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

2. 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 …

3. Money Data

4. Money Data

5. Money Data

6. Money Data
The Monetary Base

7. Money Data
The Currency Ratio

8. Effective Reserve Ratio
Money Data
Effective Reserve Ratio

9. Money Data
Excess Reserve Ratio

10. Money Data
M1 multiplier (1984+)

11. Money Data
M1 multiplier (2001+)

12. Money Data
M2 multiplier (1981+)

13. Money Data
M2 multiplier (2007+)

14. 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.

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

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