Intermediate Macroeconomics Lecture 19
Intermediate Macroeconomics Lecture 19
Money Supply 100%-reserve banking Fractional-reserve banking
Money Supply 100%-reserve banking Fractional-reserve banking
Money Supply A model of money supply The monetary base: C+R The reserve-deposit ratio: rr=R/D The currency-deposit ratio: cr= C/D Money supply: M=C+ D Monetary base: B=C+ R
Money Supply A model of money supply The monetary base: C+R The reserve-deposit ratio: rr = R/D The currency-deposit ratio: cr = C/D Money supply: M = C + D Monetary base: B = C + R
Money Supply M/B=(C+D)/(C+R) M/B=(cr+1)/(cr rr) M=[(cr+1)/(cr rr]B M=m*B m the money multiplier
Money Supply M/B = (C+D) / (C+R) M/B = (cr+1) / (cr + rr) M = [(cr+1) / (cr + rr)]*B M = m * B m: the money multiplier
Money Supply Money supply depends on ① Monetary base(B):+ 2 Reserve-deposit ratio(rr) 3 Currency-deposit ratio(cr)
Money Supply Money supply depends on ① Monetary base (B): + ② Reserve-deposit ratio (rr): - ③ Currency-deposit ratio (cr): -
Money Supply Instruments of monetary policy 1 Open-market operation ② Reserve requirement ③ Discount rate
Money Supply Instruments of monetary policy ① Open-market operation ② Reserve requirement ③ Discount rate
Money Demand Portfolio theories of money demand the role as a store of value offers a different combination of risk and return than other assets(safe/normal return) The D for M depends on the risk and return offered by M and by the various assets households can hold instead of m
Money Demand Portfolio theories of money demand --- the role as a store of value --- offers a different combination of risk and return than other assets (safe/normal return) The D for M depends on the risk and return offered by M and by the various assets households can hold instead of M
Money Demand Example: (M/P)=L(rs, rh, ze,w) Are portfolio theories useful for studying money D? Depends Narrow measures of M Broad measure of M---plausible M is a dominated asset (as a store of value, it exists alongside other assets that are always better
Money Demand Example: Are portfolio theories useful for studying money D? Depends… Narrow measures of M --- Broad measure of M --- plausible M is a dominated asset (as a store of value, it exists alongside other assets that are always better) (M / P) L(r ,r , ,W ) e s b d =
Money Demand Transaction theories of money d the role as a medium of exchange best explains why people hold narrow measures of money although returns are low, benefits of making transactions more convenient are important
Money Demand Transaction theories of money D --- the role as a medium of exchange --- best explains why people hold narrow measures of money --- although returns are low, benefits of making transactions more convenient are important
Money Demand Baumol-Tobin model of cash management Money holding over the year W)人 holding M holding time time
Money Demand Baumol-Tobin model of cash management Money holding over the year time M holding M holding time 1 1 Y
