Geldbasiskonzepte und Geldmenge (I)

Abstract

Monetary Base Concepts and the Quantity of Money

The relations between different monetary base concepts derived from structural equations for the monetary domain of an economy, namely the monetary base (Br), the adjusted base (B’) (adjusted for certain refinancing and investment dispositions of the commercial banks) and the extended base (Be) (allowing for the quantity of minimum reserves set free), and the supply of money and credit formed the central issues of the foregoing study. The multi pliers linking up these values permit the assumption of certain differences, depending on what monetary base concept is applied. For example, it can be expected that the money-supply multipliers (like the credit-supply multipliers) will respond to changes in the loan rate and bank rate relatively insensitively when Be is applied and relatively sensitively when B’ is applied. Since it also proved that when B® is applied the multipliers respond less markedly to changes in the minimum reserve rate than the other two cases, it can be assumed that the influence of B® will have a comparatively strong effect on the change in the quantity of money. With regard to the time path of the adjustment processes, where B’ is applied we arrive at the hypothesis that in the event of an increase in the adjusted base (B’), e. g. on account of inflows of foreign exchange, the quantity of money rises initially very rapidly (owing to the resulting monetarization effect deriving, for instance, from conversion of foreign exchange into domestic currency), thereafter remains temporarily stagnant and then increases again in the course of the ensuing expansion of credit. The consequent trend of the quantity of money permits us to expect a time profile which, in our opinion, should differ perceptibly from the time profile obtained by applying B” and Be. The relationships described in the contribution form the theoretical background for the following second part, in which the supply of money (together with the demand for money) in the Federal Republic of Germany is estimated econometrically for the period form early 1965 to early 1973, using alternative monetary base concepts.