Central Bank Intervention and the money Supply To study the effects of central bank intervention in the foreign exchange markets first construct a simplified balance sheet for the central bank This records the assets and liabilities of a central bank Balance sheets use double-entry bookkeeping each transaction enters the balance sheet twice Copyright 2012 Pearson Education. All rights reserved 18-4Copyright © 2012 Pearson Education. All rights reserved. 18-4 Central Bank Intervention and the Money Supply • To study the effects of central bank intervention in the foreign exchange markets, first construct a simplified balance sheet for the central bank. – This records the assets and liabilities of a central bank. – Balance sheets use double-entry bookkeeping: each transaction enters the balance sheet twice