《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材

Chapter01WhyStudyMoney,Banking,andFinancialMarkets?Chapter01WhyStudyMoney,BanWhyStudyMoney,Banking,andFinancialMarketsToexaminehowfinancialmarketssuchasbondandstockmarketsworkToexaminehowfinancialinstitutionssuchasbanksworkToexaminetheroleofmoneyintheeconomyWhyStudyMoney,Banking,andPart1IntroductionChap1WhyStudyMoney,BankingandFinancialMarkets?Chap2AnoverviewsoftheFinancialSystemChap3WhatisMoney?Part1IntroductionChap1WhyStPart2FinancialMarketsandFinancialInstitutionsChap4UnderstandingInterestRatesChap5TheBehaviorofInterestRatesChap6BankingPart2FinancialMarketsandFiFIGURE1InterestRatesonSelectedBonds,1950–2008Sources:FederalReserveBulletin;/releases/H15/data.htm.FIGURE1InterestRatesonSePart3CentralBankingandtheConductofMonetaryPolicyChap7StructureofCentralbanksChap8MultipleDepositCreationandtheMoneySupplyProcessChap9DeterminantsoftheMoneySupplyChap10ToolsofMonetaryPolicyChap11WhatshouldcentralBanksDo?MonetaryPolicyGoals,StrategyandTacticsPart3CentralBankingandthePart4MoneyTheoryChap12TheDemandforMoneyChap13AggregateDemandandSupplyAnalysisChap14TransmissionMechanismsofMonetaryPolicy:TheEvidenceChap15MoneyandInflationPart4MoneyTheoryChap12TheFIGURE4AggregatePriceLevelandtheMoneySupplyintheUnitedStates,1950–2008Sources:

/fred/data/gdp/gdpdef;/releases/h6/hist/h6hist10.txt.FIGURE4AggregatePriceLeveMoneyandInflationTheaggregatepricelevelistheaveragepriceofgoodsandservicesinaneconomyAcontinualriseinthepricelevel(inflation)affectsalleconomicplayersDatashowsaconnectionbetweenthemoneysupplyandthepricelevelMoneyandInflationTheaggregaFIGURE5AverageInflationRateVersusAverageRateofMoneyGrowthforSelectedCountries,1997–2007Source:InternationalFinancialStatistics.FIGURE5AverageInflationRaFIGURE6MoneyGrowth(M2AnnualRate)andInterestRates(Long-TermU.S.TreasuryBonds),1950–2008Sources:FederalReserveBulletin,p.A4,Table1.10;/releases/h6/hist/h6hist1.txt.FIGURE6MoneyGrowth(M2AnnMoneyandInterestRatesInterestratesarethepriceofmoneyPriorto1980,therateofmoneygrowthandtheinterestrateonlong-termTreasurybondswerecloselytiedSincethen,therelationshipislessclearbuttherateofmoneygrowthisstillanimportantdeterminantofinterestratesMoneyandInterestRatesIntereFIGURE3MoneyGrowth(M2AnnualRate)andtheBusinessCycleintheUnitedStates,1950–2008Note:Shadedareasrepresentrecessions.Source:FederalReserveBulletin,p.A4,Table1.10;/releases/h6/hist/h6hist1.txt.FIGURE3MoneyGrowth(M2AnnHowWeWillStudyMoney,Banking,andFinancialMarketsAsimplifiedapproachtothedemandforassetsTheconceptofequilibriumBasicsupplyanddemandtoexplainbehaviorinfinancialmarketsThesearchforprofitsAnapproachtofinancialstructurebasedontransactioncostsandasymmetricinformationAggregatesupplyanddemandanalysisHowWeWillStudyMoney,BankiReferences米什金，《貨幣金融學(xué)》（中文）（8)，清華大學(xué)出版社，2009米什金，《貨幣金融學(xué)》（中文）（9)，人民大學(xué)出版社，2011易綱、吳有昌，《貨幣銀行學(xué)》，上海人民出版社，1999年武康平，《貨幣銀行學(xué)教程》清華大學(xué)出版社2006年黃達(dá)，《貨幣銀行學(xué)》，中國人民大學(xué)出版社2000年戴國強(qiáng)，《貨幣銀行學(xué)》，上海財經(jīng)大學(xué)出版社，2003托馬斯，《貨幣，銀行業(yè)和金融市場》機(jī)械工業(yè)出版社2008R.哈里斯著，梁小民譯：《貨幣理論》，中國金融出版社，北京，1989References米什金，《貨幣金融學(xué)》（中文）（8)，清Chapter3WhatIsMoney?Chapter3WhatIsMoney?MeaningofMoney（貨幣）Whatisit?Money(orthe“moneysupply”):anythingthatisgenerallyacceptedinpaymentforgoodsorservicesorintherepaymentofdebts.MeaningofMoney（貨幣）WhatisitMeaningofMoneyMoney(astockconcept)isdifferentfrom:Currency:consistofdollarbills（鈔票）andcoins（硬幣）,currencyisonetypeofmoney.Wealth（財富）:thetotalcollectionofpiecesofpropertythatservetostorevalueIncome（收入）:flowofearningsperunitoftime(aflowconcept)

