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Predicting Money Multiplier in Pakistan

Author

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  • Muhammad Farooq Arby

    (State Bank of Pakistan, Karachi.)

Abstract

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.

Suggested Citation

  • Muhammad Farooq Arby, 2000. "Predicting Money Multiplier in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(1), pages 23-35.
  • Handle: RePEc:pid:journl:v:39:y:2000:i:1:p:23-35
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    File URL: http://www.pide.org.pk/pdf/PDR/2000/Volume1/23-35.pdf
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    References listed on IDEAS

    as
    1. 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.
    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. Hafer, R. W. & Hein, Scott E., 1984. "Predicting the money multiplier : Forecasts from component and aggregate models," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 375-384, November.
    4. Michele Fratianni & Mustapha Nabli, 1979. "Money stock control in the EEC countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 115(3), pages 401-424, September.
    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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    Cited by:

    1. Muhammad Arshad Khan, 2010. "Testing of money multiplier model for Pakistan: does monetary base carry any information?," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 9, pages 1-20, February.
    2. Asad Jan & Mansoor Saleem & Aqeel Ahmad & Arshad Riaz, 2013. "Disaggregate Analysis of Broad Money and Outlook of Key Monetary Aggregates," SBP Working Paper Series 58, State Bank of Pakistan, Research Department.

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