M2 Money Supply Research Articles

The Impact of Exchange Rate Volatility on The Inflation Rate: Evidence from Turkey

Exchange rate volatility can directly impact the general price level by causing changes in the costs of imported goods and services. In developing economies such as Turkey, sensitivity to exchange rate movements can be more pronounced due to a high dependence on imports and external financing sources. In this study, the relationship between variables was analyzed within the framework of the VAR model using the logarithmic values of monthly data spanning from January 2003 to May 2024. The cointegration test revealed that the variables are cointegrated in the long run and do not move independently of each other. The Granger causality test found a one-way causality at the 1% significance level, where M1 money supply affects both the exchange rate and inflation, and inflation affects the exchange rate. Based on the results obtained from the VAR models, variance decomposition analysis indicates that in Turkey, the primary driver of inflation is changes in the M1 money supply. Impulse response functions reveal that the effect of inflation on the exchange rate lasts for eight periods and ceases after the eighth period. In contrast, the response of inflation to M1 money supply persists for ten periods, exhibiting a slight increasing and decreasing trend after the seventh period. Therefore, in the formulation of economic policies, the effects of exchange rate and M1 money supply on inflation should be carefully analyzed and appropriate strategies should be determined.

Analysis of The Influence of The Value of Non-Cash Payment Transactions on The Amount of Money Supply in Indonesia

This literature explains the influence of credit card, debit card, and e-money transaction values on Indonesia’s M1 and M2 money supplies. Time series data from January 2010 to August 2023 are used taken from the official websites of Bank Indonesia and the Central Statistics Agency . The Vector Error Correction Model (VECM) is the analysis method employed. According to the study’s findings, the M1 and M2 money supply is significantly impacted by the value of debit card transactions in both the short and long term. While it has a large short-term impact on M1 and M2, the credit card transaction value variable has a negligible long-term impact on M2. In addition, the value of e-money transactions demonstrates that they have a large impact on M1 both in the short and long terms. On the other hand, it has a significant impact on M2 in the short term but not on M2 in the long run.

Forecasting Market Activity and Aggregate Demand in China Using Time Series Models

The purpose of this study was to forecast market activity and aggregate demand in China using time series models. Forecasts of market activity (MA) and aggregate demand (AD) provide insights into consumer behavior and economic trends, which are crucial for policymakers and businesses alike. In order to forecast the MA and AD in China, this study uses the time series model, especially the exponential smoothing model. Based on the increase rates of M1 and M2 money supply, respectively, and the difference in increase rates between them. These indicators are necessary to assess MA and AD and reflect changes in money liquidity and people's spending behavior. The results suggest that people will be less willing to spend and more inclined to save in the coming years. This finding suggests that MA may decline as consumers become more cautious and prioritize saving over spending. This trend could be attributed to a variety of factors, including economic uncertainty or changes in monetary policy. The implications of this research are significant because it provides a forecasting framework that can help policymakers and businesses anticipate changes in consumer demand and adjust their strategies accordingly. Understanding these trends can lead to more informed decisions in economic planning and financial forecasting.

FORECASTING CONSUMER PRICE INDEX USING MACROECONOMIC VARIABLES: A COMPARATIVE ANALYSIS OF MACHINE LEARNING AND DEEP LEARNING APPROACHES

The Turkish economy has faced many economic difficulties throughout it's history. At this point, predicting inflation accurately is very important for policy makers, businesses, investors and consumers. This study aims to estimate the Turkish Consumer Price Index. Producer price index, M1 money supply, gold price, dollar price, natural gas price and interest rate variables were used to estimate the CPI for Turkey. The variables used in the research were obtained through EVDS, the Central Bank's Electronic Data Management System. Monthly data from January 2003 to August 2023 was used in the study. The obtained data were estimated using DDPG, XGBoost, SVR, KNN and CNN-BiLSTM methods. Model performances were compared using RMSE, MSE, MAE, MAPE and R2 statistical coefficients. When model performances were evaluated, the best CPI prediction for Turkey was obtained by the SVR method.

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>

The Impact of Monetary Policy on Economic Growth in Vietnam

This article focuses on investigating the impact of monetary policy on economic growth in Vietnam in both the short and long term using the Vector Error Correction Model (VECM) over the period from 2005 to 2023. The research results indicate that, in the long term, both M2 money supply and exchange rates have a positive impact on economic growth. Among these, the influence of the M2 money supply on growth is greater than that of exchange rates, suggesting that adjustments in the M2 money supply allow for immediate and comprehensive effects on the economy compared to adjustments in exchange rates. Conversely, real interest rates have an inverse effect on GDP in the long term.

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.

Can U.S. macroeconomic indicators forecast cryptocurrency volatility?

