DSGE
VIP Member
- Dec 24, 2011
- 1,062
- 30
- 71
what is "inside Money" ? is not "inside Money" equal to (M2 - M0) ?Depends on which definition of "money" you choose. It's a very large component of M1.
Depends on what you define as "money". Like I said before, different things have a different amount of "moneyness". Obviously currency is money. Demand deposits are money. Are time deposits money, for whatever context we're in? Are money market funds money? For whatever definition of "money" you decide is appropriate for your given context, yes, "inside money" will be M - M0.
i'm confused. A bank "right now", has some slew of liabilities (customer Deposits, for which the bank is liable); simplistically, they have 10x as many assets (loans, fractionally-backed by liabilities). They also have some Vault cash. You withdraw your $100, and close your account. They have used your $100, to make 10x as many loans. So, they pull another (fungible) $100 from their Vault, and "re-back" the $1000 in loans, with their own Money. Their excess-Reserves decline by $100, their required-Reserves remain constant ?
It depends on their demand for reserves. If they say "given expected drains on deposits it's optimal to hold $1 billion in free reserves", then no they won't take $100 out of their excess reserves, they'll contract their liabilities instead.
Another reason banks might hold excess reserves is so that they can sell them in the Fed Funds market.
I just regressed log(NGDP) on log(Base) in Eviews; R^2 of 0.972. Fairly compelling evidence that the base drives the nominal economy.
you said that, with "inside Money" created endogenously, increasing Money-supply should correlate with decreasing Money-Velocity.
For a given monetary base that's true. If the monetary base is changing then that's going to cause deviations in the supply of inside money from the demand for it.
at this moment, i don't understand what you mean about "regressing...in Eviews"
Eviews is an econometrics program. I just did a linear regression of the monetary base on NGDP.
you're talking about a scatter-plot, of nGDP vs. MB, for numerous countries ?
For the US, but it's not a scatter plot, it's linear regression. Have you done any statistics or econometrics yet?
Last edited: