1. Determinants of the Money Supply
The Economics of Money, Banking, and Financial Markets Mishkin, 7th ed. Chapter 16
Determinants of the Money Supply

2. Money Multiplier: M = m × MB
Deriving Money Multiplier
R = RR + ER RR: required reserves
RR = r  D ER: excess reserves
R = (r  D) + ER R: total reserves
Adding C (currency) to both sides
R + C = MB = (r  D) + ER + C
1. Tells us amount of MB needed support D, ER and C
2. $1 of MB in ER, not support D or C
MB = (r  D) + (e  D) + (c D)
= (r + e + c)  D

3. Money Multiplier: M = m × MB
m < 1/r because no multiple expansion for currency and because as D  ER 
Full Model
M = m  (MBn + DL)

4. Excess Reserves Ratio Determinants of e
1. i , relative Re on ER  (opportunity cost ), e 
2. Expected deposit outflows, ER insurance worth more, e 

5. Factors Determining Money Supply

6. Money Supply

7. Determinants of the Money Supply

8. Deposits at Failed Banks: 1929–33

9. e, c: 1929–33

10. Money Supply and Monetary Base: 1929–33