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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Currency M1 M2 M3
UK (£bn) 27.1 459.8 804.5 926.1 % GDP 3.0 47.9 85.0 96.7
Euro-zone (€ bn) 347.5 2074.3 4287.2 5080.0 % GDP 1.2 15.8 25.5 35.3
USA ($ bn) 530.5 1091.3 4945.7 7098.8 % GDP 2.9 11.0 50.0 71.7
Four kinds of three monies(December 2000)
Table 8.1
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Table 8.2
Currency substitution* in Central/Eastern Europe(1993)
Source: Sahay and Végh (1995)
Albania 18 Poland 28Bulgaria 30 Romania 35Estonia 5 Russia 35Latvia 25 Slovenia 42Lithuania 25 Ukraine 28
*Ratio of foreign currency deposits to broad money
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Assets of some central banks, mid year 2000 (bn euros)
Table 8.3
Gold Foreign Loans to Claims onassets commercial banks gov't.
Euroland 117.3 341.8 477.3 112.8 USA 11.8 61.0 - 561.3 UK 4.8 30.3 - 22.7
Japan 1.2 268.9 39.9 487.9 Sweden 0.3 17.5 4.8 2.5 Poland 1.0 27.0 1.7 4.7
Source: IMF
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Table 8.4
Short run Long run Short run Long run
Belgium 0.06 0.41 -0.50 -3.57 Denmark 0.27 1.67 -0.30 -1.88 Finland 0.64 1.13 -0.77 -1.57 France 0.10 0.36 -0.19 -0.70
Germany 0.35 1.19 -0.53 -1.83 Greece 0.16 1.25 -0.13 -1.00 Ireland 0.07 1.48 -0.45 -9.00 Italy 0.11 1.88 -0.31 -5.17
Netherlands 0.41 0.71 -0.86 -1.51 Norway 0.09 1.74 -0.23 -4.60 Portugal 0.18 0.95 -0.51 -2.68 Sweden 0.49 1.40
Switzerland 0.04 0.36 -0.79 -7.18 UK 0.12 1.70 -0.43 -6.14 Japan 0.05 1.76 -0.44 -6.29 USA 0.06 1.18 -0.12 -2.40
Unweighted avg. 1.20 -3.70
Real income Nominal interest rate
Elasticities of real money
demand
short run = adjustment within one quarter, long run=complete adjustment
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Table 8.5
Inflation and money growth in the long run(Rule of thumb*)
*Assuming real money demand grows at 3% p.a.
Nominal money supply (%)
Inflation rate(%)
0 -3 3 0 8 5
50 47 103 100
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Mirror Types
Alg Guldros Krabb(square mirror tiles) (round mirror) (wavy mirror)
Austria 24 113 48Belgium 22 111 28Denmark 13 119 34Finland 15 107 21
France 21 100 33Germany 22 97 51Italy 23 79 44Netherlands 20 101 20
Norway 12 82 27Spain 32 112 34Sweden 15 94 24Switzerland 19 67 27
United Kingdom 25 115 30
Prices of IKEA mirrors across Europe, 1998 US$
Table 8.6Source: Haskel and Wolf (1999)
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Table 8.7
Cost of cash inventory (€):
2000
1% 1
PYTC= i +cn2n
€€
Number of Interest cost Trip's cost Total costtrips = n (PY /2n )i (cn )
1 10.00 1.00 11.00 2 5.00 2.00 7.00 3 3.33 3.00 6.33 4 2.50 4.00 6.50 5 2.00 5.00 7.00 6 1.67 6.00 7.67
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
2000
1% 1
PYTC= i +cn2n
€€
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.1
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
Where’sM1?
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.2 (a)
Narrow and wide monetary aggregates, France(% of GDP)
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.2 (b)
Narrow and wide monetary aggregates, Germany(% of GDP)
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.2 (c)
Narrow and wide monetary aggregates, UK(% of GDP)
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.2 (d)
Narrow and wide monetary aggregates, USA(% of GDP)
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.3
Money demand and prices(assuming no real GDP growth)
Time Time Time
(a) Zero inflation (b) Constant inflation (c) Rising inflation
P/P=0P/P>0
P/PP
PP
M
M M
M/P M/PM/P
0 0 0
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.4
Equilibrium in the money market
Real money stock
Nom
inal
inte
rest
rat
e
0
L Y,i,cDemand: ( )
i
Supply
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.5
Expansionary monetary policy
Real money stock
Nom
inal
inte
rest
rat
e
0
Supply
L Y,i,cDemand: ( )
iA
A´i
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.6
Increase in real economic activity
Real money stock
Nom
inal
inte
rest
rat
e
0
Supply
L Y,i,cDemand: ( )
iA
A´i
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.7
Decline in transaction costs
Real money stock
Nom
inal
inte
rest
rat
e
0
Supply
Demand
iA
A´i
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.8
Money market disequilibrium
Real money stock
Nom
inal
inte
rest
rat
e
0
Supply
Demandi A A´
i B
C C´
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
NLCDNA
CH
GRP
EI
IRL
AUSN
SFN
NZLB
FR
USADJ
DEN
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0% 5% 10% 15% 20%
M1 growth rate
CPI inflation
-8%
-6%
-4%
-2%
0%
2%
4%
6%
-10% -5% 0% 5%
Inflation differential
Exchange rate
depreciation
GR
P
E
I
UK
IRLAUS
SFNNFR
DEN
CDNNZL
B
NL
AD
CHJ
Money, inflation and the nominal exchange rate in the long run: OECD countries, 1970 to present
Figure 8.9
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.10
Money and long-run growth
Real money stock
Nom
inal
inte
rest
rat
e
0
Supply
Demand
A
A´
B
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
UnitedKingdom
Netherlands
0
2
4
6
8
10
12
14
16
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990
Nominal interest rates, UK and the Netherlands
Figure 8.11
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Rea
l m
on
ey s
up
ply
0
500
1000
1500
2000
2500
Infl
atio
n (
ann
ual
rat
e)
Real Money Stock(left scale)
Monthly Inflation(right scale)
1992 1993 1994 1995 1996
Money demand and hyperinflation in Russia
Figure 8.12
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Burda & Wyplosz Macroeconomics 3rd ednOXFORDUNIVERSITY PRESS
Figure 8.13
Trips to the bank andaverage money
holdings
t=1t=0
t=1t=0
t=1t=0
t=1t=0
one trip
two trips
three trips
four trips
PY2
PY3
PY4
PY
PY 2
PY2
2
PY2
3
PY2
4