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Journal articles on the topic 'Money multiplier'

Author: Grafiati

Published: 4 June 2021

Last updated: 1 February 2022

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1

Siddiqui, Anjum, and Ahmad Waheed. "The Controllability of Monetary Aggregates in Pakistan." Pakistan Development Review 34, no. 4II (December 1, 1995): 659–69. http://dx.doi.org/10.30541/v34i4iipp.659-669.

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The introduction of new financial i'nstruments l and the consequent asset substitutability since the advent of financial deregulation in 1991 has been accompanied by volatility of the money multiplier and the monetary aggregates. While money demand studies exist [Khan (1980)], the modelIing of the supply side of money and, in general, the impact of financial innovations on money multipliers and monetary aggregates has been largely ignored.2 In a recent study, Siddiqui and Waheed (I994a) found that during 1992-93 the narrow money multiplier felI and increased sharply, causing instability in MI. It was also observed that the broad money multiplier showed similar instability during the same period.

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2

SURREY, M. J. C. "MONEY AND THE MULTIPLIER*." Oxford Bulletin of Economics and Statistics 36, no. 1 (May 1, 2009): 1–19. http://dx.doi.org/10.1111/j.1468-0084.1974.mp36001001.x.

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3

Stauffer, Robert. "An Innovative Money Multiplier." American Economist 50, no. 2 (October 2006): 58–64. http://dx.doi.org/10.1177/056943450605000206.

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4

Bhatti, Razzaque Hamza, and Muhammad Junaid Khawaja. "The existence of a stable money multiplier in the small open economy of Kazakhstan." Journal of Economic Studies 45, no. 6 (November 12, 2018): 1211–23. http://dx.doi.org/10.1108/jes-10-2017-0284.

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Purpose The purpose of this paper is to examine whether a long-run stable money multiplier exists in Kazakhstan. It also investigates whether different episodes of currency shocks, including the financial crisis and recession of 2008–2010, have affected the working of the money multiplier in Kazakhstan. Design/methodology/approach The long-run multiplier is tested employing three cointegration tests: Engle–Granger (1987), Phillips–Ouliaris (1990) and Johansen and Juselius (1990). Findings The results of cointegration and coefficient restrictions tests are consistent with the money multiplier when broad money (M2 and M3) is used rather than when narrow money (M1) is used. The relationship between broad money and monetary base is structurally stable when examined on the basis of a dynamic (an error-correction) model. However, the M2 multiplier performs better than the M3 multiplier. Research limitations/implications This paper is restricted to testing a mechanistic version of the money multiplier and its stability using both narrow (M1) and broad money (M2 and M3) supplies. Thus, the paper focusses on the money view of the multiplier rather than the credit view of the multiplier. Practical implications One implication that emerges from the findings of this paper is that the National Bank of Kazakhstan can control M2 by controlling the monetary base, and hence the latter can serve as an indicator for monetary policy. Social implications The validity of the money multiplier implies that monetary policy can be conducted to control the money supply and the provision of bank credit to private sector to stabilize economic activity, thereby leading towards social stability in the economy as well. Originality/value In addition to offering a coherent survey of the literature on the standard money multiplier, this paper is a first attempt to find a stable money multiplier for Kazakhstan.

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5

Arby, M. Farooq. "Predicting Money Multiplier in Pakistan." Pakistan Development Review 39, no. 1 (March 1, 2000): 23–35. http://dx.doi.org/10.30541/v39i1pp.23-35.

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The paper has developed time-series models for the monthly money multiplier and its components, viz., currency-deposit ratio, reserve-deposit ratio, etc. A comparison is made between the predictive performance of the aggregate multiplier and the component models. It is found that the projected values of the multiplier on the basis of the aggregate model are closer to actual values as compared to those worked out on the basis of the component models. Thus, for the purposes of projecting the money multiplier, it may be preferable to focus on the aggregate money multiplier model. Stability tests, applied to the identified models for each component and the overall multiplier, suggest that all the models are stable.

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6

Mughal, Khurrum S., Friedrich G. Schneider, Faheem Aslam, and Alishba Tahir. "Money Multiplier Bias Due to Informal Sector: An Extension of the Existing Money Multiplier." South Asian Journal of Macroeconomics and Public Finance 10, no. 2 (January 13, 2021): 139–57. http://dx.doi.org/10.1177/2277978720979888.

