Abstract

The Influence of Non-Banks on the Macroeconomie Money on Supply

For some years now, money supply models of the Brunner-Meltzer category have enjoyed steadily growing esteem. For all that, the so-called linear version of this type of models has been largely ignored, presumably mainly because up to the present there has been a lack of attempts to transform the basic hypothesis developed by Brunner and Meltzer into a structure that can be used for test and forecasting purposes. The peculiarity of the linear model approach lies in the fact that the portfolio transactions of commercial banks and non-banks which affect the supply of money are covered by behaviour functions which are oriented throughout to the pattern of the Keynesian consumption function. For instance, the demand of non-banks for cash and time deposits at banks is split up into an autonomous and an induced component (induced by changes in the volume of money), and simultaneously it is assumed that the relation between changes in the quantity of money and those in the holding of cash, time deposits and savings deposits is roughly constant over time. I£ we proceed from the situation in the Federal Republic of Germany, the behaviour functions of the Brunner-Meltzer type seem to describe the investment decisions of nonbank in an acceptable form, However, the autonomous demand for cash and for time and savings deposits is subject to considerable fluctuations, but it can be shown that the latter may be adequately explained by changes in the national income, wealth, market interest rates and the macroeconomic price ratios. Thus, the linear money supply model is capable of making an original and simultaneously an empirically important contribution to the solution of money supply problems.