Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Capitolo 9
L’Offerta di Moneta e la
Politica Monetaria
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Instruments, Targets, and
Objectives in Monetary Policy
©EGEA 2006
Fig. 9.01
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Instruments
• Bank refinancing rates (repo and discount rates)
• Monetary base control using open market purchases and sales
• Required reserve ratios
Targets
• Long-term market interest rates
• Monetary aggregates (M1, M2, M3…)
• Exchange rates
• Inflation rates
Objectives
• Price stability (primary objective)
• Short-term growth (secondary)
• Exchange rate stability (secondary)
©EGEA 2006
Fig. 9.01
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Monetary policy procedures
©EGEA 2006
Fig. 9.02
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.02
Monetary policy procedures
Interest rate
is now
endogenous
Demand
Nominal money
(a) Money targeting
©EGEA 2006
Interest rate
Interest rate
Supply
Quantity of
nominal money
is now
endogenous.
Supply
Demand
Nominal money
(b) Interest rate targeting
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 9.01
Consolidated balance sheet of the Eurosystem
30 April 2004
(€ billions)
Assets
Gold and foreign reserves
Claims on governments
Claims on banks and financial institutions
Other assets
Total
Source: ECB Monthly Bulletin, May 2004, Table 1.1.
©EGEA 2006
Liabilities
310.1
42.6
295.1
205.7
853.5
Currency in circulation
Reserves held by commercial banks
Government deposits
Other liabilities
435.4
133.6
62.1
20.4
Net worth
202.0
Total
853.5
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.03
Central Bank
Assets
Liabilities
Foreign assets
Reserves of
commercial
banks
Loans to comm.
banks
Claims on
governments
Liabilities
Bank notes held
by nonbanks
Deposits of
government
Commercial Banks
Assets
Liabilities
Vault cash and
reserves at
Central Bank
Liabilities to
Central Bank
Deposits of
private sector
Net worth
©EGEA 2006
Assets
Bank notes held
by nonbanks
Net worth
Loans and
securities
Consolidated Government
and Nonbank Private Sector
Where’s
M0?
Deposits of
private sector
Government and
private debt
Deposits of
government
Real assets, incl.
net worth of
banking sector
Net worth
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Reserves-money stock link
Reserves
change in reserves
Deposits
change in
deposits
©EGEA 2006
Fig. 9.04
Burda, Wyplosz
♦
♦
♦
♦
♦
♦
♦
♦
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Base monetaria = M0 = CU + R
CU = ccM1 e R = rrD
Moneta = M1 = CU + D = ccM1 + D 
D = (1-cc)M1 che sostituito in M0 
M0 = [cc + rr(1-cc)]M1 
M1/M0 = 1/ [cc + rr(1-cc)] = mm
dmm/drr = -(1-cc)/([cc + rr(1-cc)])2<0
dmm/dcc = -(1-rr)/([cc + rr(1-cc)])2<0
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 9.02
M0, M2, money market multipliers, and currency
2003
Eurozone
UK
USA
Japan
©EGEA 2006
M0
(% of GDP)
M2
(% of GDP)
Multiplier
M2/M0
7.2
4.6
6.8
20.2
72.3
89.1
58.3
135.6
10.1
19.4
8.6
6.7
Currency
(% of M2)
7.4
3.6
10.7
11.0
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 9.03
Theoretical values of the money multiplier
(M1/M0)
Reserve ratio = rr
Currency/M1
0%
5%
10%
20%
30%
©EGEA 2006
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
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
The money market
©EGEA 2006
Fig. 9.06
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.06
Derived demand for monetary base
Ceteris paribus
M P  L Y , i ,c 
M0 

m
m
Interest rate
d
D
0
©EGEA 2006
Nominal money
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.06
The supply of the monetary base controlled by
the central bank
Interest rate
M0
s
A
D
0
©EGEA 2006
Nominal money
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.06
If the central bank does not respond to an
increase in the demand for monetary base...
M0
s
Interest rate
B
A
D
0
©EGEA 2006
D
Nominal money
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.06
If the central bank instead wishes to hold interest
rates constant...
M 0 M 0s 
Interest rate
s
A
C
D
0
©EGEA 2006
D
Nominal money
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.06
Actually the central bank can choose any point
along the new demand for monetary base
Interest rate
B
A
C
D
0
©EGEA 2006
D
Nominal money
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.07
ECB interest rates
7
Marginal Lending Facility
EONIA
Main refinancing rate
Deposit facility
6
5
4
3
2
1
0
Jan-99
Jul-99
©EGEA 2006
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.08
The Bank of England’s Inflation Forecast:
The Fan, 2004-06
(Percentage increase in prices on a year earlier)
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.09
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
Government bonds
80,000,000
©EGEA 2006
Liabilities
Monetary base
(no change)
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 9.04
Seigniorage around the world
Seigniorage
198091
1992-95
Inflation
198091
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
©EGEA 2006
Source: Masson, Savastano and Sahrma (1998)
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Deposit
insurance
in Europe
2004
Country
Coverage of deposits (in euros)
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Island
Italy
Netherlands
Norway
Portugal
Sweden
Spain
UK
20 000
20 000
1
40 330
25 000
60 000
90% up to ceiling 20 000
20 000
90% up to ceiling 20 000
20 000
103 000
20 000
235 000 1
25 000
28 000
20 000
90% up to ceiling 47 900 1
1
©EGEA 2006
Table 9.05
National currency value converted into € using the exchange
rate in July 2004
Source: ECB, International Association of Deposit Insurers
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 9.10
Reserve and capital adequacy ratios
Typical Commercial Bank, SA
Assets
Central bank reserves
Loans and securities
©EGEA 2006
Liabilities
(1)
Deposits
(2)
Net worth
Tier 1 (primary) capital
Tier 2 (secondary) capital