This research examines the ability of 28 U.S. macroeconomic variables to forecast the volatility of six cryptocurrencies. In- and out-of-sample analyses are performed to validate their forecasting ability. Our analysis shows that during the full-sample period, 15 variables display forecasting ability, while post-COVID-19 period, this number is 17. Among these variables, the most influential include the consumer confidence index, leading economic index, consumer price index, U.S. exports and U.S. imports. Importantly, the predictive ability of these variables appears to have strengthened during the post-COVID-19 period. The out-of-sample results confirm the effectiveness of those macroeconomic variables in the in-sample tests. Furthermore, the robustness test reveals that incorporating these U.S. macroeconomic variables can enhance the performance of the GARCH volatility model. In this study, combination methods are used to enhance forecasting stability and are proven to have good forecasting ability. Our research also indicates that integrating global macroeconomic variables can enhance forecasting ability while recognizing the valuable information provided by U.S. macroeconomic variables. Additionally, we find that variables such as the short-term government bond yield and the M1 money supply emerge as important predictors of cryptocurrency bubbles.

Monetary policy and risk of commercial banks in Vietnam

This study investigates the bank risk-taking channel of monetary policy transmission by comprehensively analyzing multiple bank risk measurements amid monetary policy shocks in Vietnam. Using banking data for 2008–2021, a dynamic panel model is estimated to examine the risk exposure of 30 Vietnamese commercial banks. The paper employs the annual M2 money supply growth as a monetary policy variable, besides two policy interest rates established by the central bank. We find that an expansion of monetary policy benefits the quality of loan portfolios; however, reduced interest rates or an extended money supply increase insolvency risk. We also document that heightened economic growth corresponds to a reduced likelihood of credit and insolvency risks, while a surge in the inflation rate leads to an escalation in insolvency risk, manifested by a decline in the Z-score index. Overall, the findings on different risk dimensions in this paper are expected to draw a comprehensive picture of banks’ risk appetite and behavior in response to monetary changes.

TVP-VAR 모형을 이용한 중국 통화정책이 부동산가격에 미치는 파급효과

Since the reform and opening up, the Chinese economy has entered a stage of rapid development and people’s demand for housing has also risen in tandem. In particular, the real estate market has grown rapidly since the reform of the housing welfare system in 1998. In 2003, the real estate industry became the pillar industry of Chinese economic development and the real estate price rose quickly as it was driving the economy. The Monetary Authority has macroscopically controlled the real estate price for nearly 20 years since 2001, but the housing price still maintains a high-speed growth, and the irrational growth brings the housing price bubble, which is extremely unfavorable to the stable development of Chinese economy. Since the financial crisis, the government has called for tougher and better regulation of house prices. Monetary policy is the most common macro-control means. Monetary authorities generally use such tools as money supply, interest rates and exchange rates to control housing prices. However, how to control housing prices according to monetary policy and stabilize the outlook for housing prices are issues that need to be solved urgently. Therefore, it is important to explore the impact relationship of monetary policy on real estate prices. This paper sorts out the development process of Chinese monetary policy and real estate market over the past 20 years and makes qualitative analysis of the adjustment process of monetary policy. Relevant analysis showed that in the sample interval, money supply M2 showed positive (+) correlation with housing price broadly, while interest rate showed negative (-) correlation with housing price. Then this paper builds a time-varying parameter vector autoregression (TVP-VAR) model by selecting money supply, short-term interest rate and average selling house price (EP) as indicators based on national macro-monthly data from 2001 to 2022. Select a specific time point to analyze the impact of different types of monetary policies on housing prices from the perspective of evenly spaced shocks. The following results can be obtained through the analysis of the equidistant shock response. Firstly, the conclusion is obtained that the effects of quantity-based (direct) instrument and price-based (indirect) instrument on housing prices are both time-varying characteristics and large in asymmetry. The trend and degree of impact on housing prices before and after the financial crisis are different, and the two regulatory effects vary greatly depending on the timing of the monetary policy, so the regulatory effect of the monetary policy easing is greater. Second, in the short-term, both quantity-based (direct) instrument and price-based (indirect) instrument have a marked impact on the housing price, and in the long-term, both have a weak control effect on the housing price, the money supply quantity has a positive impact on the housing price, and the interest rate has a negative impact on the housing price. Thirdly, brother monetary and price quantity, looking at the results from lateral comparison with monetary policy, monetary policy than monetary quantity diabetes housing price bigger impact on money supply, interest rate market progresses, housing prices lowered sensitivity of higher sensitivity on interest rates as the empirical appeared.