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To demonstrate the impact of informal economy on the official money multiplier in currency supply, we present an extension of the basic money multiplier model. The influence of economic policies may differ if they are based only on official statistics without considering the informal sector. Since most of the activities in informal sector are hidden from authorities, it is widely assumed that these activities are based on cash transactions, a part of total currency that cannot be attracted towards deposits due to the holder’s fear of prosecution and taxation, etc. Therefore, it is expected that such currency holdings can give biased results by playing a role in the money multiplier, a phenomenon that is usually ignored while attempting to alter money supply. The article also indicates that because of informal sector, the currency deposit ratio in the money multiplier is smaller than expected (depending on size of the informal sector), leading to a larger multiplier effect. JEL Classifications: E26, E51, O17

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7

Cottrell, Allin. "Endogenous Money and the Multiplier." Journal of Post Keynesian Economics 17, no. 1 (September 1994): 111–20. http://dx.doi.org/10.1080/01603477.1994.11490012.

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8

Wang, Yougui, Yan Xu, and Li Liu. "Keynesian multiplier versus velocity of money." Physics Procedia 3, no. 5 (August 2010): 1707–12. http://dx.doi.org/10.1016/j.phpro.2010.07.009.

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9

Kresak, Michał. "Mnożnik kreacji pieniądza – pojęcie, ograniczenia i krytyka." Ekonomia 25, no. 1 (May 13, 2019): 35–54. http://dx.doi.org/10.19195/2084-4093.25.1.3.

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Money multiplier — the concept, limitations and criticismThe article presents the money creation process in the modern economy, including the role of the central bank and commercial banks in this process. The concept of money multiplier is described and set in the context of Fed’s monetary policy since 1970s. Special attention is paid to the decrease of the M1 multiplier below the value of one, which accompanied the quantitative easing after the crisis arousal in 2008. Then, the main constraints are mentioned of commercial banks in the process of money creation impeding the full utilization of the multiplier potential: bank profitability and competitiveness, risk of bank runs, demand for currency, limitations concerning credit collaterals and those resulting from monetary policy, prudential regulations, and the behaviors of bank clients. The paper also reports on arguments critical toward the multiplier approach and suggests to perceive the money supply in the modern economy as an endogenously determined phenomenon: first, commercial banks grant as many credits thus creating money as they can owing to the market situation; then, they turn to the central bank to provide reserves. The latter provides reserves monetary base as the lender of last resort, aiming to control the interest rate, and not money quantity itself. The conclusions are significant for monetary policy and economic education, as the endogenous approach to money supply can explain why the quantitative easing, contrary to some concerns, did not automatically translate into a considerable increase of credit expansion and price inflation.

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10

Guse, Eran, and David W. Brasfield. "A Generalized Exposition of Money Creation in the Money and Banking Course." American Economist 65, no. 2 (December 11, 2019): 244–63. http://dx.doi.org/10.1177/0569434519891974.

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Since the Great Recession, monetary policy conducted by the U.S. Federal Reserve and other central banks has changed. However, the discussion regarding money creation and the money multiplier has not been altered in undergraduate money and banking textbooks. We suggest a change to the presentation of money creation by first removing the use of T-accounts and replacing them with a visual representation known as the money production diagram. We then present a money production function that is much like a standard production function as described in principles courses. The money multiplier is replaced by the average product of the monetary base in this production function. We use this production function to explain changes to the money supply from exogenous shocks or changes to policy. JEL classification: A22, E51, E52

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11

Chitre, V. S. "Quarterly Prediction of Reserve Money Multiplier and Money Stock in India." Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics 28, no. 1 (March 1, 1986): 1. http://dx.doi.org/10.21648/arthavij/1986/v28/i1/116346.

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12

Ongan, Serdar, and Ismet Gocer. "Money stock determination process and money multiplier: case of South Korea." Journal of Financial Economic Policy 13, no. 4 (February 22, 2021): 479–90. http://dx.doi.org/10.1108/jfep-02-2020-0039.

