View
234
Download
0
Category
Preview:
Citation preview
7/31/2019 Mm Sic Rest Ere a Economic Aase
1/20
Money matters for growth in the
short term
Florin CituJune 2012 Bucharest Romania
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
2/20
"If the coin be locked up in chests, it is thesame thing with regard to prices, as if it were
annihilated." David Hume Of Money
M*V=P*Y
Money Matters
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
3/20
M1 and CPI, a match made in heaven
F L O R I N C I T U A D V I S O R Y
0
1E+10
2E+10
3E+10
4E+10
5E+10
6E+10
7E+10
8E+10
9E+10
1E+11
0
50
100
150
200
250
300
350
400
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
CPI M1
7/31/2019 Mm Sic Rest Ere a Economic Aase
4/20
The story is not new
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
5/20
It is TRUE: higher money growth is
correlated with higher prices
F L O R I N C I T U A D V I S O R Y
0
50
100
150
200
250
300
-50 0 50 100 150 200 250
M1GW
INFEOP
7/31/2019 Mm Sic Rest Ere a Economic Aase
6/20
There is a positive relationship betweenmoney growth and inflation (.65 correlation
coefficient)
Not a surprise as most economists believe inthe inflationary monetary policies
Basically: no money no inflation
We all agree about the long run
money inflation relationship
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
7/20
Referring to the Great Depression Friedmanand Schwartz argued that "the contraction isin fact a tragic testimonial to the importance
of monetary forces [p. 300; all page referencesrefer to Friedman and Schwartz, 1963]."
Also Friedman said monetary policy canprevent money itself from being a majorsource of economic disturbance.
Or, in the short term if M falls PY can fall also
What about the short term?
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
8/20
Stock of money market deposits falls
by half in October 2008
F L O R I N C I T U A D V I S O R Y
0.0
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
03.01.2006 03.01.2007 03.01.2008 03.01.2009 03.01.2010 03.01.2011 03.01.2012
Depozite interbancare (stoc); volum (mil.lei) PMZ_VD
7/31/2019 Mm Sic Rest Ere a Economic Aase
9/20
Money market interest rates
F L O R I N C I T U A D V I S O R Y
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
03.01.2006 03.01.2007 03.01.2008 03.01.2009 03.01.2010 03.01.2011 03.01.2012
Depozite interbancare
(tranzacii); rata dobnzii (% p.a.)
PMZ_RT
7/31/2019 Mm Sic Rest Ere a Economic Aase
10/20
What did monetary policy do?
F L O R I N C I T U A D V I S O R Y
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
M1 (yoy%ch)
Cash (yoy %ch)
Overnight deposits (yoy%ch)
7/31/2019 Mm Sic Rest Ere a Economic Aase
11/20
23 octombrie 2008 Completarea normei privind funcionarea pieei monetare
interbancare cu o prevedere destinat anomaliilor depia:
n cazul n care nivelul ratei dobnzii ROBOR depete cumai mult de 25la sut nivelul ratei dobnzii pentru facilitateade credit a BNR, bancacentral poate suspenda temporarpublicarea indicilor ROBID/ROBORcalculai pe baza cotaiilorbncilor participante
n aceast situaie, BNR va publica indicii ROBID/ROBORstabilii astfel: ROBID pe toate scadenele, la nivelul ratei dobnziipentru facilitatea de depozit a bncii centrale; ROBOR pe toatescadenele, la nivelul rateidobnzii pentru facilitatea de credita bncii centrale
What does explain lower MM rates
after December 2008?
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
12/20
Money and NGDP
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
13/20
Money, NGDP, RGDP
F L O R I N C I T U A D V I S O R Y
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
2001Q1
2001Q2
2001Q3
2001Q4
2002Q1
2002Q2
2002Q3
2002Q4
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
NGDP RGDP M1
7/31/2019 Mm Sic Rest Ere a Economic Aase
14/20
Granger causality test shows that M1
does influence NGDP
F L O R I N C I T U A D V I S O R Y
Pairwise Granger Causality Tests
Date: 06/06/12 Time: 00:15
Sample: 2001Q1 2011Q4
Lags: 3
Null Hypothesis: Obs F-Statistic Probability
NGDP does not Granger Cause M1 41 0.40613 0.74955M1 does not Granger Cause NGDP 2.50910 0.07526
Pairwise Granger Causality Tests
Date: 06/06/12 Time: 00:17
Sample: 2001Q1 2011Q4
Lags: 2
Null Hypothesis: Obs F-Statistic Probability
NGDP does not Granger Cause M1 42 0.80556 0.45452
M1 does not Granger Cause NGDP 4.27513 0.02136
7/31/2019 Mm Sic Rest Ere a Economic Aase
15/20
Granger causality test shows that M1
does influence RGDP
F L O R I N C I T U A D V I S O R Y
Pairwise Granger Causality Tests
Date: 06/06/12 Time: 00:19
Sample: 2001Q1 2011Q4
Lags: 3
Null Hypothesis: Obs F-Statistic Probability
M1 does not Granger Cause RGDP 41 3.25432 0.03349
RGDP does not Granger Cause M1 1.10426 0.36084
Pairwise Granger Causality Tests
Date: 06/06/12 Time: 00:21
Sample: 2001Q1 2011Q4
Lags: 2
Null Hypothesis: Obs F-Statistic Probability
M1 does not Granger Cause RGDP 42 2.65023 0.08401
RGDP does not Granger Cause M1 1.73894 0.18976
7/31/2019 Mm Sic Rest Ere a Economic Aase
16/20
RGDP responds positively after one
quarter to an increase in M1
F L O R I N C I T U A D V I S O R Y
-2
-1
0
1
2
3
1 2 3 4 5 6 7 8 9 10
Response of RGDP to M1
Response to Cholesky One S.D. Innovations 2 S.E.
7/31/2019 Mm Sic Rest Ere a Economic Aase
17/20
NGDP responds instantaneously to an
increase in M1
F L O R I N C I T U A D V I S O R Y
-2
-1
0
1
2
3
4
1 2 3 4 5 6 7 8 9 10
Response of NGDP to M1
Response to Cholesky One S.D. Innovations 2 S.E.
7/31/2019 Mm Sic Rest Ere a Economic Aase
18/20
Money and credit
F L O R I N C I T U A D V I S O R Y
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
M1 Credit
7/31/2019 Mm Sic Rest Ere a Economic Aase
19/20
Milton Friedman: Rapid increases in thequantity of money produce inflation. Sharp
decreases produce depression.
Sudden decreases affect short term growth viaMM and the credit channel.
Information offered by Money supply and itscomponents should not be ignored, either in
the short term or long term.
Money via MM and growth in the
short term
F L O R I N C I T U A D V I S O R Y
7/31/2019 Mm Sic Rest Ere a Economic Aase
20/20
F L O R I N C I T U A D V I S O R Y
F L O R I N C I T U A D V I S O R YAn Indepndent Advisory And Consulting Company
Bucharest, Romania
email:office@macroinvestadvisory.com
Telephone: +40727642085
Recommended