Changes In Money Supply Research Articles

Comparative impact of fiscal and monetary policies on economic growth in Nigeria

This work examined the comparative impact of fiscal policy and monetary policy on economic growth in Nigeria over the period 1981 to 2021 using annual time series data on real gross domestic product, broad money supply, government expenditure, total government revenue, and interest rate (lending rate). The objectives are to determine whether the fiscal policy or the monetary policy impacts more on economic growth in Nigeria and to ascertain the causality relationship between fiscal policy, monetary policy and economic growth in Nigeria over the period. The study employed ARDL Bounds Testing methodology in determining whether long run relationship exists between fiscal policy (proxy government expenditure and total government revenue), monetary policy (proxy broad money supply and interest rate (lending rate) and real gross domestic product. The result indicated that broad money supply representing monetary policy has positive relationship with and statistically significant impact on economic growth in Nigeria over the study period as indicated by its t-statistic and probability values of 6.436365 and 0.0000 respectively. Fiscal policy variable (government expenditure), on the other hand, has negative relationship with economic growth and statistically significant impact on economic growth in Nigeria as indicated by its t-statistic and probability values of -2.427968 and 0.0234 respectively. From the result, a change in money supply (monetary policy) affects economic growth positively while a change in Fiscal policy variable (government expenditure) affects economic growth negatively. Besides, the coefficient of monetary policy (0.457048) is greater than fiscal policy coefficient (-0.300554) and implies that monetary policy impacts more than fiscal policy impacts on economic growth in Nigeria. Therefore monetary policy does impact more than Fiscal policy on economic growth in Nigeria over the period studied. The result further indicated that there is no significant causality relationship between fiscal policy, monetary policy and economic growth in Nigeria over the period covered as indicated by the probability values of both fiscal and monetary policy variables employed and economic growth. The study therefore recommends that policy makers should focus more on monetary policy than fiscal policy so as to enhance economic growth since monetary policy has more concern with economic growth than fiscal policy. Keywords: Economic growth, fiscal policy, monetary policy, ARDL, Bound Test, Causality, Nigeria.

An Analysis of Causality between Population Changes, Money Supply and Land Price Changes

An Analysis of Causality between Population Changes, Money Supply and Land Price Changes

An Analysis of Causality between Population Changes, Money Supply and Land Price Changes

An Analysis of Causality between Population Changes, Money Supply and Land Price Changes

The Asymetric Relation between Money Supply and Inflation

In this study using yearly data, it is examined if the effect of money supply (broad money) on inflation is asymmetric or not. 38 countries which have 5% and above inflation rate in average during the period of 1989–2018 are investigated through the panel data analyses. The study differs from other researches, which use monetary shocks in explaining the asymmetric relation, in which that it uses broad money change intervals along with control variables to see the asymmetric impact. Using broad money change intervals, it is concluded that the relation between broad money and inflation is explained better in the asymmetric pooled and fixed effect panel data models, compared to the symmetric models. According to the results, the effects of negative and positive changes in money supply on inflation are not symmetric. Moreover, as broad money increases, inflation goes up further. In the light of this information, it is possible to mention an asymmetric relation between broad money and inflation.

Decomposition of food price inflation in Sri Lanka

The recent upsurge in food prices in Sri Lanka has raised significant concerns, posing a threat to the food and nutritional security of the population. However, the causal factors driving this inflation still need to be better understood. Our study, utilizing Cointegration and Vector Error Correction Models (VECM), investigates the role of supply and demand-side determinants of food inflation. The study identified changes in exchange rate, agricultural wages, fuel prices, money supply, and fertilizer prices as key drivers of food inflation in Sri Lanka. Expansion of the money supply exerted the most substantial influence on food inflation in the long run. At the same time, changes in world market prices were found to be the most influential determinants of food inflation in the short run. Findings underscore the need for a comprehensive strategy that combines supply-side enhancements and demand-side management to control food inflation in Sri Lanka.

Modern Monetary Dynamics: Bids of Money Without Banks, Money Supply Theory, Money Multiplier, and Policy Implications

This research explores modern monetary dynamics with a focus on money supply without bank intermediation, money supply theory, the money multiplier mechanism, and the policy implications arising from this phenomenon. In the contemporary financial context, the emergence of financial technology (fintech) and cryptocurrencies has changed the traditional landscape of money supply, allowing money supply to occur without the direct role of banks. This article discusses the basic concepts of money supply theory, including the factors that affect the money supply in the economy. Furthermore, this study analyzes the money multiplier mechanism, which describes how money injected into the banking system can result in a larger increase in the money supply. Using both theoretical and empirical approaches, this study assesses the monetary policy implications arising from changes in the way money supply occurs, including the challenges for monetary authorities in controlling inflation and financial stability. The results show that this transformation in money supply requires innovative and responsive policy adaptations to maintain the effectiveness of monetary policy in maintaining economic stability.

