World Money Supply Research Articles

Exchange Market Pressure, Government Debt, US Money Supply, GDP Growth and Maritime Trade: An Empirical Evidence from India

Exchange Market Pressure (EMP) indices are used as comprehensive indicators of pressure on a currency. This paper examines the relationship of India government debt, India’s GDP, world money supply and world GDP with exchange market pressure in India. We use quarterly data from 1992: II to 2018: III. The results suggest a significant positive relationship between EMP and the India government debt and GDP and a negative relationship between EMP and world money supply. The relationship between EMP and world GDP is found to be insignificant. This study sheds light on the complex dynamics of EMP and its determinants in India, highlighting the impact of key economic factors and historical events on currency stability. These findings have important implications for policymakers and stakeholders in maritime trade, providing insights into the economic factors influencing currency stability in maritime trade.

Transmission Mechanism of Exchange Rate Pass-Through to Domestic Price: The Case of Afghanistan

This article investigates the mechanism of exchange rate pass-through to the prices in the context of the Islamic Republic of Afghanistan’s economy. This study explored the magnitude and speed of the pass-through effect on the prices by analyzing quarterly data from 2003 Q1 to 2019 Q2 considering five variables (viz., world food price index, foreign reserves, money supply, import price, and nominal effective exchange rate) based on the Vector Autoregression Model (VAR) with the cointegration and innovation accounting tools such has impulse response function and variance decomposition. The findings of the study suggest that the exchange rate pass-through in Afghanistan is incomplete. The import price is highly responsive in the short-run and moderately responsive an increasingly smooth movement in the long-run. However, CPI in the short-run with swift positive respond but the long-run smooth increasing movement. Furthermore, variance decomposition evidence shows that import price is affected by FR, NEER, CPI, and MS in both short-run and long-run, but the CPI strongly lagged by its variance, WFP, NEER, import price, and MS.

The Dynamics of Inflation in India:A Bounds Test Analysis

This paper investigates all the possible determinants of inflation (weighted average call money rate, food inflation, fuel and power inflation, gross fiscal deficit, trade openness, exchange rate, GDP per capita annual growth rate and world food inflation) and their impact in the long and short run in India. Using yearly data for the period from 1990 to 2016, we have employed bounds testing (ARDL) cointegration approach. Our main findings are that all the selected determinants are cointegrated with inflation in India. The error correction term with negative sign shows high speed towards equilibrium. In the long run exchange rate, world food inflation and money supply significantly contributed to increasing inflation. In the short run except for the weighted average call money rate and GDP per capita annual growth rate, all the variables play a significant role in determining inflation. The study suggests enhancement of production and productivity of agricultural commodities, especially of pulses, and management of exchange rate fluctuation that plays a multilateral role in the price management of an open economy like India.

Re-Examining the Nexus between Exchange and Interest Rates in Nigeria

Nigeria has experienced somersault of foreign exchange policies by the Central Bank. One policy concern in recent times is to have an appropriate target of the exchange and interest rates. Therefore, this paper seeks to provide a foundation for the targeting of an appropriate exchange and interest rates for the country. Using the Johansen Cointegration and Vector Error Correction Mechanism approaches, it specifically examines the relationships among Nigeria’s weak exchange rate, its local rate of interest and world interest rate. Contrary to many studies, a control measure involving inclusion of inflation, money supply and national output in the model is done. The analysis showed an equilibrium association between exchange rate and interest rate-cum-other variables and steady rectification of deviance from long-run stability over a sequence of incomplete short-run modifications. Increase in domestic and world interest rate, inflation, money supply and GDPat equilibrium would strengthen the exchange rate. Besides, further findings showed some bidirectional causal associations among the variables. By long-run implication, the targeting of an appropriate exchange rate in Nigeria requires a tightened monetary policy that is not inflation and growth biased. However, increase in world interest rate, money supply and inflation rate must be moderate in order not to worsen the exchange rate as suggested by the short-run result.

Liquidity and crude oil prices: China's influence over 1996–2011

Movement in China's money supply is shown to drive the movement in world money supply over the last fifteen years. Structural shocks to G3 (U.S., Eurozone and Japan) real M2 and to China's real M2 are both large over 1996:1–2011:12. The cumulative impact of real G3 M2 shocks on real oil prices is small and statistically insignificant. In contrast, the cumulative impact of China's real M2 on the real price of crude oil is large and statistically significant. Following a sharp fall in real oil price in the last half of 2008, the cumulative impact of China's real M2 on the real price of crude oil is particularly substantial in the recovery of oil price during 2009 from a low of $41.68 for January 2009. The analysis sheds light on the causes of movement in oil prices over the last fifteen years and in assessing the relative importance of China in the upsurge of the real price of crude oil.