MeaningofMoneyMoney(astockFunctionsofMoneyMediumofExchange（交易媒價）:Eliminatesthetroubleoffindingadoublecoincidenceofneeds(reducestransactioncosts)PromotesspecializationAmediumofexchangemustbeeasilystandardizedbewidelyacceptedbedivisiblebeeasytocarrynotdeterioratequicklyFunctionsofMoneyMediumofExFunctionsofMoneyUnitofAccount（計算單位）:usedtomeasurevalueintheeconomyreducestransactioncostsStoreofValue（價值尺度）:usedtosavepurchasingpowerovertime.otherassetsalsoservethisfunctionMoneyisthemostliquidofallassetsbutlosesvalueduringinflationFunctionsofMoneyUnitofAccoEvolutionofthePaymentsSystem（支付制度的演變）CommodityMoney（商品貨幣）:valuable,easilystandardizedanddivisiblecommodities(e.g.preciousmetals,cigarettes).FiatMoney（不兌現(xiàn)紙幣）:papermoneydecreedbygovernmentsaslegaltender（法定貨幣）.EvolutionofthePaymentsSystEvolutionofthePaymentsSystemChecks（支票）:aninstructiontoyourbanktotransfermoneyfromyouraccountElectronicPayment(電子支付，e.g.onlinebillpay).E-Money(electronicmoney，電子貨幣):DebitcardStored-valuecard(smartcard)E-cashEvolutionofthePaymentsSystMeasuringMoneyHowdowemeasuremoney?Whichparticularassetscanbecalled“money”?Constructmonetaryaggregatesusingtheconceptofliquidity:M1(mostliquidassets)=currency（通貨）+traveler’schecks（旅行支票）+demanddeposits（活期存款）+othercheckabledeposits（其他支票存款）.MeasuringMoneyHowdowemeasuMeasuringMoneyM2(addstoM1otherassetsthatarenotsoliquid)=M1+smalldenominationtimedeposits（小面額定期存款）+savingsdepositsandmoneymarketdepositaccounts（儲蓄存款和貨幣市場存款賬戶）+moneymarketmutualfundshares（retail）（貨幣市場互助基金份額（非機(jī)構(gòu)持有））.MeasuringMoneyM2(addstoM1Table1MeasuresoftheMonetaryAggregatesTable1MeasuresoftheMonetMonetaryAggregatesCurrencyTraveler’sChecksDemandDepositsOtherCheck.DepM1M2M3SmallDen.Dep.SavingsandMMMoneyMarketMutualFundsSharesMonetaryAggregatesCurrencyM1M存款的種類：*活期存款：這種存款，支用時須使用銀行規(guī)定的支票，又稱為支票存款。企業(yè)、個人、政府機(jī)關(guān)、金融機(jī)構(gòu)都能在銀行開立活期存款賬戶。定期存款：指那些具有確定的到期期限才準(zhǔn)提取的存款。儲蓄存款：這主要是針對居民個人積蓄貨幣之需所開辦的一種存款業(yè)務(wù)。一般不能據(jù)此簽發(fā)支票，支用時只能提取現(xiàn)金或先轉(zhuǎn)入存戶的活期存款賬戶。它可以進(jìn)一步分為活期和定期兩大類。存款的種類：*中國的貨幣計量：

