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Predicting Money Multiplier in Pakistan

  • Muhammad Farooq Arby

    (State Bank of Pakistan, Karachi.)

The paper has developed time-series models for the monthly money multiplier and its components, viz., currency-deposit ratio, reserve-deposit ratio, etc. A comparison is made between the predictive performance of the aggregate multiplier and the component models. It is found that the projected values of the multiplier on the basis of the aggregate model are closer to actual values as compared to those worked out on the basis of the component models. Thus, for the purposes of projecting the money multiplier, it may be preferable to focus on the aggregate money multiplier model. Stability tests, applied to the identified models for each component and the overall multiplier, suggest that all the models are stable.

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Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 39 (2000)
Issue (Month): 1 ()
Pages: 23-35

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Handle: RePEc:pid:journl:v:39:y:2000:i:1:p:23-35
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  1. R. W. Hafer & Scott E. Hein, 1983. "Predicting the money multiplier: forecasts from component and aggregate models," Working Papers 1983-012, Federal Reserve Bank of St. Louis.
  2. Johannes, James M. & Rasche, Robert H., 1979. "Predicting the money multiplier," Journal of Monetary Economics, Elsevier, vol. 5(3), pages 301-325, July.
  3. Michele Fratianni & Mustapha Nabli, 1979. "Money stock control in the EEC countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 115(3), pages 401-424, September.
  4. S.M. Mazahir Hasnain Hamdani, 1976. "Money Multiplier As a Determinant of Money Supply: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 15(2), pages 211-217.
  5. Buttler, H. -J. & Gorgerat, J. -F. & Schiltknecht, H. & Schiltknecht, K., 1979. "A multiplier model for controlling the money stock," Journal of Monetary Economics, Elsevier, vol. 5(3), pages 327-341, July.
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