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Purpose This study aims to re-examine the money stock determination process for South Korea under the assumption of the existence of potential asymmetric (non-linear) relations (a mechanism) between the money stock and the monetary base. Because, the true and detailed diagnosis of this mechanism is crucially important for the Bank of Korea’s (BOK)’ monetary policy, as this country has been adopting an inflation targeting policy (ITP) for a long-time. Design/methodology/approach This paper applies the non-linear autoregressive distributed lag model by Shin et al. (2014). This model separates the original series of the monetary base into their increases (+) and decreases (−). The increases (+) and decreases (−) done by the BOK correspond to expansionary and contractionary monetary policies, respectively, in this study. Findings The empirical findings are two-fold. First, the money stock determination process in Korea has a non-linear (asymmetric) structure. This means that increases (+) and decreases (−) in the monetary base have asymmetric (different) impacts on money stock. Second, the BOK’s only expansionary monetary policy exhibits exogenous nature money stock determination with an almost stable money multiplier. These findings may help the BOK to take preventive precautions in its monetary policy implementations. Originality/value This study with its methodology may help the BOK to take preventive measures in its ongoing ITP proactively.

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13

Freeman, Scott, and Finn E. Kydland. "Monetary Aggregates and Output." American Economic Review 90, no. 5 (December 1, 2000): 1125–35. http://dx.doi.org/10.1257/aer.90.5.1125.

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We ask whether the following observations may result from endogenously determined fluctuations in the money multiplier rather than a causal influence of money on output: (i) M1 is positively correlated with real output; (ii) the money multiplier and deposit-to-currency ratio are positively correlated with output; (iii) the price level is negatively correlated with output; (iv) the correlation of M1 with contemporaneous prices is substantially weaker than the correlation of M1 with real output; (v) correlations among real variables are essentially unchanged under different monetary-policy regimes; and (vi) real money balances are smoother than money-demand equations would predict. (JEL E300, E510)

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14

PALLEY, THOMAS I. "The theory of endogenous money and the LM schedule: prelude to a reconstruction of ISLM." Revista de Economia Política 37, no. 1 (March 2017): 3–22. http://dx.doi.org/10.1590/0101-31572016v37n01a01.

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ABSTRACT Money is at the center of macroeconomics, which makes understanding the money supply central for macroeconomic theory. This paper presents the Post Keynesian theory of endogenous money supply and shows how it is fundamentally different from the conventional money supply theory. The conventional approach relies on the money multiplier and bank lending is invisible. Post Keynesian theory discards the money multiplier and focuses on bank lending which drives money creation. The paper emphasizes the structuralist version of Post Keynesian theory which retains Keynes’ liquidity preference theory of long term interest rates and also recognizes banks are subject to financial constraints that limit their lending activities. The paper then shows how to derive the LM schedule in an endogenous money economy, which is a necessary prelude to reconstructing the ISLM model.

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15

Burlachkov, V. "Money Supply: Theory and Organization." Voprosy Ekonomiki, no. 3 (March 20, 2005): 48–60. http://dx.doi.org/10.32609/0042-8736-2005-3-48-60.

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The effect of money multiplier is determined by credit activities of the banking system and depends upon the value of the difference between average profitability in the economy and interest rate. The modification of payment systems may lead to decreasing central banks possibilities of money regulation. Seigniorage which is obtained by the banking system is a kind of economic rent. The effect of money multiplier reveals itself in the world credit market and influences exchange rate dynamics of reserve currencies. Using government securities as the main asset of central banks and as an instrument of open market operations leads to appreciation of interest rate and to decreasing of credit activities in the economy. A perspective instrument of money regulation is allocation of central banks deposits with commercial banks.

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16

Tiwari, Saraswoti. "Money Supply Determinants in Nepal: A Macro Analysis." Economic Literature 13 (February 8, 2018): 55. http://dx.doi.org/10.3126/el.v13i0.19151.

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<p>This paper analyzes the major money supply determinants in Nepal in the past 10 years from FY 2004/05 - FY 20014/15. In this study monetary base is determined by two explanatory variables (i.e. NFA and NDC) and are called the 'proximate' determinants of the base money. Among the explanatory variables, the net foreign asset (NFA) is found as better determinant than net domestic assets (NDA) in Nepalese economy. For the analysis of determinants of money multiplier (MM), the three explanatory variables i.e., reserve to total deposits ratio (r), time deposits to demand deposits ratio (t) and currency to demand deposits ratio (c) have been used. The model applied in this study shows that explanatory variable of time deposits to demand deposits ratio is the best determinant of money multiplier. The reserve money (RM) is analyzed as the best determinant of money supply, net foreign assets (NFA) is the major determinant of reserve money and time deposits to demand deposits ratio is the significant determinant of money multiplier.</p><p> <strong><em>Economic Literature</em></strong><em>, </em>Vol. XIII August 2016, page 55-60</p>

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17

Villacis, José. "A Unified Theory of Monetary Dynamics." Review of Social Sciences 1, no. 4 (April 25, 2016): 01. http://dx.doi.org/10.18533/rss.v1i4.11.

