Questions tagged [money-supply]

Use for questions primarily related to the stock of money, either narrow money (MB or M0), and broad money (M1, M2, etc). This can also be used in questions related to the creation of money by governments and central banks, including questions related to models with a money market like IS-LM, where the supply is of importance.

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4
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0answers
56 views

How exactly do Participatory Notes induce volatility into the economy?

I was reading up on participatory notes. Wikipedia defines these as "instruments issued by registered foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian ...
3
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0answers
7k views

Did the robbers from Money Heist real steal noone's money?

Money Heist (original Spanish title: La Casa de papel) is a Spanish TV show about a bank heist. From Wikipedia (bolding mine), In Money Heist, a mysterious man, known as "The Professor", is ...
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0answers
67 views

Why is money super neutral in Brunnermeier and Sannikov's I theory of money?

I'm wondering why money is super neutral in Brunnermeier and Sannikov's "I-theory of money", but is not super neutral in their 2016 AER paper "On the optimal inflation rate". In the I-theory of money,...
3
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0answers
30 views

Using US foreign tax policy to offset a raise in interest rates

I am an amateur economist at best, more a person with an economic BS looking to explore data science (I will be using python). I have a theory that I want opinion on that will allow the Fed to raise ...
3
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2answers
2k views

How does reverse repo rate affect money supply?

What is the impact of increase/ decrease of reverse repo rate on Monetary Base, Money multiplier and therefore, overall money supply?
2
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0answers
29 views

How £800,000 of specie is above what the circulation can employ?

I'm reading this (clicking it will download a PDF, so, do as you find good) analysis of Adam Smith's theory of banking and money. On page 13, the author writes: For example, Smith (293) says that if ...
2
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0answers
14 views

Liquidity puzzle in the representative household model

In a cash in advance representative household model, the nominal interest rate may be determined by $$\frac{1}{1 + i_t}= βE_t\left(\frac{M_t}{M_{t+1}}\right)$$ where $\beta$ is the discount rate. I'...
2
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0answers
180 views

Effect of Import Tariff on Supply of Currency on Foreign Exchange Market

I'm struggling with this question below for my macroeconomics course. If Argentina were to impose a tariff on its imports, how will the supply of Argentina's currency and its exchange rate be ...
2
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0answers
241 views

Friedman's version of money multiplier formula

In his Quantity Theory of Money article M. Friedman uses the following formula for the money multiplier: $$ M = H \times \frac{\frac{D}{R}(1 + \frac{D}{C})}{\frac{D}{R}+\frac{D}{C}} $$ where $M = $ ...
2
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0answers
20 views

Theoretical - Direct Money Supply model

The following question is based on a hypothetical scenario, in which the goal(s) is/are to identify how system participants may use/abuse the system to their benefit. You are in the fortunate ...
2
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0answers
454 views

Money Neutrality and Real Interest Rate

I learned from the Fischer Effect that Real Interest Rate = Nominal Interest Rate - Inflation Rate . But in today's class the professor told us that due to money neutrality, an increase in money ...
2
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0answers
44 views

Does Fannie Mae get money from the FED

Does Fannie Mae directly or indirectly get money that is printed from the federal reserve to buy mortgages, or have they ever? If so, when has this happened? How much money? What is the process by ...
2
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0answers
50 views

Why did the rate of money supply growth increase from 1993-96 in the United States?

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
2
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0answers
41 views

When in the history the governments issued non-cash money first?

I understand that the Federal Reserve is issuing money in the form of deposits. Those deposits "are not cash but they are money: they can be used for payment (at which point they become somebody else'...
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29 views

Relationship between CURRCIR, CURRENCY, and MBCURRCIR?

The FRED website has Currency Component of M1 (CURRENCY) Currency in Circulation (CURRCIR) Monetary Base; Currency in Circulation (MBCURRCIR) Monetary Base; Total (BOGMBASE) M1 Money Stock (M1) ...
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0answers
21 views

Difference between IS curve viewed by Keynes and by Friedman

In my economics lectures, we are going through Keynes vs Friedman. As far as I got we have a downward sloping IS curve in the IS-LM model. We get this curve from the Keynesian cross when the rate of ...
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0answers
29 views

What is the impact of money “sent” to another country?

I've been thinking about this a lot and I am not sure I have understood correctly. I was thinking about, for example, migrant workers who send a portion of their income back home, or wealthy ...
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0answers
42 views

How does changing the Bank of England base rate work?

If we assume the demand for money (D above) is fixed in this position (for the purposes of this question), and supply (S) is fixed in this position, then how can the BoE change market interest rates (...
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2answers
502 views

What is the effect of expansionary fiscal policy in case liquidity trap situation?

I've read that liquidity trap means interest rate is at its minimum and increase in real money stock will not lead to fall in interest rate because people will be demanding whatever the amount is ...
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0answers
27 views

Which of the possible monetary policy channels is there empirical evidence for?

