Money Stock Research Articles

Exploring the Depths of the Autocorrelation Function: Its Departure from Normality

In this article, we study the autocorrelation function (ACF), which is a crucial element in time series analysis. We compare the distribution of the ACF, both from a theoretical and empirical point of view. We focus on white noise processes (WN), i.e., uncorrelated, centered, and identically distributed variables, whose ACFs are supposed to be asymptotically independent and converge towards the same normal distribution. But, the study of the sum of the sample ACF contradicts this property. Thus, our findings reveal a deviation of the sample ACF from normality beyond a specific lag. Note that this phenomenon is observed for white noise of varying lengths, and evenforn the residuals of an ARMA(p,q) model. This discovery challenges traditional assumptions of normality in time series modeling. Indeed, when modeling a time series, the crucial step is to validate the estimated model by checking that the associated residuals form white noise. In this study, we show that the widely used portmanteau tests are not completely accurate. Box–Pierce appears to be too conservative, whereas Ljung–Box is too liberal. We suggest an alternative method based on the ACF for establishing the reliability of the portmanteau test and the validity of the estimated model. We illustrate our methodology using money stock data in the USA.

A Modigliani-Miller theorem for the public finances of globalized economies

In line with the capital structure irrelevance principle of Modigliani and Miller (1958), this article shows that when international capital allocation choices are determined by well-informed, deep-pocketed global financial investors, there are no net gains a government of a highly internationally financially integrated (“globalized”) economy can consistently extract from resorting to one type of deficit financing (say, debt) versus another (say, money) or by issuing debt in one form versus another. The article proves a new Neutrality Theorem whereby, in a globalized economy the cost of the capital needed by governments to finance their deficits is independent of whether: i) financing originates from debt or money, ii) debt is denominated in domestic or foreign currency, and iii) money and debt are issued under floating or fixed exchange rates. The theorem's two corollaries show that governments seeking to monetize their deficits must remunerate money holdings with a real return that varies inversely with credibility and directly with the stock of money The article points to areas for future research.

Transition from Fintech to Techfin

The fundamental goal of any state on the current stage of development is professional and systematic shaping and regulating money stock. Only properly organized cash circulation can foster successful establishment of the finance system and development of economy of the country in general. Today in the field of rendering finance services advanced technologies, digital mechanisms and tools are used, which modernize business-models and raise demand of clients. The future of banking service will be affected mainly by FinTech- and TechFin-companies. The authors studied these economic categories, analyzed key benefits and drawbacks of these structures and forecast their interaction in banking and non -banking fields.

The case for 100% money: Ten reasons for separating money issuance from banking

AbstractThe ‘100% money’ proposal aims at divorcing the creation of money from banking, by requiring 100% reserves on transaction accounts. The public monetary authority would then be the sole issuer of means of payment, while the banks would function as true intermediaries, financing loans with pre‐existing money. This article, building on the works of 1930s economists such as Irving Fisher, presents ten arguments in favour of this reform proposal — arguing that it would, in particular, prevent cumulative variations in the money stock, facilitate monetary control, reduce government intervention in banking, improve public finances, and make money creation more neutral.

