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Money Supply (money + supply)
Selected AbstractsUSE OF THE MONEY SUPPLY IN THE CONDUCT OF JAPAN'S MONETARY POLICY: RE-EXAMINING THE TIME-SERIES EVIDENCE,THE JAPANESE ECONOMIC REVIEW, Issue 2 2005RYUZO MIYAO This paper re-examines whether the money supply (M2 + CDs) can predict future economic activity in Japan, using recent data to the end of 2003. I find that the linkage between M2 and income or prices has largely disappeared since the late 1990s. Evidence suggests that (i) time deposit behaviour is primarily responsible for the breakdown in the M2,income relationship; (ii) bank loans also lost their predictive content in the late 1990s; and (iii) there has been a close link between time deposits and bank loans. Non-performing loans problems and ongoing restructuring may be root causes of these findings. [source] Effect of Money Supply on Real Output and Price in ChinaCHINA AND WORLD ECONOMY, Issue 2 2009Chih-Hsiang Chang F01; Q13; Q41 Abstract Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks after filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People's Bank of China's policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China. [source] Philip I of England, embezzlement, and the quantity theory of moneyECONOMIC HISTORY REVIEW, Issue 2 2002Glyn Redworth Early in 1555, King Philip I of England minted at the Tower of London over £40,000 in sterling from New World silver brought from Spain. By probing Spanish and English accountancy procedures, this article demonstrates that this sum has not been included in either sixteenth ,century or modern calculations of the circulating medium. Revised estimates for the money supply are given and possible inflationary effects on the mid ,Tudor price rise are considered. [source] Currency boards: More than a quick fix?ECONOMIC POLICY, Issue 31 2000Atish R. Ghosh Once a popular colonial monetary arrangement, currency boards fell into disuse as countries gained political independence. But recently, currency boards have made a remarkable come-back. This essay takes a critical look at their performance. Are currency boards really a panacea for achieving low inflation and high growth? Or do they merely provide a ,quick fix' allowing authorities to neglect fundamental reforms and thus fail to yield lasting benefits? We have three major findings. First, the historical track record of currency boards is sterling, with few instances of speculative attacks and virtually no ,involuntary' exits. Countries that did exit from currency boards did so mainly for political, rather than economic reasons, and such exits were usually uneventful. Second, modern currency boards have often been instituted to gain credibility following a period of high or hyperinflation, and in this regard, have been remarkably successful. Countries with currency boards experienced lower inflation and higher (if more volatile) GDP growth compared to both floating regimes and simple pegs. The inflation difference reflects both a lower growth rate of money supply (a ,discipline effect'), and a faster growth of money demand (a ,credibility effect'). The GDP growth effect is significant, but may simply reflect a rebound from depressed levels. Third, case studies reveal the successful introduction of a currency board to be far from trivial, requiring lengthy legal and institutional changes, as well as a broad economic and social consensus for the implied commitment. Moreover, there are thorny issues, as yet untested, regarding possible exits from a currency board. Thus currency boards do not provide easy solutions. But if introduced in the right circumstances, with some built-in flexibility, they can be an important tool for gaining credibility and achieving macroeconomic stabilization. [source] Announcement effects on exchange ratesINTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2009Mikael Bask Abstract An asset pricing model for exchange rate determination is presented, where technical analysis in currency trade is incorporated in the form of a moving average technique. As a result, the model has jmax+1 rational expectations equilibria (REE), where jmax is large, since jmax past exchange rates affect the current rate due to technical analysis. There is, however, a unique REE that is economically relevant, and focusing on this REE, it is shown that the exchange rate is much more sensitive to a change in money supply than when technical analysis is absent in currency trade. This result is important since it sheds light on the so-called exchange rate disconnect puzzle in international finance. Copyright © 2008 John Wiley & Sons, Ltd. [source] Is monetary discipline a precondition for the effectiveness of Iran's export promotion policies?JOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 3 2006H. Molana In the last decade, Iranian authorities have implemented a number of trade reforms and export stimulating policies. They have also tried to stabilize the dollar exchange rate and eliminate the black market premium. These policies have had little, if any, lasting favourable effect on non-oil exports. One conjecture may be based on the inconsistency of their monetary policy: as money supply is used independently,without any regard for trade reforms and export promoting policies,to accommodate government's fiscal needs, its inflationary consequences undermine export incentives. We use 1982:Q1-2000:Q2 data to estimate the response of exports to a one-off rise in money supply and find that the results support the above conjecture. Copyright © 2005 John Wiley & Sons, Ltd. [source] Optimal Monetary Policy, Taxes, and Public Debt in an Intertemporal EquilibriumJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 3 2002Bertrand Crettez This article is devoted to a study of the optimal monetary and fiscal policies within the framework of an overlapping generations model with cash-in-advance constraints. We first characterize the intertemporal equilibrium. Then we show how to decentralize the optimal growth path using available policy instruments (i.e., labor income and capital taxes, public debt, money supply). Between the four instruments: wages and capital taxes, debt and monetary policy, one is redundant among the three last which implies that the Friedman Rule is only a special case. [source] A POST-KEYNESIAN STOCK-FLOW CONSISTENT MODEL FOR DYNAMIC ANALYSIS OF MONETARY POLICY SHOCK ON BANKING BEHAVIOURMETROECONOMICA, Issue 3 2008Edwin Le Heron ABSTRACT We try to make Keynes' approach compatible with an endogenous theory of the money supply. For that purpose, the principle of liquidity preference is generalized within a competitive banking framework. Private banks can impose a monetary rationing independently of the central bank. Then, we analyse the consequences of a monetary policy shock on the financial behaviour of banks. We clarify the dynamic