The Mechanics of Money: Money Data ECO 473 - Money & Banking - Dr. D. Foster

Multipliers Money multipliers are derived from the data: M1/MB = m1* and M2/MB = m2* Had been constant (+/-) 1960s-1970s. Grew at constant rate in 1980s. Fed targets for money depends on: which multiplier is more stable, and which M is a better predictor of GDP. or, gives up and targets some other variable …

Money Data

Money Data

Money Data

Money Data The Monetary Base

Money Data The Currency Ratio

Effective Reserve Ratio Money Data Effective Reserve Ratio

Money Data Excess Reserve Ratio

Money Data M1 multiplier (1984+)

Money Data M1 multiplier (2001+)

Money Data M2 multiplier (1981+)

Money Data M2 multiplier (2007+)

The Role of the Fed The Fed buys/sells Treasury securities. This raises/lowers bank reserves. This raises/lowers excess reserves. This causes banks to increase/decrease loans. This will raise/lower measured money, M1.

The Banking System Reserves T-Bills Loans Deposits (Transactions) M1

The Mechanics of Money: Money Data ECO 473 - Money & Banking - Dr. D. Foster