EVALUATION OF THE EFFECT OF EXPANSIONARY MONETARY POLICIY IMPLEMENTED DURING COVID-19 ON THE TÜRKİYE, EU AND US ECONOMIES

In this article, the effect of expansionary monetary policy implemented during the covid-19 on the Türkiye, the EU and the USA economies has been evaluated. The beginning of the pandemic covers the period between January 2020 and January 2024. The effects of the monthly percentage change in M3 money supply on unemployment, real economic growth and inflation are presented comparatively with graphs. As a result, while Türkiye was the country where the increase in M3 money supply increased inflation the most, the country where unemployment increased most rapidly at the initial phase of the pandemic was the USA. However, over time, the Fed managed to reduce unemployment to historical low levels with the measures it took. The consequence of the contractionary monetary policy after the pandemic, inflation has been brought under control and the option of reducing interest rates has recently come to the fore. Rising inflation in the EU was also taken under control, but unemployment still remained high

The Vagaries of the Sea: Evidence on the Real Effects of Money from Maritime Disasters in the Spanish Empire

Abstract We estimate the effect of money supply changes on the real economy by exploiting a recurring natural experiment: maritime disasters in the Spanish Empire (1531–1810) that resulted in the loss of substantial amounts of silver money. We find that negative money supply shocks caused Spanish real output to decline. A transmission channel analysis highlights slow price adjustments and credit frictions as mechanisms through which money supply changes affected the real economy. Especially large output declines occurred in textile manufacturing against the backdrop of a credit crunch that impaired merchants’ ability to supply their manufacturers with inputs.

Controlling the money supply from macroeconomics perspective: Saving interest and exchange rate

<p>The M2 money supply over the last five years has tended to increase by 10-12%, which is allegedly due to macro factors, namely, low savings interest and increasing exchange rate requirements, causing rising inflation rates. This research aims to determine the influence of savings interest and the exchange rate on the money supply in Indonesia for the 2004-2023 period. The analysis technique used in this research is linear regression with annual time series data of 20 observation units. This simultaneous model has never been studied by previous researchers. The results of this research analysis provide information that every change in savings interest negatively affects the M2 Money supply by 78.60% and a significant, positive effect between the Exchange Rate and Money in circulation by 78.40%. Meanwhile, simultaneous changes in savings interest and exchange rates have a significant effect on changes in money supply in Indonesia and the influence is substantial at 91.20%. Therefore, the conclusion of this research is, that partially and simultaneously the proposed model exhibits a significant influence between savings interest and the exchange rate on the amount of money circulating in Indonesia. Therefore, it is crucial to pay attention to the current macroeconomic conditions concerning these two factors, especially the stability of the exchange rate, to ensure that it does not increase the money supply and inflation which may reduce people’s purchasing power in Indonesia.</p>

Study of the Impact of Inflation, Money Supply on Economic Growth

In a complex and volatile economic environment, the stability and sustainability of economic growth have always been the focus of attention for Governments and economists. Economic growth is not only a matter of national prosperity and stability, but also has a direct impact on the quality of life of the population and the overall well-being of society. However, the process of economic growth is often influenced by a variety of factors, among which inflation and money supply are two crucial economic variables. This paper selects the relevant data of China's consumer price index CPI, broad money and quasi-money supply M2 and gross domestic product GDP from 2003 to 2022 as the corresponding variable indicators, constructs the multiple linear regression model, and conducts the significance test for the model through statistical inference test, econometrics test, and other methods and makes relevant corrections to the model, and then arrives at the optimal model. The analysis shows that there is a close relationship between inflation and money supply, and inflation is an important factor driving China's economic growth, while changes in money supply have a relatively small impact on China's economic growth, and in the long run, inflation has a significant negative impact on economic growth, while money supply has a significant positive impact on economic growth.

Monetary Policy on Exchange Rate Volatility in Nigeria: Evidence from BARDL/ARCH and Garch Modellings

While the impact of monetary policy on the exchange rate has been explored in the literature, the volatility of the exchange rate remains an important issue of concern. This study examines the impact of monetary policy on exchange rate volatility in Nigeria. The study uses annual time series data covering 1987 until 2023 which was analysed using Autoregressive Conditional Heteroscedasticity (ARCH), bootstrap bound test for cointegration and Granger causality test within the vector error correction model. The empirical finding of the ARCH reveals the presence of conditional volatility of the exchange rate. Moreover, findings from the bootstrap bound test establish a long-run relation among the variables. The study further found that the volatility of the exchange rate is accounted for by the changes in money supply and previous fluctuation of the exchange rate. The causality test indicates the existence of causality from exchange rate volatility to money supply, interest rate, saving and population in both in short and long run. The study concludes that the volatility of the exchange rate is driven by the variability of money supply, interest rate and savings. Therefore, controlling the shocks emanating from previous exchange rate volatility and money supply is key to addressing the exchange rate fluctuation in Nigeria. The study recommends a policy mix of utilizing key fiscal and monetary policy tools that could enable Nigeria to achieve exchange rate stability.

