectations, but centrally reflect the changes and adjustments of a country’s monetary policy. As the monetary policy operations vary in different countries, the structures of the central bank balance sheets of different countries are also greatly different. Meanwhile, in different historical periods, the changes in economic and financial systems and environments will affect the choice of monetary policy instruments. This determines that there are not only large differences in total assets/liabilities but also great differences in the asset/liability structures in the balance sheet of a country’s central bank in different historical periods. For example, the total assets and liabilities and asset/liability structure of the Fed in 2008 were greatly different from those after the 2008 subprime mortgage crisis. Similarly, the total amount and structure of China’s central bank balance sheet have been constantly changing in different time periods since the reform and opening-up. It reflects the changes in the adjustment means and mechanism of China’s monetary policies and the historical changes in China’s financial system. Therefore, observing the changes in the central bank balance sheet is also one of the approaches to understand and observe a country’s monetary policies.