M0=流通中現(xiàn)金

M1=M0+企事業(yè)單位活期存款

M2=M1+企事業(yè)單位定期存款+居民儲蓄存款+證券公司客戶保證金+其他存款中國的貨幣計量：

貨幣概覽MonetarySurvey

項目Items2005貨幣和準(zhǔn)貨幣Money&Quasimoney296040.13貨幣Money（M1）107279.91流通中現(xiàn)金Currencyincirculation24032.82活期存款Demanddeposits83247.09準(zhǔn)貨幣Quasimoney188760.22定期存款Timedeposits33099.99儲蓄存款Savingdeposits141050.99其他存款Otherdeposits14609.24項目Items2005貨幣和準(zhǔn)貨幣MoM1vs.M2Doesitmatterwhichmeasureofmoneyisconsidered?M1andM2canmoveindifferentdirectionsintheshortrun(seefigure).Conclusion:thechoiceofmonetaryaggregateisimportantforpolicymakers.M1vs.M2DoesitmatterwhichFIGURE1GrowthRatesoftheM1andM2Aggregates,1960–2008Sources:FederalReserveBulletin,p.A4,Table1.10,variousissues;Citibasedatabank;/releases/h6/hist/h6hist1.txt.FIGURE1GrowthRatesoftheHowReliablearetheMoneyData?Revisionsareissuedbecause:SmalldepositoryinstitutionsreportinfrequentlyAdjustmentsmustbemadeforseasonalvariationWeprobablyshouldnotpaymuchattentiontoshort-runmovementsinthemoneysupplynumbers,butshouldbeconcernedonlywithlonger-runmovementsHowReliablearetheMoneyDatTable2GrowthRateofM2:InitialandRevisedSeries,2008(percent,compoundedannualrate)Table2GrowthRateofM2:In《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材M2GrowthRateGDPGrowthRate200011.87.9200116.89.6200217.811.3200318.112.0200410.513.1200515.515.7200614.015.5200711.312.9均值15.611.1M2

GrowthRateGDPGrowthRate199122.412.9199223.414.8199319.716.819948.49.6199510.67.5199615.78.3199716.37.1199815.86.8199916.46.81991~2007年M2與GDP增長率M2GrowthRateGDPGrowthRate2表1美英德法四國批發(fā)物價指數(shù)年份（1816-1913）美國英國德國法國18161501479414318498246679418731371301141221896647269691913100100100100指數(shù)1913=100數(shù)據(jù)來源：馬君潞：《國際貨幣制度研究》，中國財政經(jīng)濟(jì)出版社，1995。表1美英德法四國批發(fā)物價指數(shù)年份（1816-1913）美國In1944,therewasameetingof44nationsatBrettonWoods,NewHampshire.ThemeetingwascalledtheBrettonWoodsConference,officiallyknownastheUnitedNationsMonetaryandFinancialConference.Aninternationalagreement,calledBrettonWoodsAgreement,wasreachedtogovernmonetarypolicyamongnationsThepurposewastodesignapostwarinternationalmonetarysystem.BrettonWoodsSystem:1945-1972In1944,therewasameetingoUndertheBrettonWoodsSystem,theU.S.dollarwaspeggedtogoldat$35perounceandothercurrencieswerepeggedtotheU.S.dollar.Eachcountrywasresponsibleformaintainingitsexchangeratewithin±1%oftheadoptedparvaluebybuyingorsellingforeignreservesasnecessary.TheBrettonWoodsSystemwasadollar-basedgoldexchangestandard.BrettonWoodsSystem:1945-1972UndertheBrettonWoodsSystem世界出口貿(mào)易年平均增長率，