Travels with Tooy: history, memory, and the African American imagination

Thirty-five years into his research among the descendants of rebel slaves living in the South American rain forest, anthropologist Richard Price encountered Tooy, a priest, philosopher, and healer living in a rough shantytown on the outskirts of Cayenne, French Guiana. is a time traveler who crosses boundaries between centuries, continents, the worlds of the living and the dead, and the visible and invisible. With an innovative blend of storytelling and scholarship, Travels with Tooy recounts the mutually enlightening and mind-expanding journeys of these two intellectuals. Included on the itinerary for this hallucinatory expedition: forays into the eighteenth century to talk with slaves newly arrived from Africa; leaps into the midst of battles against colonial armies; close encounters with double agents and femme fatale forest spirits; and trips underwater to speak to the comely sea gods who control the world's money supply. This enchanting book draws on Price's long-term ethnographic and archival research, but above all on Tooy's teachings, songs, stories, and secret languages to explore how Africans in the Americas have created marvelous new worlds of the imagination.

An Innovative Money Multiplier

Conventional textbook treatments of money multiplier analysis are virtually devoid of any calculations of real world money supply changes, probably because the standard monetary base multiplier requires tedious calculations and is somewhat difficult to interpret. The purpose of this paper is to present a new money multiplier which is easily calculable in first differences. Applications of this new multiplier are investigated using case studies of money supply change in two periods: the Great Depression (1929–1933), and during the slow monetary growth of the early nineties (1991–1994).

How well does the Mundell-Fleming model fit Australian data since the collapse of Bretton Woods?

Australian time series for the nominal interest rate, real output, the nominal exchange rate, prices and nominal money since 1973 are characterized by a vector autoregressive process driven by five exogenous disturbances. Those disturbances are identified so that they can be interpreted as the five main sources of fluctuations found in the Mundell - Fleming model of a small open economy under flexible exchange rates, namely: world interest rate, aggregate supply, IS, money supply and money demand shocks. The dynamic responses of the estimated model to the structural shocks are analysed and shown to match most of the predictions of the Mundell - Fleming model.

Losing information: The more we study the gold standard the less we know about it

In holding a conference on the historical experience with the gold standard, the National Bureau of Economic Research had two motivations, according to Anna Schwartz' introduction, first to test old views with new tools including econometric and statistical techniques and new theories and second, to provide a basis for judging the conservative call in the United States for a return to the gold standard. Dr. Schwartz had been the research director of the U.S. Gold Commission, and Michael Bordo on its staff. The Commission recommended against an attempt to re-establish the gold standard, coming out instead in favor of adopting monetary targets as a basis of macro-economic policy. (There was, however, a minority report favoring a return to gold.) The conference participants were economists and economic historians, for the most part of a monetarist persuasion, though they uncovered sharp differences among themselves over whether the nation or the world was the appropriate unit for assessing the money supply. This fat volume reporting the conference consists of 15 papers divided into five parts, with specific comments on all but A. Schwartz' introduction and L. Yeager's wind-up after-dinner speech, and general discussion among the participants. The first section on "Old and New Interpretations of the Gold Standard" has, in addition to the introduction, a masterly summary of the traditional literature by M. Bordo, and a revisionist paper by D. McCloskey and R. Zecher, putting forward an extreme monetarist view in which only the world money supply and the world price level count and central banks are of no consequence. The second, on "Rules of the Game", has papers by J. Dutton and J. Pippenger, testing various rules ascribed to the prewar Bank of England, with some new evidence and advanced statistical techniques, which produce no firm results. It also includes an account of the 1847 financial crisis in Britain by R. Dornbusch and J. Frenkel. The third section has four country papers: Canada in the interwar period, by R. Shearer and C. Clark; Germany, 1879-1913 by P. McGouldrick; Sweden, 1873-1914 by L. Jonung; and Italy, 1861-1914 by M. Fratianni and F. Spinelli. The three papers of Part IV deal with "International Linkages", and specifically with business cycles (W. Huffman and J. Lothian) and real output in various countries (S. Easton), plus another paper on Canada, this time dealing with borrowing from Britain before the war. The

Monetary control in open economies: National versus global monetarism

For about a decade the central banks of the leading Western industrial nations have set annual money supply targets.1 Despite the common monetarist tone of their strategies, each central bank uses its own definition of the money supply relating solely to its national territory (national monetarism), thereby laying itself open to criticism from those who, like Professor Ronald McKinnon, hold that nationally oriented money supply control has had its day and instead advocate management of the world money supply (global monetarism).2 The following article tests the arguments of the proponents of an international quantity theory and examines whether domestically oriented money supply management is really out of tune with the times.

