The monetary base is the set of notes, coins and checks issued by the Central Bank of Chile (CBC) and that are heldby the public or as monetary reserves in banks. In CBC’s Balance Sheet, the monetary base is considered a liabillity.

The equity of the Central Bank of Chile has presented negative values since 1997, since the profitability of the Bank’s Assets (mainly International Reserves), has been lower than the interest payment that the Bank has made for the different Documents it has issued to sterilize the monetary effects of purchase foreign currency.

It is important to highlight that the variation on Bank’s Equity is influenced by the exchange rate, since the assets of the International Reserves are kept in foreign currency and the liabilities, for the most part, are denominated in national currency. Therefore, a depreciation of the exchange rate, generates a higher valuation of assets, resulting in a profit that improves the CBC’s Equity. If the exchange rate appreciates, we will notice the opposite effect.