1948—1976年為7.7%，

1913—1938年，平均每年只增長0.7%?！敦泿拧y行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材Ononehand,performingtheroleoftheworld'sreservecurrency,theUSdollarshouldkeepitsvaluestable.Ontheotherhand,theinternationaleconomyneededdollarsforliquiditypurposesandtosatisfydemandforreserveassets.ThisforcedUStorunconsistentlylargecurrentaccountdeficits.TriffinarguedthatsuchpersistentdeficitswouldeventuallyputpressureontheUSdollarandleadtothedemiseoftheBrettonWoodssystemofinternationalexchange.TriffinDilemmaOnonehand,performingtheroChapter4UnderstandingInterestRatesChapter4UnderstandingInteresDiscountingtheFuture()……PresentValue（現(xiàn)值）Definition（定義）:AdollarpaidtoyouoneyearfromnowislessvaluablethanadollarpaidtoyoutodayDiscountingtheFuture(TimeLine$100$110Year01PV$1002$121nCannotdirectlycomparepaymentsscheduledindifferentpointsinthetimeline$100*(1+i)n$100$100$100TimeLine$100$110Year01PV$1002SimplePresentValueFormula（簡單的現(xiàn)值公式）SimplePresentValueFormula（簡TimeLine$100$100Year01PV1002$100$100n100/(1+i)100/(1+i)2100/(1+i)nCannotdirectlycomparepaymentsscheduledindifferentpointsinthetimelineTimeLine$100$100Year01PV1002$FourTypesofCreditMarketInstrumentsSimpleLoan（簡易貸款）:Thelenderprovidestheborrowerwithanamountofmoney,whichmustberepaidtothelenderatthematuritydatealongwithanadditionalpaymentfortheinterest.Fixed-PaymentLoan（定期定額貸款）:Thistypeofloanhasthesamecashflowthroughoutthelifeoftheloan.CouponBond（息票債券）:Acouponbondpaystheownerofthebondafixedinterestrate(couponpayment)everyyearuntilthematuritydate,whenaspecifiedfinalamountispaid.FourTypesofCreditMarketInFourTypesofCreditMarketInstrumentsDiscountBond（貼現(xiàn)發(fā)行債券）:Adiscountbondisboughtatapricebelowitsfacevalue(atadiscount),andthefacevalueisrepaidatthematuritydate.FourTypesofCreditMarketInYieldtoMaturity(到期收益率)Definition（定義）：Theinterestratethatequatesthe

presentvalueofcashflowpaymentsreceivedfromadebtinstrument（未來現(xiàn)金流的現(xiàn)值）

with

itsvaluetoday（今天的價值）YieldtoMaturity(到期收益率)Defini代表債券價格代表第t期債券的利息代表債券的期數(shù)代表債券本金代表到期收益率TheformulaofYieldtoMaturity(到期收益率的公式)代表債券價格代表第t期債券的利息代表債券的期數(shù)代表債券本金代Table1YieldstoMaturityona10%-Coupon-RateBondMaturinginTenYears

(FaceValue=$1,000)Whenthecouponbondispricedatitsfacevalue,theyieldtomaturityequalsthecouponrateThepriceofacouponbondandtheyieldtomaturityarenegativelyrelatedTheyieldtomaturityisgreaterthanthecouponratewhenthebondpriceisbelowitsfacevalueTable1YieldstoMaturityonTable1YieldstoMaturityona10%-Coupon-RateBondMaturinginTenYears