The Policy Implications of Internationally Mobile Capital under Fixed Exchange Rates

It is a well known prediction of the monetary approach to the balance of payments that a small country with a fixed exchange rate is precluded from pursuing an independent monetary policy. In the long run, it must inflate at the same rate as the rest of the world. Parkin (1974) demonstrated, however, that some degree of monetary independence is possible in the short run. Thus, if countries expand the domestic component of their money supplies at different rates, the existence of inflation differentials can be explained. The model used to derive this result was limited to the current account of the balance of payments. Moreover, there being no bond market, the only policy option available was a fiat money increase. It is the purpose of this paper to extend the Parkin model to incorporate the capital account of the balance of payments and to analyse the policy implications of internationally mobile portfolio capital for a small country faced by an increase in the world money supply. By re-specifying the model, it is also possible to widen the menu of policy options to include the sterilization of capital inflow to meet an interest rate target, targets for domestic credit expansion and complete capital controls. The dynamic stability properties of the model's response to an inflationary increase in the world money supply are examined. It is demonstrated that the long-run results of the monetary approach hold true provided capital is effectively immobile. If not, the model permits no stable solution. Its short-run properties are essentially similar to those obtained by Parkin.

International Reserves and World-Wide Inflation: Further Analysis

N MY 1976 ARTICLE investigating the relationship between increases in the global holdings of international reserves, changes in the world money supply, and world-wide inflation, I argued that there is a direct causation running from increases in global reserves to the world money supply and further to worldwide inflation. The basis for the argument is contained in the sequential linkage between (1) reserve increases causing an expansion of the money supply and (2) a monetary expansion causing inflationary pressures. While these arguments are well established for single economies, I argued that there is also a global chain of events linking changes in reserves, money, and prices. In this note, I address first the relationship between global reserve changes and the world money supply and then provide further evidence on the linkage between global reserve changes and world-wide inflation-the central issue of my original paper.

A Note on Heller's Use of Regression Analysis

HIS NOTE ATTEMPTS to show that Robert Heller's use of regression analysis in his important 1976 article, "International Reserves and World-Wide Inflation," is inadequate. Heller's study supposedly indicates that over the long run (1951-74), changes in global international reserves had a significant impact on the aggregate world money supply. Our study concludes that there are serious limitations in the use of regression analysis to illustrate this relationship. Heller regressed changes in the world money supply on changes in world international reserves for the period 1951 to 1974. The following are Heller's results, which were corrected for autocorrelation: l

Monetarism and UK monetary policy<xref ref-type="fn" rid="fn1"><sup>*</sup></xref>

The basic contention of monetarists is that there is a stable function of money in relation to income (which comes to the same as saying that there is a stable velocity of circulation, invariant to changes in the quantity of money in circulation). This assertion, first put forward by the early followers of the quantity theory of money in the 18th and 19th centuries, was denied by Keynes and reasserted by Friedman on the basis of statistical evidence which shows a high correlation between changes in the amount of money in circulation and changes in the money value of the national income. Friedman admitted, however, that there is nothing in his findings which logically excluded an interpretation diametrically opposite to his own—i.e., that the change in the money supply may be the consequence, not the cause, of the change in money incomes (and prices), and that the mere existence of time-lag—that changes in the money supply precede changes in money incomes, is not in itself sufficient to settle the question of causality—one cannot rule out the possibility of an event A which occurred subsequent to B being nevertheless the cause of B (the simplest analogy is the rumblings of a volcano which frequently precede an eruption). Apart from that it is notoriously difficult to establish the existence of a lead of one factor over another, when both move in the same direction in time and the whole question of the existence of a 'lag' is by no means established. + In the case of commodity-money, the activities of the mining industry increase the world money supply which is thus determined by factors that are largely independent of the public's demand to hold money. It is possible, therefore (as a result of, say, the discovery of new gold fields), for additional money to appear which will, in its impact effects, cause a fall in its value relative to other commodities until all the new money finds a 'home'—in the increased balances held by some or all money users. If the proportion of income or expenditure which people wish to hold in the form of money balances (the famous k in the Cambridge quantity equation) is rigidly given, and real income (or output) is also given, the only way in which 'new money' can be