HIDDEN ENTREPRENEURSHIP IN THE NATIONAL ECONOMY: REASONS AND FEATURES

The purpose of the article is to substantiate and systematize the causes and features of hidden entrepreneurship in the national economy. It is noted that the generalization of the problem of the appearance and reasons for the development of hidden entrepreneurship creates conditions for determining the methods of reducing its level in Ukraine at the current stage. Identification of the main reasons, as well as awareness of the negative consequences of the further development of hidden entrepreneurship for the national economy should become the foundation for the transformation of the institutional environment in the country. Attention is focused on the fact that in scientific works there is a position that the emergence of the "underground economy" is due to endogenous reasons of self-awareness of entrepreneurs, their attitude to existing restrictions and prohibitions, as well as their attitude to the justice of the existence of such restrictions. The reasons for the appearance of hidden entrepreneurship are divided into general and partial. It was determined that common causes exist as a result of prohibitions and restrictions that are established regarding the regulation of the main aspects of economic activity. In turn, partial or specific reasons lead to the emergence of hidden entrepreneurship at the level of individual operations, types of activities, in relation to a specific restriction or prohibition. It was determined that the next stage in the development of social business began at the end of the 20th century as a result of the creation of the first social enterprises. It is during this period that the concept of "social business" begins to be used, which takes on the characteristics of a socio-economic phenomenon and is the subject of independent research by scientists. Thus, analyzing the given historical milestones in the development of the phenomenon of social entrepreneurship, two approaches to solving social problems that have arisen in society are highlighted: financial and institutional. It is substantiated that a significant reason for the possible appearance of hidden entrepreneurship is the practical implementation of the relationship between politics and the shadow economy. In addition, an important reason for the appearance of hidden entrepreneurship is the intention and desire of business to "survive" in conditions of socio-economic instability. This is due to the fact that the excessive costs faced by entrepreneurship in the legal sphere put the entrepreneur himself on the edge of survival, which leads to the forced transfer of the business into the shadows. It is pointed out that the reasons for the appearance of hidden entrepreneurship are also related to circumstances of an objective nature. In this case, it is not so much about a deliberate violation of the established restrictions as about their absence or insufficient formation. It is primarily about the emergence of operations and activities related to the intensification of the use and spread of information and communication technologies, the development of creative industries, social networks, etc. It is justified that in order to explain the cause-and-effect relationships of hidden entrepreneurship, it is advisable to pay attention to the possibilities of using a behavioral approach. That is, the study of the essence of behavior regarding the implementation of hidden entrepreneurship is expedient to conduct also from the standpoint of a behavioral approach and a separate aspect – deviant behavior. Attention is focused on the fact that the basis of behavior oriented towards hidden entrepreneurship is the motive of preserving activity, saving costs, and striving to increase one's own wealth. Usually, this behavior is accompanied by the choice of a form of shadow operations, given the scale of the business and risk appetite. It was determined that the main essential characteristics of behavior oriented towards hidden entrepreneurship are: individuality, propensity to risk, the search for a compromise between the expectation of income and the avoidance of losses. It was concluded that hidden entrepreneurship from the point of view of cause-and-effect relationships is one of the forms of the embodiment of the behavior of the subject of economic relations, which reflects the complex interaction of his rational and emotional motives. The main consequences of hidden entrepreneurship can be: a decrease in competition, especially in the case of an established partnership of shadow business with politics; receiving benefits, privileges, exclusive rights in the state, including due to corruption and lobbying for draft laws; reducing the risks of economic activity; the possibility of legalization of illegally obtained income; illegal appropriation of rights to economic benefits; the formation of stocks of money of shadow origin, due to the need to pay shadow expenses.

A study of macroeconomic variables that effected employment in the United States from 1948 to 2021

The paper provides an analysis of important U.S. macroeconomic variables that effect aggregate employment. The paper seeks to answer the question “What are the deter¬minants of changes in aggregate employment in the United States of America (U.S.)?” This is an important research topic because significant increases in unemployment can have a profound effect on an entire society, not just on its unemployed workers. When employment declines, public health declines, crime increases, suicides increase, and public revenues decrease. This paper uses quarterly data from 1948-2021 to estimate the effect of important macroeconomic variables on aggregate employment. The macroeconomic variables include personal consumption expenditures, U.S. federal government expenditures, nominal GNP, international trade (imports plus exports), M3 money stock, the mini-mum wage level, non-residential fixed investment, non-manufacturing employment, and U.S. federal tax receipts.

WHAT DRIVES MOVEMENTS IN THE INCOME VELOCITY OF MONEY? A CASE STUDY OF THE U.S.