The Relationship Between Stock Performance and Money Supply Based on VAR Model in the Context of E-commerce

Abstract With the development of network technology, electronic money as a payment and settlement tool based on the network has been developing at an unprecedented speed. Based on the background of e-commerce, this study uses the data from June 2012 to June 2022 to establish a vector autoregressive model to study the interaction between oil prices, stock performance, and money supply. Such a model can not only further our understanding of the complex relationship between these important variables but also shed light on future oil prices. Granger causality test, impulse response function analysis, and variance decomposition analysis have been applied to variables in the model. The main finding is that oil price responds to changes in stock performance and money supply, stock performance is affected by both oil price and money supply, and changes in money supply can be explained by stock performance fluctuations. Such a relationship can help inform traders in e-commerce and investment banking to generate better predictions of future oil prices.

The Effect of Global Oil and Gas Prices and Production Fluctuations on the Economy of Nigeria

Once a cornerstone of the U.S. economy, crude oil production now experiences a paradigm shift, abundant for domestic consumption and export, signaling a lasting global oil price transformation. Despite a surge in U.S. hydrocarbon production and weakening oil prices, imports from Nigeria dramatically dropped from 1.5 million barrels per day in 2006 to 0.2 million in 2013, ceasing entirely by early 2014. Consequently, Nigeria faced a sudden depletion of trade surpluses and reduced foreign reserves. This study delves into the immediate and long-term challenges confronting Nigeria, particularly examining the impact of recent oil and gas price fluctuations on key macroeconomic factors. Findings highlight the balance of payments' high elasticity to oil price shifts and low elasticity to money supply changes with a coefficient of determination of 78.69%. Additionally, the exchange rate shows low elasticity to oil price changes and moderate elasticity to money supply variations with a coefficient of determination of 82.80%.

Pengaruh Produk Domestik Bruto dan Inflasi Terhadap Jumlah Uang Beredar (M1) di Indonesia Periode 1980 – 2020 Menurut Pendekatan Klasik

The The research aims to determine the effect of gross domestic product (GDP) and inflation on the total money supply (JUB) in Indonesia. This study uses timeseries data from 1980 to 2020 obtained from the Central Bureau of Statistics, and Bank Indonesia. This study uses a classical approach. The research was conducted using multiple linear regression. Hypothesis testing using the t test and f test is used to determine the feasibility of the model. The results of the analysis show that the Gross Domestic Product Variable (X1) partially has a positive and significant effect on the Money Supply in Indonesia. The Inflation Variable (X2) partially influences the Money Supply in Indonesia. Based on the analysis of the Simultaneous Test value prob. F of 0.00 < error rate of 0.05. Thus, Ho is rejected and H1 is accepted. This shows that the Gross Domestic Product (X1) Inflation (X2), simultaneously has a significant effect on the Money Supply in Indonesia, because F count is 36.07 > 3.25 F table and the Adjusted R Square coefficient or the coefficient of determination is 0.7452 This means 74.52% of the variation or change in the total money supply can be explained by variations in Gross Domestic Product and Inflation, while the rest (25.48%) is explained by other variables outside this research model. This is consistent with the quantity theory of money. According to the quantity theory of money, according to Irving Fisher, it states that the amount in circulation is directly proportional to changes in prices.

Research on the Measurement of Central Bank Communication Index and its Impact on the Macroeconomy

With the increasing size of financial assets and the complexity of monetary patterns, countries around the world are gradually becoming more transparent in their monetary policies, using central bank monetary policy communication as a new type of monetary policy instrument. To measure central bank communication more accurately, this paper proposes a dynamic topic model, LDA-BP, based on branching processes, to construct the central bank communication index. At the same time, this paper does four things: it uses the constructed communication index as a proxy variable for the new monetary policy instrument; it builds a TVP-FAVAR model that can extract potential macroeconomic information from many variables, and its time-varying nature can better reflect the dynamic regulatory effect of monetary policy; it constructs a three-dimensional impulse response diagram; and it conducts a systematic analysis of macroeconomic impact. The experimental results of demonstrate its effectiveness on central bank monetary policy communication, as it captures timely information about conventional monetary policy instruments and immediately responds to changes in interest rates and money supply. All three monetary policy instruments are effective in smoothing output volatility, with monetary policy communication having a longer-term impact on the macroeconomy.