The World money supply: Concept and measurement

Die Geldversorgung der Welt: Konzept und Messung. — Der Aufsatz erarbeitet zuerst die theoretischen Grundlagen fur ein Konzept der Geldversorgung der Welt und legt dann die relevanten Zahlen vor. Es wird die Ansicht vertreten, da\ das zweckmA\ige Konzept der Welt-Geldversorgung von dem Wechselkurssystem abhAngt. Bei einem System flexibler Wechselkurse mit exogenem Geldangebot sollte ein geeignetes Me\konzept gleitende Gewichte auf der Basis der Volkseinkommen benutzen, um das Welt-Geldangebot zu errechnen. Bei festen Wechselkursen und endogenem Geldangebot sind stattdessen gleitende Gewichte auf der Basis der Geldmengen am besten geeignet. In der Arbeit werden die neuen Zeitreihen des Welt-Geldangebots fur 1958–1975, fur WAhrungsreserven und fur Geld im engeren und im weiteren Sinne berechnet. Au\erdem werden Zeitreihen fur IndustrielAnder, entwickelte und weniger entwickelte LAnder vorgelegt. Die beiden neuen Zeitreihen werden mit vorhandenen Reihen verglichen, bei denen die Geldmengenaggregate unter Verwendung von festen BIP-Gewichten und den jeweiligen Wechselkursen berechnet werden.

Inflation in Open Economies.

Part 1 The world environment: inflation - an international monetary problem or a national social phenomenon? the determination and control of the world money supply under fixed exchange rates, 1961-71 international liquidity and world inflation in the 1960s political origins of the international monetary crisis a quarterly economic model of world trade and prices, 1955-71. Part 2 Individual countries: the origins of inflation in less developed countries - a selective review the relations between wage inflation and unemployment in an open economy the determinants of price and wage inflation - the case of Italy world influences on the Australian rate of inflation inflation a small, fixed exchange rate, open economy - model for New Zealand inflationary expectations and the long run trade-off between inflation and unemployment in open economies.

THE DETERMINATION AND CONTROL OF THE WORLD MONEY SUPPLY UNDER FIXED EXCHANGE RATES 1961 ‐ 1971*

The Manchester SchoolVolume 43, Issue 3 p. 293-316 THE DETERMINATION AND CONTROL OF THE WORLD MONEY SUPPLY UNDER FIXED EXCHANGE RATES 1961 - 1971* MICHAEL PARKIN, MICHAEL PARKIN University of ManchsterSearch for more papers by this authorIAN RICHARDS, IAN RICHARDS University of ManchsterSearch for more papers by this authorGEORGE ZIS, GEORGE ZIS University of ManchsterSearch for more papers by this author MICHAEL PARKIN, MICHAEL PARKIN University of ManchsterSearch for more papers by this authorIAN RICHARDS, IAN RICHARDS University of ManchsterSearch for more papers by this authorGEORGE ZIS, GEORGE ZIS University of ManchsterSearch for more papers by this author First published: September 1975 https://doi.org/10.1111/j.1467-9957.1975.tb01227_1.x * We are indebted to Malcolm Gray for his help and comments. Any remaining errom are our own responsibility. AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Volume43, Issue3September 1975Pages 293-316 RelatedInformation

Our Current Inflationary Experience

The old "cost push" versus "demand pull" debate on inflation is being reargued in the context of the current world inflation. In the best of the current debate, which is carried on in a world context, the contrast is between "special factors" and a "demand pull" explanation that focuses on the build up of price expectations, initiated and buttressed by the lack of any mechanism to control the rate of growth of the world money supply. The key determinant of the world money supply since the last war has been the United States money supply and, since the mid 1960s, this has been increasing rapidly.

The Effects of the Substitution of Dollars for Gold for the Distribution of the Adjustment Burden and the Control of the World Money Supply

The substitution of a fiat money, like dollars, for a commodity money, like gold, in the international activities of national monetary authorities has important consequences for the functioning of the international monetary system. This substitution process has occurred in two areas that, although historically related, can be seperated. One substitution process has been the replacement of specie with foreign sexchange as the asset used by monetary authorities for stabilizing their exchange rates. As early as the latter part of the 19th century, authorities who were stabilizing the gold values of their currencies by buying and selling gold would occassionally enter the foreign exchange market directly. By the end of World Way II, most of the major countries in teh western world outside the United States had altogether ceased stabilizing exchage rates via the gold market. Most countries are now maintaining fixed exchange rates by direct purchases and sales in the markets for foreign exchange rates by direct puchases and sales in the markets for foreign exchange. The other substitution process, about which more is known, has been the partial replacement of gold with interest bearing securities in the international reserve of monetary authorities.

Macroeconomic Policies and the Distribution of the World Money Supply

I. Solution of the model and the impact of monetary policy, 121.—II. Burden of adjustment and the foreign trade multiplier, 129.—III. Policy coordination, capital mobility, and sterilization, 133.