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 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 …

3. Multipliers

4. Money Data

5. Money Data

6. Money Data

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

8. Money Data
The Currency Ratio
7/2019
0.76

9. Effective Reserve Ratio
Money Data
Effective Reserve Ratio

10. Money Data
Excess Reserve Ratio

11. Money Data
M1 multiplier
8/2019
1.16

12. Money Data
M2 multiplier
7/2019
4.54

13. 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.

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

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