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 through the 1950s. Fell at constant rate from 1960 to 1984. 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 …

Multipliers 1985-2019 1960-1984

Money Data

Money Data

Money Data

Money Data The Monetary Base 7/2019 $3.27 tr.

Money Data The Currency Ratio 7/2019 0.76

Effective Reserve Ratio Money Data Effective Reserve Ratio

Money Data Excess Reserve Ratio

Money Data M1 multiplier 8/2019 1.16

Money Data M2 multiplier 7/2019 4.54

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