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<p>In the end, the only and eternal vocation of money is circulation. This circulation causes the contrary effect to income expansion, studied by the income velocity of circulation of money, by the income multiplier and by the bank money multiplier. These three issues are thought to belong to the same operation. Therefore, a unified money theory can be established.</p><p>A dynamic economy finances investments with the savings existing in the system but, the economy is simultaneously growing in real and nominal terms. Such growth in circulating capital is only possible through the creation of money in the economic system. In general terms, the system tends to finance growth with the spontaneous creation of money.</p>

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18

Marchal, Jean, and Frédéric Poulon. "Multiplicateur et probabilité." Articles 57, no. 1 (January 21, 2009): 70–86. http://dx.doi.org/10.7202/600962ar.

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ABSTRACT Keynes begun his scientifïc career with probability theory. But, he had not the idea, as far as we can know, to give a probabilistic interpretation of his famous multiplier. This article is aimed at showing that probability theory, and especially finite Markov chains theory, gives an easier and even more natural interpretation of the keynesian multiplier than the traditional methods. Multiplier theory may be looked on as old-fashioned today, but it is still at the heart of most of macroeconometric models. So, we define first the relative position of the multiplier, which is linear and actually static, inside these models which are non-linear and dynamic. Secondly, we give a markovian interpretation of the income multiplier in both cases of the simple multiplier and the matrix multiplier. We compare it with the traditional interpretation: in the probabilistic interpretation every kind of economic agents (banks and firms, and not only households) take a part in the process of incomes which leads to the multiplier. Finally, we enlarge our method to the neighbouring analysis of the money multiplier and of the velocity of money. Our conclusion is that the markovian method could also be used for a keynesian crisis analysis.

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19

Bachurewicz, Gracjan Robert. "The Post-Keynesian endogenous-money supply: evidence from Poland." Review of Keynesian Economics 7, no. 3 (July 2019): 402–18. http://dx.doi.org/10.4337/roke.2019.03.09.

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The paper examines the endogenous-money-supply theory for a representative emerging-market economy, namely Poland. The Post-Keynesian theory is tested against the fractional reserve theory of money creation that assumes money supply to be exogenously determined and controlled by the monetary authority. Granger-causality tests, the estimates from a vector error-correction model and the analysis of impulse-response functions from a general vector autoregression support the Post-Keynesian proposition of money-supply endogeneity in Poland during the 2001–2016 period. The demand for bank credit, represented by bank lending, causes changes in both bank deposits and the M3 money supply. Bank loans also Granger-cause the monetary base, as Post-Keynesian theory asserts. In short, loans make deposits, instead of the reverse. The M3 money multiplier does not Granger-cause broad money supply in Poland – a finding which further undermines the popular ‘money multiplier’ view. The above conclusions provide important insights for the Polish central bank regarding how it should understand monetary policy.

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20

Zaki, Mokhlis Y. "Forecasting the money multiplier and the control of money supply in Egypt." Journal of Development Studies 32, no. 1 (October 1995): 97–111. http://dx.doi.org/10.1080/00220389508422403.

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21

Leeper, Eric M., Nora Traum, and Todd B. Walker. "Clearing Up the Fiscal Multiplier Morass." American Economic Review 107, no. 8 (August 1, 2017): 2409–54. http://dx.doi.org/10.1257/aer.20111196.

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We quantify government spending multipliers in US data using Bayesian prior and posterior analysis of a monetary model with fiscal details and two distinct monetary-fiscal policy regimes. The combination of model specification, observable data, and relatively diffuse priors for some parameters lands posterior estimates in regions of the parameter space that yield fresh perspectives on the transmission mechanisms that underlie government spending multipliers. Short-run output multipliers are comparable across regimes—posterior means around 1.3 on impact—but much larger after 10 years under passive money/active fiscal than under active money/passive fiscal—90 percent credible sets of [1.5, 1.9] versus [0.1, 0.4] in present value, when estimated from 1955 to 2016. (JEL E52, E62, E63, H50)

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22

Goodhart, C. A. E. "Money, Credit and Bank Behaviour: Need for a New Approach." National Institute Economic Review 214 (October 2010): F73—F82. http://dx.doi.org/10.1177/0027950110389774.

