Correlation Between Money Supply And Price Level For Morocco Essay

The early to mid-eighties presented a challenge to the fed. A combination of falling oil prices and the Federal Reserve 's control of the money supply, helped to slow down an inflation that had been largely out of control in the previous decade. By the mid-eighties, the economy had bounced back and the United States was entering into one of the longest periods of consistent and sustainable economic growth since the second world war. Along with this growth, the annual inflation rate did not exceed 5%.

In this paper, we will be using the log-log model. The log-log model used for the demand for wealth (attuned for inflation). We will be using the M1, as a display, for demand on wealth and interest rate as the illuminating variable affecting the demand for wealth. Using the regression, we will study the hypothesis. For this paper, the hypothesis used will talk about the connection between money and the interest rate. The null hypothesis, in this case, will be the interest affecting the demand for money in the economy. The data that we will be reviewing is from October 2008 to October 2011, 3 years worth of data. This connection will give us the basic understanding of the performance of the monetary policy in US economy after the crisis.

In politics, our nation is divided into many different parties. Each party has their own stance on how things ought to be and what changes need to be made in order to have society function they way they’d like. Macroeconomics also can be viewed as divided. Instead of being divided into parties, economists are separated by different schools of thought. There’s many schools of thought because macroeconomics is such a complex matter. When there’s problems in the economy answers can be found in a plethora of places, because there’s so many moving parts. These moving parts of the economy are what economists use to make sense of everything. When people view some parts more important than others or find different solutions, different schools of thought become apparent. One of these schools of thought come from the writings of economists Anna Schwartz, Karl Brunner, Allan Meltzer, and most notably Milton Friedman. The school of thought became known as Monetarism, which focused on the macroeconomic effect of a nation’s money supply and its central banking institution (Mccallum). We will be focusing on Friedman and the contributions he made to monetarism, which includes his quantity theory of money.

Understanding the foundation for which our economy and society as a whole is built upon, the need for a controlled and managed monetary system to function effectively in order to facilitate trade and stabilize the flow within our economy is a must. To facilitate this need the federal government implements tools for analyzing the economy in order to regulate and control, and decisions are made based on the inputs and observations made to stabilize and enable the money to grow and retract as required within our economic system. Again, based on the aforementioned, the phrase “money makes the world go

C) decreases the amount of funds that business firms can raise by selling newly-issued stock.

Hondroyiannis and Papapetrou (2001) found that the domestic market economic activity affects the performance of domestic stock market. Toda and Yamamoto (1995) indicated that stock prices lead nominal income, the exchange rate and the price level, but money supply and interest rate lead the stock price. Abdul Rashid (2008) found that the stock prices Granger-caused by the short run changes in interest rates and stated that the association between the health of the stock market in the sense of a rising share prices and the health of the economy is only a long-run phenomenon. Pethe and Karnik (2000) reported weak causality running from IIP to share price index (Sensex and Nifty) but not the other way round and it held the view that the state of economy affects stock prices. Fama and Gibbon (1982) examined the relationship between inflation, real returns and capital investment and supported Mundell (1963) and Tobin (1965) findings that expected real returns on bills and

In Friedman’s monetarist construct of money has two side that is highly active. One of the side is money is being the cause of all failures and asymmetries in the economy (in the short term). The other side is neutral which money is influencing only the price level (in the long term). The nominal quantity of money is determined by its supply. On the other hand, the real volume of the money stock is expressed in the amount of goods and services that can be acquired for a given nominal amount of money and is conditioned by the demand for money, which is directly related to the price level.

Chapter one is devoted to ‘introduction’ consisting the general background of Nepalese economy with some political and socio-economic scenario. The monetary background with reference to banking and financial institutions and, price and inflationary situation of Nepalese economy are focused in this chapter. Besides, statement of the problem, importance of the study and objectives are mentioned clearly. ‘To examine the relationship between money supply and price level in Nepal’ is the general objective of the present study. Hypothesis, limitations, scope for future research and plan of the present study as the requisites of the study are also mentioned clearly.

According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel emergence of unregulated monetary mechanisms based on an explosion of private liabilities generated international liquidity in both periods. It also adds to explain the workings of the international monetary systems of the two periods which

The classical argument by Milton Friedman (1953) in favor of flexibility still holds much water: if prices move slowly, it is both faster and less costly to move the nominal exchange rate in response to a shock that requires an adjustment in the real exchange rate.

In this paper, our point is to raise the negative and positive repercussions which impact the money related circumstance besides measure the level of influence by the parts for financial duty of particular country with phenomenal reference to India . FDI seen as a crucial driving force for monetary advancement in the making countries, It impacts the financial improvement by engaging family unit hypothesis, extending human capital course of action and by reassuring the development move in the host countries. The essential inspiration driving the study is to look at the impact of FDI on monetary advancement in India, from the time of 1990

The major determinants of money supply being the size of monetary base and the components that determines the money multipliers, such as income level, deposit rate, various interest rate, liquidity preferences of the people, the theory suggests that the NRB’s policy has been a steady growth money supply which is reflected in the publication, the Periodic Economic Planning, of the planning commission and the Economic Review published by NRB. According to Thapa (1997), the highest growth was recorded in 1960, and the lowest growth was recorded in 1971. In 1960, the M1 and M2 monetary aggregates grew by 40.9% and reserve money (monetary base) grew by 48.8%. In 1971, the growth of M1 was 3.9% while reserve money declined by almost 1%.

A number of frameworks have been introduced by the economists regarding the concept of Quantity Theory of Money. Ajuzie Immanuel, et.al. (2008) opines as “The concept of the Quantity Theory of Money (QTM) was introduced in the economic theory in the 16th century. Jean Boldin in his book reprinted in 1924 argued that the reasons for the rise in French prices were abundance of gold and silver, monopolies, scarcity, the pleasure of princes, and devaluation of the currency. He asserted that prices had increased higher than they were fifty years back in France. He was primarily interested in determining the causes of the price rise in France. According to Boldin, gold and silver were used as currency in France and due to the over use of such items prices had increased. It was one of the first statements that linked price movement to movements in money stock (Klein, 1970). He noted that the increase in the supply of gold and silver used as money caused an increase in demand for French goods, resulting in the increase of prices at home abroad. In the 1690s, John Locke developed monetary theory and elaborated the discussion by examining the effects of money on trade, the role of the demand for money, and the importance of interest rate on the economy. He believed that money is a medium of exchange in trade (Klein, 1970) and that the amount needed depended on the “quickness of circulation”, which we today refer to as “velocity” of

The present study is associated with the utilization of secondary data on Money Supply and Price Level for the economy of Nepal. The data of concerned variables are taken from various issues of Economic Bulletin of Nepal Rastra Bank. Quarterly data on money supply and price level ranging from 1976Q1 to 2012Q2, a total of 143 periods have been used in the present study. The present study has employed the data sets of money supply and price level transformed in logarithmic form to minimize the problem of heteroscedasticity.

The intent of writing the following literature review is to highlight the knowledge of origin of black money, the consequences of black money on Indian economy. In addition this section will anchor on how the economy is going to change if black money from around the globe is brought back to its country. This review will be done by studying and scanning of existing resources on Indian economy. It will also determine the policies made to stop generating black money in the first place.