©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Capitolo 9 LOfferta di Moneta e la...

©EGEA 2006

Burda, Wyplosz MACROECONOMIA: UNA PROSPETTIVA EUROPEA

Capitolo 9

L’Offerta di Moneta e la Politica Monetaria

©EGEA 2006


Instruments, Targets, andObjectives in Monetary Policy

Fig. 9.01

©EGEA 2006

Burda, Wyplosz MACROECONOMIA: UNA PROSPETTIVA EUROPEA Fig. 9.01

Instruments

• Bank refinancing rates (repo and discount rates)

• Monetary base control using open market purchases and sales

• Required reserve ratios

Targets

• Long-term market interest rates

• Monetary aggregates (M1, M2, M3…)

• Exchange rates

• Inflation rates

Objectives

• Price stability (primary objective)

• Short-term growth (secondary)

• Exchange rate stability (secondary)

©EGEA 2006


Monetary policy procedures

Fig. 9.02

©EGEA 2006


Monetary policy procedures

(a) Money targeting (b) Interest rate targeting

Nominal money

Inte

rest

rat

e

Inte

rest

rat

eNominal money

Supply

Supply

DemandDemand

Interest rate is now endogenous

Quantity of nominal money is now endogenous.

Fig. 9.02

©EGEA 2006

Burda, Wyplosz MACROECONOMIA: UNA PROSPETTIVA EUROPEA Table 9.01

Assets Liabilities

Gold and foreign reserves 310.1 Currency in circulation 435.4

Claims on governments 42.6 Reserves held by commercial banks 133.6

Claims on banks and financial institutions 295.1 Government deposits 62.1

Other assets 205.7 Other liabilities 20.4

Net worth 202.0

Total 853.5 Total 853.5

Source: ECB Monthly Bulletin, May 2004, Table 1.1.

Consolidated balance sheet of the Eurosystem30 April 2004

(€ billions)

©EGEA 2006


Where’sM0?

Foreign assets

Loans to comm. banks

Claims on governments

Reserves of commercial

banks

Bank notes held by nonbanks

Deposits of government

Net worth Deposits of

private sector

Deposits of government

Real assets, incl. net worth of

banking sector

Government and private debt

Net worth

Vault cash and reserves at

Central Bank

Loans and securities

Liabilities to Central Bank

Deposits of private sector

Net worth

Bank notes held by nonbanks

Central BankConsolidated Government

and Nonbank Private Sector

Commercial Banks

Assets Liabilities

Assets Liabilities

Assets Liabilities

Fig. 9.03

©EGEA 2006


Reserves-money stock link

Reserves

Deposits

change in reserves

change indeposits

Fig. 9.04

©EGEA 2006


♦ Base monetaria = M0 = CU + R

♦ CU = ccM1 e R = rrD

♦ Moneta = M1 = CU + D = ccM1 + D ♦ D = (1-cc)M1 che sostituito in M0 ♦ M0 = [cc + rr(1-cc)]M1 ♦ M1/M0 = 1/ [cc + rr(1-cc)] = mm

♦ dmm/drr = -(1-cc)/([cc + rr(1-cc)])2<0

♦ dmm/dcc = -(1-rr)/([cc + rr(1-cc)])2<0

©EGEA 2006


M0 M2 Multiplier Currency (% of GDP) (% of GDP) M2/M0 (% of M2) Eurozone 7.2 72.3 10.1 7.4 UK 4.6 89.1 19.4 3.6 USA 6.8 58.3 8.6 10.7 Japan 20.2 135.6 6.7 11.0

M0, M2, money market multipliers, and currency2003

©EGEA 2006


Theoretical values of the money multiplier (M1/M0)

Table 9.03

Currency/M1 5% 10% 20%

0% 20.0 10.0 5.0 5% 10.3 6.9 4.2

10% 6.9 5.3 3.6 20% 4.2 3.6 2.8 30% 3.0 2.7 2.3

Reserve ratio = rr

©EGEA 2006


The money market

Fig. 9.06

©EGEA 2006


Derived demand for monetary base

Nominal money

Inte

rest

rat

e

0

D

, ,0d P Y i cM

Mm m

L

Ceteris paribus

Fig. 9.06

©EGEA 2006


The supply of the monetary base controlled by the central bank

Inte

rest

rat

e

0

D

0sM

Fig. 9.06

Nominal money

A

©EGEA 2006


If the central bank does not respond to an increase in the demand for monetary base...

Inte

rest

rat

e

0

D D

0sMB

Fig. 9.06

Nominal money

A

©EGEA 2006


If the central bank instead wishes to hold interest rates constant...

Inte

rest

rat

e

0

D D

0sM 0sM

Fig. 9.06

Nominal money

CA

©EGEA 2006


Actually the central bank can choose any point along the new demand for monetary base

Inte

rest

rat

e

0

D

A

D

B

C

Fig. 9.06

Nominal money

©EGEA 2006


0

1

2

3

4

5

6

7

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04

Marginal Lending Facility

EONIA

Main refinancing rate

Deposit facility

ECB interest rates

©EGEA 2006


The Bank of England’s Inflation Forecast:The Fan, 2004-06

(Percentage increase in prices on a year earlier)

©EGEA 2006


Foreign exchange market interventionand sterilization

Foreign exchange Monetary base-80,000,000 -80,000,000

Danmarks Nationalbank

Assets Liabilities

Foreign exchange Monetary base-80,000,000 (no change)

Government bonds80,000,000

Danmarks Nationalbank

Assets Liabilities

Fig. 9.09

©EGEA 2006


Seigniorage around the world

Source: Masson, Savastano and Sahrma (1998)

Table 9.04

1980 91 1992-95 1980 91 1992-95

Advanced Economies 0.8 0.3 7.2 3.3 US 0.4 0.4 5.4 2.8 Germany 0.5 0.3 2.9 3.5 Japan 0.6 0.3 2.6 0.9

Hungary 0.4 4.1 12.7 23.1 Poland 7.0 2.2 99.5 34.6 Israel 1.9 0.5 111.1 11.3

Africa 1.4 1.3 19.6 22.2 Asia 1.5 2.0 7.6 7.1 Latin America 3.2 2.4 251.4 110.1

Seigniorage Inflation

©EGEA 2006


Country Coverage of deposits (in euros) Austria 20 000 Belgium 20 000

Denmark 40 330 1 Finland 25 000 France 60 000 Germany 90% up to ceiling 20 000 Greece 20 000 Ireland 90% up to ceiling 20 000 Island 20 000 Italy 103 000 Netherlands 20 000

Norway 235 000 1 Portugal 25 000 Sweden 28 000 Spain 20 000

UK 90% up to ceiling 47 900 1 1 National currency value converted into € using the exchange rate in July 2004 Source: ECB, International Association of Deposit Insurers

Deposit insurance in Europe

2004

©EGEA 2006


Reserve and capital adequacy ratios

Assets Liabilities

Central bank reserves Deposits

Net worthLoans and securities Tier 1 (primary) capital

Tier 2 (secondary) capital

Typical Commercial Bank, SA

(1)

(2)

Fig. 9.10

©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Capitolo 9 LOfferta di Moneta e la...

Documents

Transcript of ©EGEA 2006 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA Capitolo 9 LOfferta di Moneta e la...