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The standard approach, in teaching and textbooks, to explaining the determination of both the supply of money, and the provision of bank credit to the private sector, has been the money multiplier approach, whereby the Central Bank sets the high-powered monetary base, and then the stock of money is a multiple of that. The greatest book on Monetary History ever written, Friedman and Schwartz (1963), Monetary History of the United States, was constructed around this same analytical framework of the money multiplier, whereby M, the money supply, would increase by a large multiple of the change in the high-powered monetary base, H. M=H⋅(1+C/D)(R/D+C/D) Yet when the authorities in the major developed countries attempted to use this relationship to expand the money stock (and bank lending) by force-feeding the banks with base money (H), in the process of Quantitative Easing (QE) in 2009, the prior relationships collapsed.

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23

Downes, Darrin, Winston Moore, and Dwayne Jackson. "Financial liberalization and the stationarity of money multiplier." International Economic Journal 20, no. 2 (June 2006): 227–40. http://dx.doi.org/10.1080/10168730600699507.

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24

Dalziel, Paul. "The Keynesian Multiplier, Liquidity Preference, and Endogenous Money." Journal of Post Keynesian Economics 18, no. 3 (March 1996): 311–31. http://dx.doi.org/10.1080/01603477.1996.11490075.

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25

Carpenter, Seth B., and Selva Demiralp. "Money, Reserves, and the Transmission of Monetary Policy : Does the Money Multiplier Exist?" Finance and Economics Discussion Series 2010, no. 41 (May 2010): 1–55. http://dx.doi.org/10.17016/feds.2010.41.

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26

Carpenter, Seth, and Selva Demiralp. "Money, reserves, and the transmission of monetary policy: Does the money multiplier exist?" Journal of Macroeconomics 34, no. 1 (March 2012): 59–75. http://dx.doi.org/10.1016/j.jmacro.2011.09.009.

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27

Fontana, Giuseppe, Riccardo Realfonzo, and Marco Veronese Passarella. "Monetary economics after the global financial crisis: what has happened to the endogenous money theory?" European Journal of Economics and Economic Policies: Intervention 17, no. 3 (February 12, 2020): 339–55. http://dx.doi.org/10.4337/ejeep.2020.0056.

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The 2010s have witnessed a new shift in central banking and, partially at least, in monetary economics and macroeconomic modelling. It is a fact that the endogenous money theory has been gradually clawing back popularity at the expense of the classical theory of interest rates, the financial intermediation view of banks, the money-multiplier story and the quantity theory of money. However, the loanable funds theory and the view of banks as pure financial intermediaries (sometimes coupled with the money-multiplier story) are still sometimes invoked. In addition, the dynamic process of creation, circulation and destruction of money is usually neglected. The point is that money endogeneity is still regarded by many mainstream economists as a mere empirical fact, not a key feature of capitalist market-based economies to be properly explained by a logically consistent theory. By contrast, dissenting economists have further advanced the endogenous money view through: (a) a generalised theory of the endogenous process of money creation; (b) the increasing popularity of modern monetary theory in the public debate; and (c) the development of aggregative stock–flow consistent models and agent-based stock–flow consistent models as an alternative to dynamic stochastic general equilibrium models.

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28

Barba, Aldo. "CURBING THE MONEY MULTIPLIER: CAPITAL REQUIREMENTS VERSUS NARROW BANKING*." Contributions to Political Economy 37, no. 1 (2018): 16–24. http://dx.doi.org/10.1093/cpe/bzy008.

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29

Xiong, Wanting, Boyao Li, Yougui Wang, and H. Eugene Stanley. "The versatility of money multiplier under Basel III regulations." Finance Research Letters 32 (January 2020): 101167. http://dx.doi.org/10.1016/j.frl.2019.04.024.

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30

Cesar, H., and J. de Haan. "Predicting the money multiplier in the Netherlands once more." Empirical Economics 14, no. 3 (September 1989): 215–27. http://dx.doi.org/10.1007/bf01972391.

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31

von Hagen, Jürgen. "Operating targets and information variables in money multiplier forecasting." Review of World Economics 126, no. 4 (December 1990): 643–61. http://dx.doi.org/10.1007/bf02707473.

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32

Grishchenko, V. O. "Money multiplier in the context of modern views on money creation: theory and facts." Voprosy Ekonomiki, no. 11 (November 19, 2018): 50–69. http://dx.doi.org/10.32609/0042-8736-2018-11-50-69.