There are many possible monetary policy channels. These channels are the different ways that changes in the Fed's interest rates can affect the economy: exchange rate depreciations, business ...
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0answers
25 views

Why is Double-entry Bookkeeping always equal? (Part 2)

In this question, with answer here Destroying the Dollarhypothetically a hack is used to trick whatever programme is used to make sure accounts balance, so say a transfer is made from Bank manager A ...
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0answers
178 views

How does a country increases or decreases it currency value (exchange rate) against other nations currency?

I want to know how a country, Mexico for instance, keeps the exchange rate higher or lower against other nations currency, USD, EUR, JPY. How does the value of a nation currency is valued against ...
1
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1answer
112 views

Does a negative interest decrease the money supply?

If there is less money, its value increases. There is less liquidity when there is less money. Does a negative interest decrease the money supply? Especially when people don't need money: they saved ...
1
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1answer
112 views

Why may printing trillions of dollars not lead to inflation?

By definition, inflation should be affected by the increase of the money supply. During the pandemic, there have been numerous huge monetary policies executed, e.g., quantitative easing (QE), ...
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0answers
14 views

Time series for contrasting empirically money demand and Taylor rules series

Non-cashless New-keynesian models often include discretionary monetary policy expressed as a Taylor rule: $1+i_t = (1+i)\left(\frac{1+\pi_t}{1+\pi}\right)^{\phi_\pi}\left(\frac{y_t}{y_t^n}\right)^{\...
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30 views

Effects between price level and interest rate

I'm looking at the relationship between the price level and the interest rate in an economy. If the price level goes up, with fixed nominal money supply, the real money supply goes down, therefore, ...
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0answers
16 views

Increase in money supply when price are flexible in the basic new keynesian model

I would like to know what would be the effect on price and quantities of an increase in money supply in the basic new keyensian model. What happen if price are fully flexible ? What if prices are ...
0
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0answers
57 views

How does the U.S. Fed printing money result in a debt for future generations?

I'm unclear when I see news articles about how the U.S. Treasury will borrow $2 Trillion in the second half of 2020, why would the Fed printing money result in a debt for future generations? I can ...
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1answer
70 views

How does total money in the economy changes?

I don't understand why total money in economy increases. Where does this money come from?
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0answers
30 views

Pareto efficiency analysis of level of M1 growth from quantitative easing

BMO recently conducted an analysis on US monetary policy and noted that quantitative easing has had diminishing effects on M1 growth. Daniel Krieter wrote: QE has fed through to the real economy in a ...
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0answers
28 views

In credit easing, how do central banks avoid allegations of unequal treatment?

In credit easing, central banks purchase private assets such as corporate bonds. How do central banks choose which corporate bonds to buy? If the central bank buys bonds of one company but not those ...
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0answers
26 views

What happens if you cannot lend more than what you have?

This is hypothetical but what would happen if you cannot lend more money than you have? Say you have £100, the maximum you can lend is £100. But somehow you lend £200 to Joe, and Joe spends all of it ...
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1answer
121 views

A hypothetical question on neutrality of money

Let's assume that we start with an economy producing two goods, A and B, with each priced $100. Each good is weighted using the same quantity, so CPI equals 100. Nominal wage is also 100 dollars. An ...
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0answers
60 views

Does only enough money exist to pay the principal on all debts, and none for the interest or for anything else?

This is reported to be the testimony of Marriner Eccles, Governor of the Federal Reserve Board, before the House Committee on Banking and Currency, on September 30, 1941. Does this mean that only ...
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0answers
36 views

Helicopter Money: a tax on banks?

In this text of voxEU, the author are trying to explain why helicopter money will not have it's expected effect. For that conclusion they try to explain the different schemes on how Central Banks pay ...
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1answer
72 views

Cons of printing more money but not injecting in the system directly

So I don't know if this might be the right place, if it isn't I'd appreciate if anyone can link me to the right place. Anyways here is the question. I've read up on what are the cons of printing more ...
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1answer
101 views

Inflation and stock price

I have indicated my understanding and problem on the attached image below. I'm a bit confused on the impact of inflation on stock price. As increase in inflation would cause nominal interest rate to ...
-2
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1answer
130 views

Would taxing money owned (as a share of purchasing power) be a better form of taxation?

Consider a nation whose money is entirely digital (like Bitcoin), but centralized (unlike Bitcoin). Furthermore, the total money supply is fixed, i.e. money cannot be created nor destroyed. To be ...
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1answer
50 views

Why don't we mint more m0 instead of creating m1 through fractional reserve banking?

From what I understand, m1 money is just as liquid as m0 since an individual can withdraw it from the bank at any time and in any quantity (up to the amount (s)he deposited). Because of this I don't ...
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1answer
72 views

Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...