What is Central bank’s balance sheet?

A central bank’s balance sheet is like a supermarket list that shows what the bank owns and owes, just like when you write down what you have and what you need to pay back.

Imagine your central bank is like a big kid who manages money for everyone else. When it buys things, like government bonds, it's like buying candy with its piggy bank money. When it sells those bonds later, it’s like trading that candy for more coins. That’s how it keeps track of what it has and what it needs to pay back.

• Assets are like things the central bank owns, like government bonds or cash.
• Liabilities are like what the central bank owes, like money it lent out to banks or people.

Think of it like a toys and coins game: if the central bank gives you more toys (money), your list (balance sheet) changes. It shows how much it gave away and how much it still has left.

Sometimes, the balance sheet gets bigger, like when the central bank buys lots of bonds to help the economy. And sometimes it gets smaller, like when it sells those bonds back.