In their efforts to stabilize the price level, central banks often rely on the growth rate in the stock of money as an intermediate target variable. Usually, the premise underlying this approach is that the income velocity of money, defined as the ratio of nominal GDP to the stock of money, either randomly fluctuates around a constant mean or can, at least, be predicted with sufficient accuracy. The purpose of this paper is to put this assumption to the test. We do so by applying a first-order autoregressive model, supplemented by a set of lagged exogenous regressors, to the quarterly changes in velocity in the U.S. Our results confirm previous findings that dynamic dependencies exist between changes in the income velocity of money over successive periods of time. They also support the assertion that rising long-term interest rates lower the demand for money. Perhaps most importantly, however, we find that all else being equal, the degree of financialization in the economy, measured by the ratio of financial assets to GDP, has a positive and statistically significant effect on velocity. A possible explanation of this finding is the increasing availability of tradable, non-monetary financial instruments that are close substitutes for bank deposits.

ARE MONEY AGGREGATES GOOD PREDICTORS FOR THE BULGARIAN INFLATION RATE?

The purpose of this article is to study the relationship between the increase of the money stock and the increase of the price level in the Bulgarian economy through the implementation of a monetarist price gap model and through the study of VAR forecasting performances. Firstly, we obtain that the price gap, namely the difference between the theoretical sustainable price level as defined using the equation of exchange and the observed price level is a relevant predictor for inflation dynamics in Bulgaria. Secondly, the analysis of the performance of VAR forecasts of inflation show that the M2 money supply is a fundamental variable present in the best forecasting models, evaluated through their predictive accuracy, when tested on the recent inflationary upswing which began in the third quarter of 2021. This finding is especially important for Bulgaria, given that its monetary policies are bonded to those of the European Central Bank (ECB) through its local currency board. The ECB’s expansionist monetary policy in the wake of the COVID-19 pandemic can thus be seen as one of the factors explaining the unusually high inflation level in Bulgaria.

The Impact of Japan's Yield Curve Control (YCC) on Inflation of Japan

After the bursting of the bubble crisis in Japan, the government adopted a series of quantitative easing policies to improve the weak economic environment and promote economic growth. in September 2016, the Japanese government began to implement the yield curve control policy to improve the economic environment by controlling the yield on government bonds. the YCC policy, in theory, could promote economic growth and achieve the inflation target in Japan, but the actual effect was lacking. This paper analyses the main reason for the unsatisfactory implementation of the yield curve policy in Japan is the special social environment in Japan. Although the YCC policy has led to an increase in the money circulating in the market, after firms have received the money, they do not expand their investment production at home due to Japan's own lack of domestic demand, but choose to invest the money in stocks, government bonds or other overseas markets for profit. After the money flowed around the market, it went back to the capital market without making the liquidity in the market increase. This paper uses Granger causality tests to analyze the causal relationship between the ageing population, personal savings, average wage and the inflation rate in Japan, and finds through the tests that the inflation rate conversely affects the above factors. The interaction between these two factors has trapped the Japanese economy in a cycle of economic malaise, which is difficult to break with YCC policy.

