2.1  MONEY CREATION BY CENTRAL BANKS  How then do central banks create money and influence the quantity of money in the market? In the first place, central banks provide central bank money in the form of banknotes.
The issuance of banknotes entails a reduction in the liquidity of credit institutions, since credit institutions must deposit liquid means with the central bank against the withdrawal of the banknotes. Banknotes and coins in euro are the only ones to have legal tender status in the euro area. Secondly, central banks provide central bank money in the form of deposit liabilities.