1. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Capitolo 9 LOfferta di Moneta e la Politica Monetaria

2. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.1 Instruments, Targets, and Objectives in Monetary Policy Fig. 9.01

3. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.1 Fig. 9.01 Instruments Bank refinancing rates (repo and discount rates) Monetary base control using open market purchases and sales Required reserve ratios Targets Long-term market interest rates Monetary aggregates (M1, M2, M3…) Exchange rates Inflation rates Objectives Price stability (primary objective) Short-term growth (secondary) Exchange rate stability (secondary)

4. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.2 Monetary policy procedures Fig. 9.02

5. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.2 Monetary policy procedures (a) Money targeting (b) Interest rate targeting Nominal money Interest rate Nominal money Interest rate is now endogenous Quantity of nominal money is now endogenous. Fig. 9.02

6. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.1 Table 9.01 Consolidated balance sheet of the Eurosystem 30 April 2004 ( billions)

7. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Wheres M0? Foreign assets Loans to comm. banks Claims on governments Reserves of commercial banks Bank notes held by nonbanks Deposits of government Net worth Deposits of private sector Deposits of government Real assets, incl. net worth of banking sector Government and private debt Net worth Vault cash and reserves at Central Bank Loans and securities Liabilities to Central Bank Deposits of private sector Net worth Bank notes held by nonbanks Central Bank Consolidated Government and Nonbank Private Sector Commercial Banks Assets Liabilities Assets Liabilities Assets Liabilities Figure 9.3 Fig. 9.03

8. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.4 Reserves-money stock link Reserves Deposits change in reserves change in deposits Fig. 9.04

9. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Base monetaria = M0 = CU + R CU = ccM1 e R = rrD Moneta = M1 = CU + D = ccM1 + D D = (1-cc)M1 che sostituito in M0 M0 = [cc + rr(1-cc)]M1 M1/M0 = 1/ [cc + rr(1-cc)] = mm dmm/drr = -(1-cc)/([cc + rr(1-cc)]) 2 <0 dmm/dcc = -(1-rr)/([cc + rr(1-cc)]) 2 <0

10. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.2 Table 9.02 M0, M2, money market multipliers, and currency 2003

11. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.3 Theoretical values of the money multiplier (M1/M0) Table 9.03 Currency/M15%10%20% 0%20.010.05.0 5%10.36.94.2 10%6.95.33.6 20%4.23.62.8 30%3.02.72.3 Reserve ratio =rr

12. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 The money market Fig. 9.06

13. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 Derived demand for monetary base Nominal money Interest rate 0 Ceteris paribus Fig. 9.06

14. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 The supply of the monetary base controlled by the central bank Interest rate 0 Fig. 9.06 Nominal money A

15. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 If the central bank does not respond to an increase in the demand for monetary base... Interest rate 0 B Fig. 9.06 Nominal money A

16. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 If the central bank instead wishes to hold interest rates constant... Interest rate 0 Fig. 9.06 Nominal money CA

17. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.6 Actually the central bank can choose any point along the new demand for monetary base Interest rate 0 A B C Fig. 9.06 Nominal money

18. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.7 Fig. 9.07 ECB interest rates

19. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.8 Fig. 9.08 The Bank of Englands Inflation Forecast: The Fan, 2004-06 (Percentage increase in prices on a year earlier)

20. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.9 Foreign exchange market intervention and sterilization Fig. 9.09

21. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.4 Seigniorage around the world Source: Masson, Savastano and Sahrma (1998) Table 9.04 1980­911992-951980­911992-95 Advanced Economies0.80.37.23.3 US0.4 5.42.8 Germany0.50.32.93.5 Japan0.60.32.60.9 Hungary0.44.112.723.1 Poland7.02.299.534.6 Israel1.90.5111.111.3 Africa1.41.319.622.2 Asia1.52.07.67.1 Latin America3.22.4251.4110.1 SeigniorageInflation

22. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.5 Table 9.05 Deposit insurance in Europe 2004

23. ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Figure 9.10 Reserve and capital adequacy ratios AssetsLiabilities Central bank reservesDeposits Net worth Loans and securitiesTier 1 (primary) capital Tier 2 (secondary) capital Typical Commercial Bank, SA (1) (2) Fig. 9.10