Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103584
Authors: 
Robinson, Richard
El Nasser, Marwan
Year of Publication: 
2013
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Publisher:] MDPI [Place:] Basel [Volume:] 1 [Year:] 2013 [Issue:] 2 [Pages:] 32-44
Abstract: 
In response to the financial crisis of 2008, the Federal Reserve radically increased the monetary base. Banks responded by increasing excess reserves rather than increasing bank loans, and the public responded with a substantial flight to liquidity in the form of currency and demand deposits. As a result, the money-supply multipliers substantially decreased, so that the actual money supply measures grew more moderately than the base. The sustained multiplier-collapse spawned reexamination of monetary versus fiscal theories of price-level determination. This paper, however, presents decompositions of the money-multiplier collapse into changes in the currency-to-deposit ratios, and changes in the reserve-to-deposit ratio. By doing so, possible near-term increases in the multipliers are simulated so that the possibility of either full or partial restoration to their pre-crisis levels is assessed. Policy possibilities for controlling the money supply over various horizons follow. This analysis illustrates the Federal Reserve's exit dilemma that results from its financial-crisis policy.
Subjects: 
money supply
money multiplier
monetary policy
JEL: 
E51
E52
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article

Files in This Item:
File
Size
481.97 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.