Effects of Macroeconomic Variables on the Performance of Mutual Funds: Evidence from Bangladesh Financial Market

Using multiple regression analysis in this research paper, this is examined that these macroeconomic variables (Money Supply-M2, Inflation Rates and Exchange Rates) have significant relationships with the performance of mutual funds (represented by monthly return based on NAV) in Bangladesh. According to this project paper, money supply M2 has negative relationship with the performance of mutual funds in the financial market of Bangladesh. Because, higher level of money supply in the market weaken the monetary value of taka which makes the market more vulnerable. And this vulnerable market leads a negative impact on the whole financial market as well as mutual fund industry. Interest rates have positive relationship with the performance of mutual funds in the financial market of Bangladesh because higher level of interest rate increases the tendency of savings in the ultimate consumers and they try to consume less and save more. This savings is going to be invested in the capital market as well as in mutual fund industry which leads the market to a better position for the fund managers. Inflation rates have negative relationship with the performance of mutual funds in the financial market of Bangladesh as the higher level of inflation make the price of commodities higher and the monetary price of the taka lower. This tendency of making the less value of money, most of the investors want to withdraw their investment from the market which leads a downturn in the financial market as well as in the mutual fund industry. At the end, exchange rates have positive relationship with the performance of mutual funds as the higher level of exchange rate makes the Bangladeshi taka more powerful in the international market.

Money Supply, Inflation and Budget Deficit in Russia Compared to the United States

The author examines the causes and sources of the depreciation of money in Russia compared with that in the United States. The subject is causal connections between the budget deficit, money supply, and the depreciation of money. The relevance of the research for Russia is determined by concerns about macroeconomic stability and high inflation. In the case of the United States, an increase in the money supply and an inflation spike occurred because of the debt financing of the federal budget deficit. The scientific novelty of the paper lies in considering the two main options for monetary policy to support the liquidity of public debt: hard and soft, and the analytical methods and results of the research. One of the important scientific results is that the burden of public debt should be measured not as the ratio of public debt to gross domestic product (GDP) but as the share of public debt in a bond market. The second scientific result is very important for the practice: during 2011–2022, in the eight biennial periods, the GDP deflator was approximately equal to the growth of the money supply M2 minus GDP growth. Thus, the depreciation of money was directly caused by monetary policy. In the other three biennial periods, a substantial difference was observed, probably because of external shocks. As the method of the study, the author estimated the effect of interest rates caused by crowding out corporate debt by public debt. It was substantiated that to obtain the effects of soft monetary policy and thus the increase of M2 to GDP deflator, it is essential to use biennial periods. Based on the results of the analysis, it was revealed that, particularly in 2021–2022, the growth of the GDP deflator amounted to 139.8% and was due to the growth of the money supply M2 by 140.5%. At the same time, the effect on GDP growth was insignificant, at 3.4%. The key conclusion is that for the implementation of macroeconomic stability policies, it is necessary to manage the expansion of the M2 money supply, the exchange rate, and to use the GDP deflator as an important indicator in addition to the inflation index — consumer price index. A good way to achieve this is to adopt a special law for controlling inflation, similar to the USA Inflation Reduction Act.

Adakah Pengaruh Peningkatan Transaksi Pembayaran Nontunai terhadap Jumlah Uang Beredar selama Pandemi Covid - 19

This research aims to find out whether there are non-cash payments regarding the amount of money circulating in Indonesia during the Covid-19 pandemic. The money supply used in this research is narrow money (M1) and broad money (M2). Non-cash payments in this research are represented by four transaction schemes, namely the card payment system (APMK), electronic money, Bank Indonesia's national clearing system (SKNBI), and the BI-RTGS system. The Error Correction Model is used to study the relationship between non-cash payment systems and the money supply. Data processing in this research uses Eviews 9. The partial research results show that only the value of electronic transactions has a positive effect on the narrow money supply (M1) and none of the variables from the non-cash payment scheme in this study have a partial effect on the broad money supply (M2). Meanwhile, it simultaneously shows that the value of ATM/Debit transactions, the value of electronic money transactions, the value of credit card transactions, the value of clearing transactions, and the value of BI-RTGS transactions together influence the M1 and M2 money supply.

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 Determinants of Tax Revenue: The Case of Turkey

Tax is the most basic public financing instrument of the treasury. Tax is an important instrument of fiscal policy as well as its role in financing public investment and public services. For these reasons, it is imperative for all countries must achieve a stable level of tax that allows public needs to be met. Economic and financial factors affecting the performance of tax revenue play an important role in the determination and implementation of tax policies. This study investigated the determinants of tax revenues in Turkey. For this purpose, the effect of USD/TL exchange rate, M2 money supply, industrial production index, deposit interest rate, unemployment rate and export variables, which are considered to be effective on the tax level, on the tax level in Turkey for the period 2006M1- 2022M11 within monthly observations, is analyzed by ARDL methods. The empirical findings reveal that there is a cointegration relationship between tax revenues and all series. According to the long-run coefficient estimates, M2 money supply, industrial production index and deposit interest rate affect the tax level positively, while unemployment rate and USD/TL exchange rate affect the tax level negatively.