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For a long period of time, multiple money expansion has been regarded empirically proven. Nevertheless, in recent decades it has been widely disputed, particularly in the publications of central banks and those of the BIS. In this paper we show that multiple money expansion is characteristic of underdeveloped financial systems. In the era of multiple money expansion the volume of lending was limited by the supply of bank reserves. Today, however, the main constraint is the demand for credit. This is supported by our analysis of banks’ balance sheets as well as VAR analysis of factors of bank lending in Russia in 2005—2017.

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33

Harris, W. V. "A Revisionist View of Roman Money." Journal of Roman Studies 96 (November 2006): 1–24. http://dx.doi.org/10.3815/000000006784016215.

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The consensus view that all Roman money consisted of coins has been undermined in recent times and should be discarded. The inhabitants of the Roman Empire frequently and on a significant scale made payments by means of credit-money, creating a ‘multiplier effect’, which meant that in high classical times the Roman economy was not constricted, as is often supposed, by an inelastic money-supply. Yet the monetary system was not modern; rather it had its counterparts in such economies as those of seventeenth-and early eighteenth-century Britain.

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34

Hasan Thwaini, Falah, and Ahmed Abdulzahra Hamdan. "Money supply. Endogenous or exogenous variable? With reference to Iraq." Banks and Bank Systems 12, no. 4 (December 15, 2017): 144–53. http://dx.doi.org/10.21511/bbs.12(4-1).2017.03.

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The issue of whether money supply is a dependent or an independent variable remains a debating one, especially with the ongoing development and innovation of institutions, tools, and financial, monetary, and banking derivatives. In general, we can say that there are two trends of thought about the issue under consideration. The first trend views money supply as an exogenous variable because the monetary authority can control and monitor it. The second one views money supply as an endogenous variable because Federal Bank has no ability to affect it, especially when nominal or money income is changed and reflected on money multiplier and money supply, and also when the monetary authority cannot restrict the monetary expansion as a result of different factors related to the economy structure or related to other non-economic factors.

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35

Kapounek, Svatopluk. "Money Demand and its Keynesian and Postkeynesian Concepts – case of the Czech Republic." Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 58, no. 6 (2010): 209–26. http://dx.doi.org/10.11118/actaun201058060209.

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Money exogeneity, stable money demand and its interest rates elasticity is basic condition of central banks’ monetary policy implementation and efficiency. The stable money demand function ensures that the money supply would have predictable impact on the macroeconomic variables such as inflation and real economic growth.This article deals with the money demand estimation under the keynesisan and postkeynesian theoretical approaches. Although central banks may have certain control over the money supply, they cannot fix the stock of money in a country, caused by multiplier effect of deposits. Different trends in monetary aggregates fluctuation contribute to reject the money exogeneity hypothesis. The author applies the CUSUM and Hansen’s stability tests to identify instability in the models of the Czech Republic and Eurozone.

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36

Beenstock, Michael. "The Determinants of the Money Multiplier in the United Kingdom." Journal of Money, Credit and Banking 21, no. 4 (November 1989): 464. http://dx.doi.org/10.2307/1992354.

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37

R. Adediyan, Aderopo. "Determinants of Money Supply in Nigeria." Central Bank of Nigeria Journal of Applied Statistics, Vol. 11 No. 2 (April 8, 2021): 181–99. http://dx.doi.org/10.33429/cjas.11220.7/8.

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Studies on money supply determinants focus on the Classicists or Monetarists, Keynesians and post-Keynesians variables like income and money multiplier. This research extends the literature on money supply determinants to include the influence of financial liberalization on money supply with a reference to Nigeria between 1980 and 2019, using the Autoregressive Distributed Lag (ARDL) approach. Data used for the study were collected from the 2019 CBN Annual Statistical Bulletin. The study found that financial liberalization is an important factor in determining money supply in Nigeria, in addition to currency ratio, required reserve ratio and high-powered money. As a result, the extent of the liberalization of the financial sector matters in decisions on the regulation of money supply in the economy.

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38

Zhang, Huiyi, Richard Skolnik, Yu Han, and Jinpei Wu. "The Impacts of China's Shadow Banking Credit Creation on the Effectiveness of Monetary Policy." International Journal of Finance & Banking Studies (2147-4486) 9, no. 4 (October 20, 2020): 33–46. http://dx.doi.org/10.20525/ijfbs.v9i4.899.