Causes of Exchange Rate Volatility

This study examined the determinants of exchange rate volatility basing evidence on 7 African countries; Niger, Sudan, Cameron, Equatorial Guinea, Tunisia, Congo, and Cote D’Ivoire from 1990-2023. The study conducted the Autoregressive Distributive Lag (ARDL) bounds testing for co-integration and also estimated the error correction model. Furthermore, ARCH and GARCH models were analyzed to measure the volatility of a time series by fitting an autoregressive model to the squared residuals of the time series. The ARCH and GARCH results suggest the volatility of the exchange rate markets in the aforementioned countries is not random. The speed of adjustment of the volatility in the exchange rate of the Sudanese economy is 39%, in Niger Republic it is 50%, in Cameroon it is 52%, in Tunisia it is 55%, in Congo the speed is 32%, in Equatorial Guinea, the speed of adjustment is 58% and in Côte D’Ivoire the speed is 45%, respectively. The study found that the determinants of exchange rate volatility among African countries vary depending on the specific country. The observed volatility in the Sudanese exchange rate was anchored by the significant positive influence of inflation and income differentials as well as the significant negative influence of interest rate differential. In Niger Republic, exchange rate volatility was driven by the significant positive influence of productivity growth and money supply as well as the significant variation in oil prices and interest rate differentials. The observed short-run volatility in Cameroon's exchange rate was significantly and positively influenced by inflation differential and money supply variation whereas it was significantly but negatively propelled by interest rate differential and oil price shock. In Tunisia, exchange rate volatility was stimulated by the significant positive influence of inflation differential, productivity growth, oil price shock, and the significant negative role played by trade balance. The observed short-run volatility in the Congolese exchange rate was induced by the significant positive impact of inflation differential, income differential, trade balance, variation in money supply, and the significant negative impact of interest rate differential. In Equatorial Guinea, the observed exchange rate volatility was determined based on the significant and positive impact of differential in the inflation rate, oil price shock, changes in the money stock, and the foreign balance of trade. The observed volatility in the Côte D’Ivoire exchange rate was significantly and positively driven by the differentials in inflation rate, interest rate, and income level, the foreign trade balance but significantly stimulated by the negative influence of oil price shock. The general policy advice is that governments of all the countries covered by the study should implement exchange rate controls to limit the volatility of their currency fluctuation by imposing a limit on the amount of foreign currency that can be traded in the country. African governments should monitor the inflation differential between their own country and their trading partners to see if it is becoming too large. If it is, the government might raise interest rates to make its currency more attractive to investors.

Developing Monetary-Credit Tools in National Economy of Russia

The article analyzes work of the Bank of Russia and puts forward suggestions for new monetary-credit tools, which can ensure progressive development of country economy in conditions of rejecting one-polar system of international relations. Policy of the Bank of Russia is characterized by consistent use of such tools as ‘sterilization’ of money stock, its ‘pressing’ by key interest rate, gold selling. These methods implementing basic principles of market fundamentalism in the monetary variant hinder the development of national economy. To replace them the authors propose to fix in the legislative way a direct responsibility of the Ministry of Finance of Russia and the Bank of Russia for attaining planned macro-economic figures and to introduce their coordinated work in line with the Ministry of Economic Development of Russia that can be headed by Deputy Prime Minister. According to the authors it is advisable to pass to policy of real post-capitalism and interest-free economy, as elimination of credit repayment can become a serious incentive factor of intensification for entrepreneurial and working activity. In the monetary sphere it is recommended to introduce the digital ruble in two forms that could delimit deals: with industrial and consumer goods. As a result Russia could show an example of successful solution of the problem acute for many countries, i.e. development of a new system of monetary and credit relations, which on the basis of proposed tools can guarantee a real growth in production and people well-being.

Stock Market Predictions through Deep Belief Neural Network

Abstract: Owing to the huge potential returns, the proportionate degree of exposure, and the adaptability of the transaction, a big number of people choose to invest their money in stocks. This is due to the fact that stocks come with both of these factors. If investors are able to successfully foresee changes in stock values, they have the opportunity to generate considerable returns from their financial investments. The value of a stock may be affected by a wide variety of variables, including the current state of the market and the macroeconomic environment as a whole, significant events in the economic and social spheres, investor attitude, and management actions made by the firm. Predicting the value of a company's shares has always been considered as the most challenging and essential component of academic research. This view continues to hold true today. Utilizing mathematical and statistical models is a common component of the traditional approaches used for predicting stock values. These methods have been around for quite some time. Despite this, these strategies are not enough for dealing with the intricate dynamics of the stock market, which are always evolving. The fast development of computer technology over the last several decades has led to an increase in the prevalence of the use of machine learning among academics. Therefore, this paper outlines an effective strategy for stock market prediction that utilizes K Nearest Neighbors, Linear Regression, along with Deep Belief Network and Decision making.

