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OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Balance sheet of the European Central Bank
(September 2000)
Assets
Liabilities
Gold and foreign reserves
Claims on governments
459.0
112.8
Claims on banks and
financial institutions
Other assets
481.7
Total
76.3
1129.8
Currency in circulation
Reserves held by
commercial banks
Other deposits by banks
and financial institutions
Government deposits
Other liabilities
373.5
113.1
Net worth
222.1
Total
Source: Monthly Bulletin, ECB, November 2000
233.0
58.1
130.0
1129.8
Table 9.1
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
M0, M2, money market multipliers and currency
(2000)
M0
(% of GDP)
Japan
USA
Eurozone
UK
14.9%
6.0%
5.8%
3.7%
M2
(% of GDP)
Multiplier
M2/M0
128.4%
11.0%
31.0%
61.9%
8.6
1.8
3.1
16.9
Currency
(% of M2)
9.9%
54.4%
18.7%
5.9%
Table 9.2
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Theoretical values of the money multiplier
(M1/M0)
Reserve ratio = rr
Currency/M1
0%
5%
10%
20%
30%
5%
10%
20%
20.0
10.3
6.9
4.2
3.0
10.0
6.9
5.3
3.6
2.7
5.0
4.2
3.6
2.8
2.3
Table 9.3
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Seigniorage around the world
Seigniorage
1980-91
1992-95
Inflation
1980-91
1992-95
Advanced Economies
US
Germany
Japan
0.8
0.4
0.5
0.6
0.3
0.4
0.3
0.3
7.2
5.4
2.9
2.6
3.3
2.8
3.5
0.9
Hungary
Poland
Israel
0.4
7.0
1.9
4.1
2.2
0.5
12.7
99.5
111.1
23.1
34.6
11.3
Africa
Asia
Latin America
1.4
1.5
3.2
1.3
2.0
2.4
19.6
7.6
251.4
22.2
7.1
110.1
Source: Masson, Savastano and Sahrma (1998)
Table 9.4
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Bank insurance
Coverage of deposits
Coverage of deposits
Austria
Belgium
Denmark
Finland
20 000
20 000
40 000
25 000
France
Germany
Greece
Ireland
60 000
90% up to ceiling 20 000
20 000
90% up to ceiling 20 000
Iceland
Italy
Netherlands
Norway
Portugal
Sweden
Spain
UK
20 000
103 000
20 000
250 000
25 000
25 000
20 000
90% up to ceiling 22 000
Table 9.5
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Monetary policy procedures
Interest rate
Interest rate
Supply
Demand
Supply of base money
(M0)
(a) Money targeting
Supply
Demand
Supply of base money
(M0)
(b) Interest rate targeting
Figure 9.1
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Central Bank
Assets
Liabilities
Foreign assets
Reserves of
commercial
banks
Loans to comm.
banks
Claims on
governments
Assets
Liabilities
Bank notes held
by nonbanks
Bank notes held
by nonbanks
Deposits of
government
Net worth
Commercial Banks
Assets
Liabilities
Vault cash and
reserves at
Central Bank
Liabilities to
Central Bank
Loans and
securities
Consolidated Government
and Nonbank Private Sector
Deposits of
private sector
Net worth
Where’s
M0?
Deposits of
private sector
Government and
private debt
Deposits of
government
Real assets, incl.
net worth of
banking sector
Net worth
Figure 9.2
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Reserves-money stock link
Reserves
change in reserves
Deposits
change in
deposits
Figure 9.3
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Reserves-money stock link with currency
M0
M1
Currency Reserves
Currency
change in reserves
Deposits
change in
deposits
Figure 9.4
Burda & Wyplosz Macroeconomics 3rd edn
OXFORD
UNIVERSITY PRESS
The money market
Interest rate
B
A
C
D
D
0
Monetary base (M0)
Figure 9.5
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
ECB interest rates
6
lending
EONIA
refinancing
4
deposit
2
EONIA = euro
overnight
index average
0
1999
2000
Figure 9.6
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Bank of England’s Fan
(inflation forecasts as of November 2000)
Percentage
increase in
prices on a
year earlier
Source: Inflation Report, Bank of England, November 2000
Figure 9.7
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Foreign exchange market intervention
and sterilization
Danmarks Nationalbank
Assets
Foreign exchange
-80,000,000
Liabilities
Monetary base
-80,000,000
Danmarks Nationalbank
Assets
Foreign exchange
-80,000,000
Liabilities
Monetary base
(no change)
Government bonds
80,000,000
Figure 9.8
OXFORD
Burda & Wyplosz Macroeconomics 3rd edn
UNIVERSITY PRESS
Reserve and capital adequacy ratios
Typical Commercial Bank, SA
Assets
Liabilities
Central bank reserves
Deposits
Loans and securities
Net worth
Tier 1 (primary) capital
Tier 2 (secondary) capital
Figure 9.9