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This paper researches the impact that shadow banking in China has upon credit creation and the potential effectiveness of monetary policy. Using a credit creation model, we derive the effect that shadow banking has upon the money multiplier and the money supply. The model shows that shadow banking can change the money multiplier, potentially increasing it during an expansion and decreasing it during a contraction. Introducing shadow banking in a CC-LM model results in a shift of the CC and LM curves resulting in a higher equilibrium output. A vector autoregressive model is used to empirically estimate the impact of shadow banking deposits' growth rate on the growth rates of the broad money supply, GDP, and the CPI. The results show that shadow banking's credit creation function in China has a pro-cyclical characteristic, potentially reducing the money supply's controllability and increasing the difficulty in effectively regulating monetary policy. This paper introduces shadow banking into the currency creation process of traditional commercial banks, accounting for the reserve requirement ratio, the excess reserve ratio, the shadow bank leakage rate, and the reserved deduction rate. Future research can determine whether coordinating monetary policy and leverage ratio regulation mitigates the impact of shadow banking. Another area of research is how the shadow banking of non-financial companies affect monetary policy.

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Ofoi, Mark, and Parmendra Sharma. "Does the Money Multiplier Hold in Pacific Island Countries? The Case of Papua New Guinea." Journal of Risk and Financial Management 14, no. 9 (September 20, 2021): 449. http://dx.doi.org/10.3390/jrfm14090449.

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This is the first study to systematically assess the significance of the standard money multiplier vis-à-vis the bank credit transmission channel in the case of Pacific Island Economies, focusing on Papua New Guinea. The vector autoregressive model comprising six variables—interest rate, inflation rate, loans, deposits, reserve money, and real output—was estimated using quarterly data for the period 1980q1 to 2017q4. We applied the ordinary least squares (OLS) method to estimate the system of vector autoregressions (VARs). The estimation was conducted for the full and sub-sample periods. From the impulse response functions generated, the results suggest that the money multiplier does not hold and that the transmission to bank credit appears weak. It seems that the ability of the Central Bank to make loanable funds available through its conduct of monetary policy may not enhance private sector credit. On the other hand, there appears to be a significant and positive association between bank deposits and credit, suggesting that bank deposits and credit are endogenous and demand driven.

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Haghighat, Jafar, and Tanaz Salahesh. "The role of money multiplier in monetary transmission mechanism in Iran (bank lending and money supply)." International Journal of Monetary Economics and Finance 9, no. 2 (2016): 212. http://dx.doi.org/10.1504/ijmef.2016.076476.

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van den End, Jan Willem. "The breakdown of the money multiplier at the zero lower bound." Applied Economics Letters 21, no. 13 (April 7, 2014): 875–77. http://dx.doi.org/10.1080/13504851.2014.894626.

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42

Welsch, Heinz. "Domestic Fiscal Policy in a Monetary Union: What are the Spillovers? / Fiskalpolitik in einer Währungsunion: Internationale Auswirkungen." Jahrbücher für Nationalökonomie und Statistik 220, no. 3 (June 1, 2000): 327–42. http://dx.doi.org/10.1515/jbnst-2000-0306.

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Summary This paper examines the spillovers of domestic fiscal expansion in a monetary union. Such a policy action leads to cross-country crowding-out effects on the one hand and cross-country multiplier effects on the other. The overall effect is indeterminate a priori. The approach pursued is therefore an empirical one, using a computable general equilibrium (CGE) model with a simple representation of the money market. Three groups of parameters are identified as key determinants of the fiscal policy spillover: the elasticities of substitution in foreign trade (being a measure of the degree of trade integration), the interest elasticity of money demand, and the elasticity of wages with respect to the employment situation. For a reasonable range of parameter configurations, the interest rate effect always dominates the multiplier effect. Especially, even with a degree of trade integration four times as high as commonly assumed the overall spillover is (slightly) negative.

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Čábelková, Inna. "Soft monetary policy in a sustainable economy as a rigid game." E3S Web of Conferences 250 (2021): 06005. http://dx.doi.org/10.1051/e3sconf/202125006005.

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Over the past decade, central banks in a majority of developed countries injected astonishing amounts of money into national and international economies in the hope of helping real sectors and with worries of high inflation. Neither of these came true. This paper describes the reasons for such unusual dynamics using a case of the sustainable economy. The three factors considered include the increased propensity to save, the decreased money multiplier, and substantial growth in the financial markets. The mathematical model studies the effect of the new money created on the real sector via the effect on real consumption depending on the share of the new money received by the less and more affluent part of the population. The results suggest, that the higher is the proportion of new money allocated to the poorer part of the society, the higher is the effect of overall money on the real sector if the propensity to consume in this part of the population is held constant.