(FaceValue=$1,000)Whenthecouponbondispricedatitsfacevalue,theyieldtomaturityequalsthecouponrateThepriceofacouponbondandtheyieldtomaturityarenegativelyrelatedTheyieldtomaturityisgreaterthanthecouponratewhenthebondpriceisbelowitsfacevalueTable1YieldstoMaturityonConsol(統(tǒng)一公債)orPerpetuity（永久債券）Definition:Abondwithnomaturitydatethatdoesnotrepayprincipalbutpaysfixedcouponpaymentsforever Forcouponbonds,thisequationgivesthecurrentyield,aneasytocalculateapproximationtotheyieldtomaturityConsol(統(tǒng)一公債)orPerpetuity（永久債DiscountBond（貼現(xiàn)發(fā)行債券）DiscountBond（貼現(xiàn)發(fā)行債券）1-57OtherMeasuresofInterestRates1-57OtherMeasuresofInterest1-58CurrentYield（當(dāng)期收益率）

、

C ic=

PTwoCharacteristicsIsbetterapproximationtoyieldtomaturity,nearerpriceistoparandlongerismaturityofbondChangeincurrentyieldalwayssignalschangeinsamedirectionasyieldtomaturity1-58CurrentYield（當(dāng)期收益率） 、1-59

(F–P) 360idb=x

F(numberofdaystomaturity)

Oneyearbill,P=$900,F=$1000

$1000–$900 360idb= x =0.099=9.9% $1000 365TwoCharacteristicsUnderstatesyieldtomaturity;longerthematurity,greaterisunderstatementChangeindiscountyieldalwayssignalschangeinsamedirectionasyieldtomaturityYieldonaDiscountBasis（貼現(xiàn)收益率）1-59 (F–P) ?2006PearsonAddison-Wesley.Allrightsreserved1-60BondPageoftheNewspaper?2006PearsonAddison-Wesley.《貨幣、銀行和金融市場經(jīng)濟(jì)學(xué)》第八版-ppt課件教材RateofReturn（回報率）Definiton(定義):therateofreturnisdefinedasthepaymentstotheownerplusthechangeinitsvalue.RateofReturn（回報率）Definiton(定RateofReturnandInterestRatesThereturnequalstheyieldtomaturityonlyiftheholdingperiodequalsthetimetomaturityAriseininterestratesisassociatedwithafallinbondprices,resultinginacapitallossiftimetomaturityislongerthantheholdingperiodThemoredistantabond’smaturity,thegreaterthesizeofthepercentagepricechangeassociatedwithaninterest-ratechangeRateofReturnandInterestRaRateofReturnandInterestRates(cont’d)Themoredistantabond’smaturity,thelowertherateofreturntheoccursasaresultofanincreaseintheinterestrateEvenifabondhasasubstantialinitialinterestrate,itsreturncanbenegativeifinterestratesriseRateofReturnandInterestRaTable2One-YearReturnsonDifferent-Maturity10%-Coupon-RateBondsWhenInterestRatesRisefrom10%to20%Table2One-YearReturnsonDInterest-RateRiskPricesandreturnsforlong-termbondsaremorevolatilethanthoseforshorter-termbondsThereisnointerest-rateriskforanybondwhosetimetomaturitymatchestheholdingperiodInterest-RateRiskPricesandrRealandNominalInterestRatesNominalinterestratemakesnoallowance