The Practical Application and Marginal Expansion of Keynesian Model

Recently, there have been a lot of discussion about how variable change will affect output, real wages, and the nominal values of stock in certain assumptions. This paper describes improved new Keynesian model in closed economy for showing the adjustment of different component. Firstly, it will discuss the condition when an increase in tax by using mathematical derivation and examine the change when a rise in nominal wage through the use of macroeconomic analysis, then it will analyze the process when changing the target interest rate. Lastly, it will provide some evaluations of these several conditions. The results of the studies indicate that while an increase in tax, the real wages will rise, output will decline and the nominal money stock will do the same. Besides, the analysis has revealed that when a growth in nominal wages will result in a boost in price level and nominal money stock, and production remains constant. Additionally, when the target interest rate is raised, output will fall, real wages will rise as a result of a declining price level and a fixed nominal wage, and the nominal money stock will drop. All these preliminary results throw light on real life scenarios of central banks and countries.

Money, payments systems, limited participation, and central banking

A limited participation model is constructed to capture the role of a centralized payments system in conducting central bank’s policies. The government controls a money stock through the management of collateral requirements for the payments system as payment policy and open market operations as monetary policy. In equilibrium, due to limited participation, monetary policy whose effects are asymmetric across economic individuals may deteriorate some individual welfare. However, payment policy may wash out this distortion through an adjustment in the choice of credit-settlement types without deteriorating any individual welfare.

Existence of the money multiplier in a developing economy: a case of Saudi Arabia

In this study, cointegration methods are used to test the existence of the money multiplier model in Saudi Arabia for 1997m1-2020m4 and subperiods before and after the 2008 global financial crisis. Residual-based tests support broad (M2 and M3) multipliers over the full sample and pre-crisis period, albeit the M3 multiplier performs better than the M2 multiplier. Johansen's vector autoregression (VAR) and Pesaran et al. (2001) autoregressive distributed lags (ARDL) cointegration and coefficient restriction tests reveal that broad multipliers perform well. Narrow and broad multipliers are mean-reverting in the pre-crisis period, and the M3 multiplier is mean-reverting over the full sample. These multipliers are stable in a dynamic framework. Therefore, the Saudi Arabian Monetary Authority (SAMA) can control money stock and inflation by controlling base money. Narrow and broad multipliers are also predictable and broad monetary aggregates can influence monetary policy.

A Monetary Model of Inflation for Bangladesh, 1974-1985

A model of inflation for Bangladesh is developed and estimated for the period 1974:2-1985 :4, in line with the monetary approach and based on the hypothesis that any disequilibrium in the real money-market adjusts itself through changes in the price level, but not instantaneously. Changes in the prices oftraded gooas in the international market, real permanent income, real money stock, one period lagged rate of inflation, and changes in the terms of trade between traded and non-traded goods are found to be the major determinants of inflation in Bangladesh.

Impact of Covid-19 on Retail Investor Investment Preferences

Main Objective: This research aims to calculate the impact of the Covid 19 pandemic on the investment choices of retail investors by using the stock market as a benchmark. In addition to these objectives, there are several other objectives to evaluate the impact of Covid-19 on stock investment preferences by retail investors in the stock market, to understand whether retail investors are compliant to invest money in stocks by considering the effects of the pandemic identifying retail investor stock preferences after Covid-19 and factor the causes, and analyze the change in returns provided by investment in stocks based on the effects of Covid-19. Background problem: The role of the covid-19 pandemic in changing retail investment preferences has been speculated on since it was first recorded in 2020. The Covid-19 pandemic has caused various consequences that affect investor preferences and subsequently change investment behavior. Novelty: Investor preferences were affected enough by the covid-19 pandemic to change during the global lockdown timeframe. These preferences have been linked to several intrinsic and extrinsic factors that range from personal reasons to investment characteristics and performance in the stock market.

Globalization of Economics and Politics of Antiinflation

 We can conclude that, in understanding of the essence of inflation, preference must be given to the conception according to which the inflation is the violation of the money turnover law, the violation that shows itself in the surplus of money stock compared to its real demand, or in the exchange depreciation followed by price increases without enriching the production quality. Among various monetary and non-monetary factors causing the inflation, the main ones are the growth of demand and the growth of costs (of shipping). In fact, mostly, the monetary and non-monetary factors of the price increases act simultaneously in economy. For the moment, there is no any perfect classification of inflation types in the economic literature. The expanded scheme of classification given in the paper is approximative and needs to be supplemented by inflation types which appear during the integration processes in the world. The low efficiency of the monetary model of anti-inflation regulation, applied in most of the countries in the world, made it necessary to use a new strategy against inflation, i.e. inflation targeting. It appeared as an intersection of new classical and new Keynesian theories, as a reaction to the weakening of results of monetary aggregates and exchange rate targeting.