process between the monetary policy and net investment within a Minskyan approach. First, we build a Post-Keynesian stock-flow consistent model with a private-bank sector introducing more realistic features. Second, we perform some simulations. [source] A POST-KEYNESIAN AMENDMENT TO THE NEW CONSENSUS ON MONETARY POLICYMETROECONOMICA, Issue 2 2006Article first published online: 24 APR 200, Marc Lavoie ABSTRACT A common view is now pervasive in policy research at universities and central banks, which one could call the New Keynesian consensus, based on an endogenous money supply. This new consensus reproduces received wisdom: in the long run, expansionary fiscal policy leads to higher inflation rates and real interest rates, while more restrictive monetary policy only leads to lower inflation rates. The paper provides a simple four-quadrant apparatus to represent the above, and it shows that simple modifications to the new consensus model are enough to radically modify received doctrine as to the likely effects of fiscal and monetary policies. [source] Endogenous Money: What it is and Why it MattersMETROECONOMICA, Issue 2 2002Thomas I. Palley Endogenous money is widespread in economic theory. The post-Keynesian contribution is identification of a causal link between bank lending and the money supply. Though driven by macroeconomic concerns, the post-Keynesian debate has reduced to a microeconomic debate over the role of financial intermediaries in the accommodation process. In the IS,LM model endogenous money flattens the LM. This misses its substantive significance which is the discrediting of monetarist money supply policy rules and monetarist critiques of central banking, its identification of the key role of credit, and its provision of a credit-driven theory of the business cycle. [source] THE YEN-DOLLAR EXCHANGE RATE AND MALAYSIAN MACROECONOMIC DYNAMICSTHE DEVELOPING ECONOMIES, Issue 3 2007Mansor H. IBRAHIM E30; F33; F40 This paper empirically assesses the effect of the yen-dollar exchange rate on selected macroeconomic variables, namely, real output, price level, and money supply, for Malaysia. The results, which are based on a vector autoregressive framework, suggest that variations in the yen-dollar rate can have significant influences on Malaysia's macroeconomic variables. More specifically, the yen-dollar depreciation leads to contraction in real GDP and money supply. These results are fairly robust to alternative model specifications. We believe that, apart from providing important insights into the interactions between the yen-dollar rate and domestic macroeconomic variables, our results contribute to the debate on choice of exchange rate regimes for Malaysia. [source] USE OF THE MONEY SUPPLY IN THE CONDUCT OF JAPAN'S MONETARY POLICY: RE-EXAMINING THE TIME-SERIES EVIDENCE,THE JAPANESE ECONOMIC REVIEW, Issue 2 2005RYUZO MIYAO This paper re-examines whether the money supply (M2 + CDs) can predict future economic activity in Japan, using recent data to the end of 2003. I find that the linkage between M2 and income or prices has largely disappeared since the late 1990s. Evidence suggests that (i) time deposit behaviour is primarily responsible for the breakdown in the M2,income relationship; (ii) bank loans also lost their predictive content in the late 1990s; and (iii) there has been a close link between time deposits and bank loans. Non-performing loans problems and ongoing restructuring may be root causes of these findings. [source] OPTIMAL CONTRACTS FOR CENTRAL BANKERS AND PUBLIC DEBT POLICY*THE JAPANESE ECONOMIC REVIEW, Issue 4 2004HIROSHI FUJIKI We consider how the second-best allocation corresponding to an optimal rule under the policy commitment of a central bank and a fiscal authority with a consolidated government budget constraint can be achieved, even though these authorities are unable to commit themselves to their optimal policies and ignore the strategic interaction between their policies. Our results show that the best practical institutional arrangement is to have an instrument-independent central bank that controls the money supply to determine the rate of inflation and commits itself to an inflation target that depends on fiscal variables. [source] Industrial output and stock price revisited: an application of the multivariate indirect causality modelTHE MANCHESTER SCHOOL, Issue 3 2004Bwo-Nung Huang This paper presents an analysis of the empirical relationship between stock returns, industrial production, money supply, inflation and interest rates across five countries,Canada, France, Japan, Taiwan and the USA. Specifically, we estimate a five-variable vector autoregression model in order to answer the question: does industrial production predict stock returns directly or indirectly (i.e. does industrial production help predict a variable that itself predicts stock returns)? The key result is that there is no direct and significant statistical relationship in any of the five countries, but there is strong evidence of an indirect relation in Taiwan (via money supply) and another indirect relation in the USA (via interest rate). This indirect causality is verified by examining the relative predictability of stock returns both with and without the additional information. Predictability increases when the indirect relationship is exploited. [source] A Small Open Economy with Staggered Wage Setting and Intertemporal Optimization: The Basic AnalyticsTHE MANCHESTER SCHOOL, Issue 4 2003John Fender We develop a model of a small open economy with optimizing, infinitely lived agents. They have monopoly power over the price of their labour, and wage setting is staggered. We consider the effects of an unanticipated increase in the money supply. In all cases, the exchange rate depreciates immediately to its long-run value with no overshooting. With unitary elasticity of substitution in preferences between home and foreign goods, output rises instantaneously but gradually returns to its initial value in the long run. Trade remains balanced at all times. With an elasticity of substitution above unity, there is a trade surplus in the short run and a deficit in the long run, as permanently higher net foreign assets are accumulated. Convergence to the steady state is faster, and thus output persistence is smaller. With unitary elasticity the dynamics are the same as in an equivalent closed economy, so, to the extent that an elasticity greater than one is plausible for an open economy, we conclude that openness reduces output persistence. [source] Effect of Money Supply on Real Output and Price in ChinaCHINA AND WORLD ECONOMY, Issue 2 2009Chih-Hsiang Chang F01; Q13; Q41 Abstract Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks after filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People's Bank of China's policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China. [source] | |||||||||||||