forinflationRealinterestrateisadjustedforchangesinpricelevelsoitmoreaccuratelyreflectsthecostofborrowingExanterealinterestrateisadjustedforexpectedchangesinthepricelevelExpostrealinterestrateisadjustedforactualchangesinthepricelevelRealandNominalInterestRateFisherEquationTheRelationshipbetweenNominalinterestrateandRealinterestrate:FisherEquationTheRelationshiFIGURE1RealandNominalInterestRates(Three-MonthTreasuryBill),1953–2008Sources:Nominalratesfrom/releases/H15.TherealrateisconstructedusingtheprocedureoutlinedinFredericS.Mishkin,“TheRealInterestRate:AnEmpiricalInvestigation,”Carnegie-RochesterConferenceSeriesonPublicPolicy15(1981):151–200.Thisprocedureinvolvesestimatingexpectedinflationasafunctionofpastinterestrates,inflation,andtimetrendsandthensubtractingtheexpectedinflationmeasurefromthenominalinterestrate.FIGURE1RealandNominalIntChapter5TheBehaviorofInterestRatesChapter5TheBehaviorofInterDeterminingtheQuantityDemandedofanAssetWealth:thetotalresourcesownedbytheindividual,includingallassetsExpectedReturn:thereturnexpectedoverthenextperiodononeassetrelativetoalternativeassetsRisk:thedegreeofuncertaintyassociatedwiththereturnononeassetrelativetoalternativeassetsLiquidity:theeaseandspeedwithwhichanassetcanbeturnedintocashrelativetoalternativeassetsDeterminingtheQuantityDemanTheoryofAssetDemandHoldingallotherfactorsconstant:ThequantitydemandedofanassetispositivelyrelatedtowealthThequantitydemandedofanassetispositivelyrelatedtoitsexpectedreturnrelativetoalternativeassetsThequantitydemandedofanassetisnegativelyrelatedtotheriskofitsreturnsrelativetoalternativeassetsThequantitydemandedofanassetispositivelyrelatedtoitsliquidityrelativetoalternativeassetsTheoryofAssetDemandHoldingSummaryTable1ResponseoftheQuantityofanAssetDemandedtoChangesinWealth,ExpectedReturns,Risk,andLiquiditySummaryTable1ResponseoftSupplyandDemandforBondsAtlowerprices(higherinterestrates),ceterisparibus,thequantitydemandedofbondsishigher:aninverse（相反的，負(fù)向的）relationshipAtlowerprices(higherinterestrates),ceterisparibus,thequantitysuppliedofbondsislower:apositiverelationshipSupplyandDemandforBondsAtFIGURE1SupplyandDemandforBondsFIGURE1SupplyandDemandfoMarketEquilibriumOccurswhentheamountthatpeoplearewillingtobuy(demand)equalstheamount