Investigating Factors Influencing Inflation in the USA

The determination of inflation has been extensively explored in economic literature and it remains an ongoing and developing field of study. Researchers have examined diverse econometric methodologies and analyzed data from varying time spans to identify the factors influencing inflation. In this research paper, we explore the factors influencing inflation in the USA by utilizing the monthly data from 2002 to 2020. To achieve our aim, we employ error correction model (ECM) and then granger causality method. The findings indicate that certain lagged changes in inflation, consumer price index (CPI) for fuel and utilities, CPI all city average and production price index play a significant role in accounting for the variations in inflation in the USA but the lagged changes in money supply are not a significant determinant in accounting for the fluctuations in inflation in the USA. Moreover, the results of causality analysis suggest that all factors have significant Granger causality on inflation, except money supply.

The Relationship Between Money Supply and Price Movements from A Structural Perspective

This paper examines the impact of money creation and flow on prices, including house prices and financial asset prices, from a structural perspective. By analyzing central bank monetary statistics, the study highlights the relationship between money supply and price changes, emphasizing long-term effects on consumer prices and short-term effects on incremental household deposits. Furthermore, the study emphasizes the importance of monitoring changes in the money supply, both domestically and internationally, with specific attention to the PPI (Producer Price Index) changes. The real estate market is identified as a significant driver of money creation, particularly through deposits in non-bank financial institutions. Additionally, deposits in non-bank financial institutions are found to be an important indicator of stock market volatility. The paper recommends that asset prices be included as a key target of monetary policy and advocates closely monitoring trends in international commodity prices.

Stock Returns and State-Dependent Effects of Changes in Exchange Rate and Money Supply from Central Banks

This study investigates the state-dependent effects of exchange rate movements and money supply shocks on stock market returns using daily stock returns, exchange rate, and variations in money supply data obtained from the databank.worldbank.org website from 1990 to 2022. The stock markets of ten emerging and developed countries were used in the study. The Markov-Switching regression methodology was utilized for this study. The results suggest that for the developed stock markets, in Regime 1, a positive shock to the money supply stimulated a significant rise in the stock returns while in Regime 2, a positive shock to the money supply induced a drop in returns. This suggests that for the developed stock markets, the effect of money supply shock on returns is state-dependent. In the developing stock markets, the coefficient for exchange rate was negative and significant in Regime 1, while it was insignificant in Regime 2. Therefore, the effect of exchange rate on returns is state-dependent in developing countries. Also, the coefficient for volatility in the exchange rate was negative and sizable in both regimes, indicating that the returns effect of volatility is not state-dependent. Basically, each day the exchange rate appreciates, stock returns rises in the developed stock markets while a devaluation policy executed in developing countries stimulated some decline in returns of emerging markets. In both regimes, a rise in money supply shock had positive and significant returns. The effect of money supply on stock returns is not state-dependent. Consequently, developing countries need flexible approaches to managing the variations in the exchange rates and money in circulation. While policymakers in developed markets may need to focus more on reducing volatility rather than adjusting exchange rates to influence stockpiling, those of emerging countries could benefit more from policies that stabilize exchange rates.

Exchange rates and monetary policy when tradable and nontradable goods are complements

This paper examines the implications of complementarity between tradable and nontradable goods for exchange rates and monetary policy in a two-country general equilibrium model. In doing so, it revisits well-known findings in the New Open Economy Macroeconomics literature that exchange rates are proportional to relative national money supplies and that optimal monetary policies respond only to domestic shocks. These results depend on a number of simplifying assumptions, including a unitary elasticity of substitution between tradable and nontradable goods. When this assumption is replaced by a more-realistic one of complementarity, exchange rates depend on relative productivity in addition to money supplies when prices are flexible. When prices are sticky, complementarity amplifies the effect of changes in relative money supplies on the exchange rate and creates additional spillover effects from changes in the foreign money supply to domestic consumption. With complementarity, optimal monetary policies respond to external as well as internal shocks.

Money supply, opinion dispersion, and stock prices

This study develops a simple model that shows how money matters in the determination of stock prices. When investors have different opinions on the stock's value and face market frictions, the money supply in an economy influences the demand for stocks and hence positively affects stock prices. Unlike the discounted-cash-flow model, the present model indicates that stock prices routinely depart from the fundamentals; overpricing or underpricing occurs depending on the amount of money in the economy. The results of the model suggest that stock prices fluctuate because of money supply changes and that monetary policy may cause a disconnect between the stock market and the real economy.