The Federal Reserve Bank of St. Louis' adjusted monetary base combines in a single index Federal Reserve actions that affect the supply base money -- open market operations, discount window lending and unsterilized foreign exchange market intervention -- with actions that affect depository institutions' demand for base money -- changes in statutory reserve requirements. The adjusted monetary base equals the sum of the monetary base and a reserve adjustment magnitude (RAM) that maps changes in reserve requirements into equivalent changes in the (unadjusted) monetary base. This paper presents a revised measure of the adjusted total reserves component of the monetary base and a new RAM. The revised measure of the adjusted reserves component differs from the current measure by including the aggregate amount of depository institutions' required clearing balance contracts with the Federal Reserve. The new RAM differs from the current RAM by recognizing that, since the Monetary Control Act of 1980, an increasing number of depository institutions have not significantly changed their demand for base money (vault cash and Federal Reserve deposits) relative to transactions deposits following changes in statutory reserve requirements. The new adjusted reserves data suggest that the stance of monetary policy, measured by the growth rate of adjusted reserves, has been more volatile since 1980 then suggested by the current measure.
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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
1996-004.
Length: Date of creation: 1996 Date of revision: Publication status: Published in Federal Reserve Bank of St. Louis Review, March/April 1996, 78(2) Handle: RePEc:fip:fedlwp:1996-004
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Thomas J. Sargent, 1982.
"The Ends of Four Big Inflations,"
NBER Chapters,
in: Inflation: Causes and Effects, pages 41-98
National Bureau of Economic Research, Inc.
[Downloadable!]
Other versions:
Anatol Balbach & Albert E. Burger, 1976.
"Derivation of the monetary base,"
Review,
Federal Reserve Bank of St. Louis, issue Nov, pages 2-8.
[Downloadable!]
Albert E. Burger & Robert H. Rasche, 1977.
"Revision of the monetary base,"
Review,
Federal Reserve Bank of St. Louis, issue Jul, pages 13-28.
[Downloadable!]
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