thatpeoplearewillingtosell(supply)atagivenpriceBd=Bsdefinestheequilibrium(ormarketclearing)priceandinterestrate.WhenBd>Bs,thereisexcessdemand,pricewillriseandinterestratewillfallWhenBd<Bs,thereisexcesssupply,pricewillfallandinterestratewillriseMarketEquilibriumOccurswhenShiftsintheDemandforBondsWealth:inanexpansionwithgrowingwealth,thedemandcurveforbondsshiftstotherightExpectedReturns:higherexpectedinterestratesinthefuturelowertheexpectedreturnforlong-termbonds,shiftingthedemandcurvetotheleftExpectedInflation:anincreaseintheexpectedrateofinflationslowerstheexpectedreturnforbonds,causingthedemandcurvetoshifttotheleftRisk:anincreaseintheriskinessofbondscausesthedemandcurvetoshifttotheleftLiquidity:increasedliquidityofbondsresultsinthedemandcurveshiftingrightShiftsintheDemandforBondsSummaryTable2FactorsThatShifttheDemandCurveforBondsSummaryTable2FactorsThatFIGURE2ShiftintheDemandCurveforBondsFIGURE2ShiftintheDemandShiftsintheSupplyofBondsExpectedprofitabilityofinvestmentopportunities:inanexpansion,thesupplycurveshiftstotherightExpectedinflation:anincreaseinexpectedinflationshiftsthesupplycurveforbondstotherightGovernmentbudget:increasedbudgetdeficitsshiftthesupplycurvetotherightShiftsintheSupplyofBondsESummaryTable3FactorsThatShifttheSupplyofBondsSummaryTable3FactorsThatFIGURE3ShiftintheSupplyCurveforBondsFIGURE3ShiftintheSupplyFIGURE4ResponsetoaChangeinExpectedInflationFIGURE4ResponsetoaChangeFIGURE5ExpectedInflationandInterestRates(Three-MonthTreasuryBills),1953–2008Source:ExpectedinflationcalculatedusingproceduresoutlinedinFredericS.Mishkin,“TheRealInterestRate:AnEmpiricalInvestigation,”Carnegie-RochesterConferenceSeriesonPublicPolicy15(1981):151–200.Theseproceduresinvolveestimatingexpectedinflationasafunctionofpastinterestrates,inflation,andtimetrends.FIGURE5ExpectedInflationaFIGURE6ResponsetoaBusinessCycleExpansionFIGURE6ResponsetoaBusineFIGURE7BusinessCycleandInterestRates(Three-MonthTreasuryBills),1951–2008Source:FederalReserve:/releases/H15/data.htm.FIGURE7BusinessCycleandITheLiquidityPreferenceFrameworkTheLiquidityPreferenceFrameFIGURE8EquilibriumintheMarketforMoneyFIGURE8EquilibriumintheMDemandforMoneyintheLiquidityPreferenceFrameworkAstheinterestrateincreases:Theopportunitycostofholdingmoneyincreases…Therelativeexpectedreturnofmoneydecreases……andthereforethequantitydemandedofmoneydecreases.DemandforMoneyintheLiquidShiftsintheDemandforMoneyIncomeEffect:ahigherlevelofincomecausesthedemandformoneyateachinterestratetoincreaseandthedemandcurvetoshifttotherightPrice-LevelEffect:ariseinthepricelevelcausesthedemandformoneyateachinterestratetoincreaseandthedemandcurvetoshifttotherightShiftsintheDemandforMoneyShiftsintheSupplyofMoneyAssumethatthesupplyofmoneyiscontrolledbythecentralbankAnincreaseinthemoneysupplyengineeredbytheFederalReservewillshiftthesupplycurveformoneytotherightShiftsintheSupplyofMoneyAFIGURE9ResponsetoaChangeinIncomeorthePriceLevelFIGURE9ResponsetoaChangeFIGURE10ResponsetoaChangeintheMoneySupplyFIGURE10ResponsetoaChangSummaryTable4FactorsThatShifttheDemandforandSupplyofMoneySummaryTable4FactorsThatEverythingElseRemainingEqual?Liquiditypreferenceframeworkleadstotheconclusionthatanincreaseinthemoneysupplywilllowerinterestrates:theliquidityeffect.Incomeeffectfindsinterestratesrisingbecauseincreasingthemoneysupplyisanexpansionaryinfluenceontheeconomy(thedemandcurveshiftstotheright).EverythingElseRemainingEquaEverythingElseRemainingEqual?Price-Leveleffectpredictsanincreaseinthemoneysupplyleadstoariseininterestratesinresponsetotheriseinthepricelevel(thedemandcurveshiftstotheright).Expected-Inflationeffectshowsanincreaseininterestratesbecauseanincreaseinthemoneysupplymayleadpeopletoexpectahigherpricelevelinthefuture(thedemandcurveshiftstotheright).EverythingElseRemainingEquaPrice-LevelEffect

andExpected-InflationEffectAonetimeincreaseinthemoneysupplywillcausepricestorisetoapermanentlyhigherlevelbytheendoftheyear.Theinterestratewillriseviatheincreasedprices.Price-leveleffectremainsevenafterpriceshavestoppedrising.Arisingpricelevelwillraiseinterestratesbecausepeoplewillexpectinflationtobehigheroverthecourseoftheyear.Whenthepricelevelstopsrising,expectationsofinflationwillreturntozero.Expected-inflationeffectpersistsonlyaslongasthepricelevelcontinuestorise.Price-LevelEffect

andExpectFIGURE11ResponseoverTimetoanIncreaseinMoneySupplyGrowthFIGURE11ResponseoverTimeFIGURE12MoneyGrowth(M2,AnnualRate)andInterestRates(Three-MonthTreasuryBills),