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Darbha, Gangadhar. "Testing for long-run stability - an application to money multiplier in India." Applied Economics Letters 9, no. 1 (January 2002): 33–37. http://dx.doi.org/10.1080/13504850110047155.

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Ertfrk, Korkut A. "The Notion of Disequilibrium, the Multiplier, and the Endogenous Supply of Money." Review of Radical Political Economics 30, no. 3 (September 1998): 74–83. http://dx.doi.org/10.1177/048661349803000308.

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46

Koo, Richard C. "It Is Private, Not Public Finances that Are Out of Whack." German Economic Review 15, no. 1 (February 1, 2014): 166–90. http://dx.doi.org/10.1111/geer.12028.

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Abstract When the private sector as a whole is forced into debt minimization following the bursting of a debt-financed bubble, the money multiplier turns negative at the margin and government borrowing and spending become essential in maintaining both the GDP and money supply. With unborrowed private savings languishing in the financial system, the market also encourages government borrowing in the form of low bond yields which is a natural corrective mechanism of an economy suffering from balance sheet recession. In the eurozone, this corrective mechanism fails because of the ease of capital flight between government bond markets within the currency zone.

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Stauffer, Robert F. "Back to Basics: Reserve Requirements and Money Stock Changes, 1929–1936." American Economist 44, no. 1 (March 2000): 62–69. http://dx.doi.org/10.1177/056943450004400108.

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This paper explains how the shift of deposits from nonmember banks and country banks to larger member banks increased the average or “effective” reserve requirement in the 1929–1936 period. The result was an inappropriate tightening of monetary conditions, along with liquidity problems for those banks most susceptible to failure. A basic money multiplier model is developed to help clarify the possible impact of increases in effective reserve requirements. The resulting perspective strengthens the usual charges against the Federal Reserve of monetary policy malfeasance during the Great Depression.

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Lavoie, Marc. "Rethinking monetary theory in light of Keynes and the crisis." Brazilian Keynesian Review 2, no. 2 (January 31, 2017): 174–88. http://dx.doi.org/10.33834/bkr.v2i2.96.

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The purpose of the present paper is to examine the main changes that have occurred or that need to occur in monetary economics, and to do this in light of what Keynes told us 80 years ago in his General Theory, or even more than 85 years ago when he wrote the Treatise on Money. Inflation targeting and central bank independence are re-examined, as are the standard views of the money multiplier and of the fractional-reserve system. Unconventional monetary policies, although previously suggested by Keynes, appear to be a disguised return to Monetarism and the actual impact of quantitative easing must be understood in light of a theory of endogenous money with monetary implementation occurring within a framework where the target interest rate is set at the floor of the corridor.

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Kirikos, Dimitris G. "Monetary policy effectiveness in the liquidity trap: a switching regimes approach." Review of Keynesian Economics 9, no. 1 (January 19, 2021): 139–55. http://dx.doi.org/10.4337/roke.2021.01.07.

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Liquidity trap economics seems to have fared particularly well on all counts of its predictions, in the aftermath of the 2008 global financial crisis. Therefore, in this paper we evaluate formally the effectiveness of unconventional monetary policy in a liquidity trap, based on data from Japan, the USA, and the eurozone over periods of liquidity trap conditions (1994–2018 for Japan and 2009–2018 for the USA and the eurozone). Under effective unconventional policies, changes in the base money-growth regime should be associated with similar regime changes in either inflation or investment expenditure growth and the estimation of a switching regimes model allows us to test whether significant joint regime shifts occur in the data. Also, a test of liquidity trap conditions is based on a discrepancy of regime shifts between growth rates of base money and broad money, since this implies a collapse of the money multiplier. Our findings show that drastic shifts in the growth rate of the monetary base do not produce similar behavior for the inflation rate, investment expenditure growth, and broad money growth, thus pointing to liquidity trap conditions and unconventional monetary policy ineffectiveness.

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Hanley, Brian P. "Release of the Kraken: A Novel Money Multiplier Equation’s Debut in 21st Century Banking." Economics: The Open-Access, Open-Assessment E-Journal 6, no. 2012-3 (2012): 1. http://dx.doi.org/10.5018/economics-ejournal.ja.2012-3.

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