monetary base

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Monetary base

Sum of the currency held by the public and reserves held by financial institutions with the Federal Reserve Banks. This is the monetary aggregate that the Federal Reserve has control over through its monetary policy. Also called High Powered Money because the effect of changes in monetary base on money supply is magnified by the money multiplier.

Narrow Money

A measure of the money supply used by the various central banks that includes only currency in circulation and very near money instruments. In the Federal Reserve System, narrow money includes all physical currency and deposits in checking accounts as well as Negotiable Orders Withdrawal accounts. It does not include savings accounts, certificates of deposit, or money market accounts. This is called narrow money because it applies the most restrictive definition of money. It is also called the money base. See also: M1, M0.

monetary base


high-powered money

that part of the MONEY SUPPLY that is directly

under the control of a country's CENTRAL BANK. In the UK this consists of CURRENCY (BANK NOTES and COINS) in circulation plus commercial banks’ TILL MONEY and their operational balances at the BANK OF ENGLAND - equal to the ‘M0‘ definition of money. See MONEY SUPPLY DEFINITIONS, MONETARY POLICY.

References in periodicals archive ?
Under a pure fiat money system, dominated by a hegemon, identification of monetary disorder becomes more hazardous especially where high-powered money (an alternative term for the monetary base) has become essentially removed from the pivot of the monetary system.
State money is the high-powered money that is produced by central banks.
Because then commercial banks and other financial institutions would need to keep some of that high-powered money in reserve in order to be able to meet demands for it and so on.
More specifically, Brown recommends a growth rate for the monetary base equal to the estimated long-run growth rate for the real demand of high-powered money.
In comparison, for dollars, the Federal Reserve determines the amount of high-powered money that is produced (currency plus bank reserves), which ultimately determines the total number of dollars in the world.
There are also four identities defining real income, the change in international reserves, the stock of money, and the stock of high-powered money.
Table A-1 Measures of Seigniorage Variables Description Monetary Base Reserve money (line 14 in IFS) (or high-powered money) Seigniorage l: Ratio of the change in high powered money to nominal GDP (Fischer 1982) Seigniorage 2: Ratio of high-powered money to nominal GDP in current period minus ration of high-powered money to nominal GDP in last period plus the product of the ratio Of high powered money to nominal GDP in last period times the growth rate of nominal GDP In current period to one plus the growth rate of GDP in current period (Walsh 1998).
The policy framework has changed throughout transition, from broad money targeting (1990-1996) to high-powered money targeting (1997-2005), and then to inflation targeting (August 2005).
By increasing the stock of high-powered money, the open-market purchase drives down nominal and real interest rates, and so increases consumption and investment.
The change in the deposit-currency ratio alone would have produced a decline of 37 per cent; the change in the deposit-reserve ratio, a decline of 20 per cent; interaction between the two ratios, a rise of 10 per cent; these three converted the 171/2 per cent rise that high-powered money would have produced into a 35 per cent decline in the stock of money.
The euro banknotes from Holland would end up as the source of additional deposits held by member banks with the central banks still remaining in monetary union and so adding to the amount of high-powered money circulating in that truncated area.
A high-powered money laundering steering group met recently to consider the implications of the changeover and review anti-fraud arrangements.

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