Nghiên cứu tác động của chỉ số điều kiện tài chính tới lạm phát ở Việt Nam

This paper investigates the impact of the financial condition index on inflation in Vietnam by using the Autoregressive- Distributed Lag Model (ARDL) combined with a time series dataset from January 2013 to December 2022. Research results show that loosening financial conditions will put pressure on inflation in the short term but not in the long term. In addition, the oil price and M2 money supply also have a positive impact on Vietnam’s inflation. On that basis, this paper also proposes policy recommendations to improve the effectiveness of monetary policy in Vietnam

Monetary policy in China: A Factor Augmented VAR approach

This paper investigates the effectiveness of Chinese monetary policy. We employ the data-rich Factor Augmented VAR (FAVAR) model to address the paucity of Chinese data. We find that the Divisia monetary aggregate M2 (DMA2) that considers both the quantity of monetary assets and the user-cost of the money/forgone interest rate is more effective in boosting economic activities and prices than other instruments (e.g., interest rate, simple money supply M2, and required reserve ratio). These other instruments produce outcomes that contradict theoretical predictions in at least one area. Therefore, we suggest the use of the DMA2 to steer the performance of the Chinese economy effectively.

Does the monetary policy of the United States affect the consumer price inflation in Russia?

Subject. The economic environment in Russia, similar to other countries, is represented by the consumer price index. It is regulated by the monetary policy of the Central Bank of the Russian Federation. Since Russia participates in international economic relations, its economic environment is affected by the monetary policy of the USA, because this country plays the greatest role in the global economy and the global economic system as a whole. At the moment, the monetary policy of the Federal Reserve System of the USA has a stronger impact on consumer price inflation in Russia than the monetary policy of the Central Bank, because the US economy is significantly larger than the Russian economy. Specifically, an increase in money supply in the USA, required to stimulate economic activity in the country, can accelerate the growth of the consumer price index in our country. It is therefore important to build economic and mathematical models in order to predict the consumer price index in Russia based on the indicators of the CB and the FRS. Purpose. The purpose of our study was to determine the effect of the monetary policy of the CB and the FRS on the consumer price index in Russia and derive multiple autoregression equations in order to predict the consumer inflation rate in our country based on the indicators of the CB and the FRS. Methodology. In our study, we used general and specific scientific methods: analysis, synthesis, and statistical methods (correlation and regression analysis). The study was based on the analysis of relevant scientific literature and economic journals. Conclusions. The study determined that the monetary policy of the FRS directly affects the consumer price index in Russia. It also stresses the need to develop measures aimed at eliminating the side effects of the monetary policy of the FRS in Russia. The article demonstrates a strong negative effect of increased US money supply on the economic situation in Russia and a strong correlation between the M2 money supply in the USA, the US dollar index, and the consumer price index in Russia, as compared to a less significant impact of the key rate of the CB and the M2 money supply in Russia.

An Empirical Study on the Interconnections between Money Supply and Housing Price

In recent years, the COVID-19 epidemic has caused varying degrees of impact on the M2 money supply. Though the money supply side, a rise in the money supply will cause superfluous funds to access the real estate sector through various channels, which will have an impact on the real estate sector. In this paper, the VAR model is adopted to explore the mutual dynamic influence between M2 and real estate prices through variable stability test, lag selection of VAR model, convergence, impulse response and variance decomposition, etc. The analysis shows that the money supply of M2 positively influences the housing prices in China, however, the housing price has little effect on M2. In other word, the connection is unidirectional, from M2 to housing prices. Based on the consequences of concrete analysis, this paper provides some reference approaches for the progress of our real estate industry in the future.

The impact of the monetary policy transmission mechanism-the money supply channel on the economy

This study aims to assess the effectiveness of the monetary policy transmission mechanism on the money supply channel to the economy with the goal of prices (inflation) and income (Real GDP) from the first quarter of 2010 to the fourth quarter of 2021. The variables in this study include the BI Rate or Bank Indonesia reference interest rate, the money supply M0, the money supply M1, the money supply M2, inflation, and real GDP. The data processing phases begin with verifying data stationarity, optimum lag processing, and the Johansen co-integration test. Then this research employs an analytical method, namely the vector error correction model (VECM). The effectiveness of monetary policy transmission was analyzed using the optimal lag test. Then the impulse response and variance decomposition function to see the magnitude of the response of each variable. This study shows that the transmission of monetary policy to inflation through the money supply channel is more effective than the money supply channel to real GDP.