Providing an Islamic approach of monetary systems

PurposeThe purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic paradigm, including the Quran, Sunnah, jurisprudence and Islamic philosophy thinking, to illustrate the origins of the Islamic approach to monetary systems. The money interest rate and its studies are explained, and the role of money and credit in the production function is considered. Then, it is shown that money maintains the demand for money in the overlapping generation model, as well as the consumption behavior of households. It is followed by an explanation of general Pareto optimality and the role of the money interest rate in inefficiency and nonoptimality for households and firms. Finally, Section 4 concludes the paper.Design/methodology/approachThis paper studies the effects of money issuance and bank creation on Pareto optimality. In explaining the origins of the Islamic approach to monetary systems, the literature review, it focuses on western economics’ literature and Islamic economics paradigms such as the Quran, sunnah, jurisprudence and Islamic philosophy thinking. In modeling section, the authors show how banks’ fractional reserve credit is profitable. The authors also examine how the introduction of the money interest rate can change the Pareto optimality. In this regard, the comparison between two situations, namely, financing by the stock of money and borrowing in the credit market, indicates that welfare is reduced by the creation system and is inefficient (or nonoptimal). The result is that no money and no credits are created. The provision of this system compensates money by increasing the real money supply or deflation. To ensure Pareto optimality, it has been proven in the field of microfoundation that there should be no fixed money contracts and no money interest rates. It is necessary that the interest rate on consumption credit is zero or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector.FindingsAs a result, the authors proved mathematically that the money interest rate must be zero to ensure productivity and Pareto optimality. On the other hand, the introduction of money or credit through loanable money leads to inefficiency, both in production and households and in the general equilibrium. The inflation generated by the credit system stimulates the change in the price level and perpetuates this inefficiency. Thus, if the authors want to return to the optimality condition, the interest rate on consumption credit must be zero or Qarz-al-Hasna is breached. However, the behavior of the fractional banking system and the credit mechanism teaches us that the money interest rate is an integral part of credit and loanable funds. Thus, the elimination of the money interest rate from the banking system without bank creation is implausible. Finally, to ensure Pareto optimality, it has been mathematically proven in the field of microfoundation that there should be no fixed money contracts and no money interest rate. It is necessary that the interest rate on consumption credit is zero, or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector. The result is that no money and credit are created. The provision of this system compensates money by increasing the real money supply or deflation.Originality/valueThe capitalist theory of the definition of interest plays a decisive role in economic science. In this context, the authors are dealing with different vocabularies and terms for the interest rate. These different vocabularies have their origin in the different economic situations and especially determine the thinking of the schools. Because of the relationship between future and spot, the authors have to transform the variable “level” into the variable “interest rate” in the dynamic space. Finally, the exact explanations for the movement and evaluation of the economy are revealed by the correlation of the different interest rates.

A connection between the consumer theory and quantity theory of money

This essay shows a connection between consumer theory and quantity theory of money, inspired by Richard Cantillon's approach, in which changes in the money stock influence price levels, characterizing the elasticity of the money supply in relation to the price level to the consumer. Thus, changes in the money supply generate changes in the price level, and such monetary effects impact the consumer's optimal choice if the change in the money supply influences the prices of two goods with different intensities. When the government expands the amount of money in the economy, it affects relative prices and, consequently, changes the decisions of economic agents in a market economy. Based on US quarterly data, 1946:04 to 2019:04, the empirical results show that the change in the stock of money directly affects the optimal change in consumption and indirectly affects the optimal change in consumption via the change in relative prices, showing that money does not it's neutral.