The implications of the operations of the banking sector on money supply

Type :

Term papers

Pages :

4 pages

Format :

.doc

Published date :

05/12/2009

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Summary :

 
 

Table of Contents The implications of the operations of the banking sector on money supply Table of Contents

 
  1. Brief overview
  2. A Mechanistic model of bank deposit determination
  3. Policy and non-bank public's demand for currency
  4. Factors influencing the money supply
  5. Reserves available approach
  6. Conclusion

Abstract

Brief Overview

Bank deposits make up over 80% of the M3. Thus bank behavior is important to money supply.

Cash is an asset to the bank. Deposits are a liability since the bank must repay them on demand or at short notice.

The banks know that at any point in time only a % of investors will remove deposits. They calculate how much will be withdrawn and invest the rest for profit.

In the balance account, the total of assets equals the total of liabilities.

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