1950–2008Sources:FederalReserve:/releases/h6/hist/h6hist1.txt.FIGURE12MoneyGrowth(M2,AnChapter6BankingChapter6BankingBankingbalancesheetbusinessOff-balancesheetactivities(OBSA)AssetLiabilityOBSAinanarrowscenceInter-businessBankingbalancesheetbusinesTheBankBalanceSheetLiabilitiesCheckabledepositsNontransactiondepositsBorrowingsBankcapitalTheBankBalanceSheetLiabilitDeposits1.CheckableDepositsno-interest-bearingcheckingaccounts:demanddepositsinterest-bearingcheckingaccounts:NOW(negotiableordersofwithdrawal)ATS(automatictransfersfromsavings)MMDAs(moneymarketdepositaccounts)

Deposits1.CheckableDepositsDeposits2.Non-transactionDepositsSavingsaccountTimedepositsSmall-denominationtimedeposits(<$100,000)large-denominationtimedeposits(≥$100,000)Deposits2.Non-transactionDepBorrowingsBorrowingsfromTheCentralBankBorrowingsfromotherbankandfinancialinstitutionsRepurchaseagreementsBorrowingofEurodollarsBorrowingsBorrowingsfromTheBankCapitalstock(commonstockandpreferredstock)SurplusUndividedprofits(retainedearnings)ReservesDebentures

BankCapitalAssets(usesoffunds)loanCashitemsOtherassetssecuritiesAssets(usesoffunds)loanCashTheBankBalanceSheetAssetsReservesCashitemsinprocessofcollectionDepositsatotherbanksSecuritiesLoansOtherassetsTheBankBalanceSheetAssetsTable1BalanceSheetofAllCommercialBanks(itemsasapercentageofthetotal,December2008)Table1BalanceSheetofAllBasicBanking:CashDepositOpeningofacheckingaccountleadstoanincreaseinthebank’sreservesequaltotheincreaseincheckabledepositsFirstNationalBankFirstNationalBankAssetsLiabilitiesAssetsLiabilitiesVaultCash+$100Checkabledeposits+$100Reserves+$100Checkabledeposits+$100BasicBanking:CashDepositOpeBasicBanking:CheckDepositFirstNationalBankSecondNationalBankAssetsLiabilitiesAssetsLiabilitiesReserves+$100Checkabledeposits+$100Reserves-$100Checkabledeposits-$100FirstNationalBankAssetsLiabilitiesCashitemsinprocessofcollection+$100Checkabledeposits+$100BasicBanking:CheckDepositFiBasicBanking:MakingaProfitAssettransformation:sellingliabilitieswithonesetofcharacteristicsandusingtheproceedstobuyassetswithadifferentsetofcharacteristicsThebankborrowsshortandlendslongFirstNationalBankFirstNationalBankAssetsLiabilitiesAssetsLiabilitiesRequiredreserves+$100Checkabledeposits+$100Requiredreserves+$100Checkabledeposits+$100Excessreserves+$90Loans+$90BasicBanking:MakingaProfitInter-business

Banksettlementsettlementinstrumentcheck,draftandpromissorynotestermsofsettlementsettlementbyremittancesettlementbycollectionsettlementbyletterofcreditFinanceleaseFiduciarybusinessSafedepositboxInter-business

BanksettlementLetterofcredit

IssuingBank/Buyer’sBankSeller/BeneficiaryAdvisingBank/NegotiatingBankBuyer/ApplicantLetterofcredit

IssuingBank/Off-Balance-SheetActivitiesLoansales(secondaryloanparticipation)Generationoffeeincome.Examples:Servicingmortgage-backedsecurities.CreatingSIVs(structuredinvestmentvehicles)whichcanpotentiallyexposebankstorisk,asithappenedin