Quantitative Easing: Money Supply and Commodity Prices of Oil, Gold, and Cocoa in Ghana

This study investigates the dynamic relationships between the money supply (M2) and key commodity prices (Cocoa, Gold, and Crude) in the context of Ghana. Utilizing Vector Error Correction Model (VECM) analysis, we analyze the short-term and long-term Granger causality relationships among these variables, aiming to shed light on the potential linkages between monetary policy and commodity markets. The analysis covers the period from December 1999 to April 2023, using lag structures of 1 and 8 to capture both short-term and more enduring effects. Our findings reveal significant Granger causality relationships between the money supply and various commodities, with nuanced patterns emerging across different lags. In the short-run, our results suggest bidirectional causal relationships between COCOA and M2, CRUDE and M2, and GOLD and M2. Additionally, M2 Granger causes changes in COCOA, CRUDE, and GOLD. However, the causal relationship between COCOA and GOLD appears to be unidirectional, with COCOA not significantly Granger causing changes in GOLD. The short-term findings highlight the intricate interplay between monetary policy and commodity markets. In the long-run (lag 8), our analysis unveils robust Granger causality relationships between the variables. Past values of COCOA, CRUDE, and GOLD Granger cause changes in M2, indicating a notable influence of commodity markets on the money supply. Similarly, M2 Granger causes changes in CRUDE and GOLD. Notably, the findings underscore a more comprehensive and intertwined relationship between monetary policy and commodity prices in the long-run. Based on these results, we derive several policy implications. Policymakers should carefully consider the potential impact of monetary policy decisions, such as quantitative easing, on commodity markets and price dynamics. Measures to stabilize commodity prices, promote export diversification, manage inflation expectations, and enhance economic resilience are recommended. Additionally, effective data monitoring, international collaboration, and proactive risk management strategies are essential components for navigating the complex interactions between monetary policy and commodity markets. This study contributes to a deeper understanding of the intricate connections between monetary policy and commodity prices in Ghana, offering insights for policymakers, researchers, and stakeholders seeking to promote sustainable economic growth and stability. Further research can delve into the mechanisms underlying these relationships and explore their broader implications for trade balances, economic performance, and policy formulation.

The M2 Money Supply, the Economy, and the National Debt: A Mathematical Approach

The United States dollar was tied to a finite standard dating back to 1792. The dollar has survived multiple wars, armed conflicts short of war, economic recessions, and the Great Depression. At the end of World War II, the dollar, by international agreement, effectively became the world’s reserve currency. Other currencies were fixed to the dollar and the dollar was in turn fixed to the gold standard, that is, the value of a dollar was fixed at thirty-five dollars per ounce of gold. In 1971, the United States government severed the dollar from the gold standard leaving the size of the money supply free of any finite limit. Since that time, the United States money supply, national debt, and stock market indices have experienced exponential growth. The purpose of this paper is to investigate mathematically and model the relationship among these key economic indicators. Our work in this paper allows us to gain some insight into how each of these economic indicators can influence one another while giving us a better idea of how the economy functions. We were allowed to collect data for each of the indicators over a certain period which allowed us to demonstrate that a strong correlation exists among these three indicators. After collecting our data and making some logical assumptions, we modeled the money supply as a function of time. In turn, we modeled the Dow Jones stock market index as a function of the money supply. Finally, we produced a model of the National Debt as a function of the Dow Jones stock market index. From the data, we collected and our economic indicator models, we derived a series of differential equations that would help us observe the exponential growth trend of each graphically. By showing a comparison from our collection of raw data versus our results from our model, we conclude that, under prevailing circumstances, it is reasonable to expect growth in all three indicators and increasing market volatility for some time to come. We have answered the question of whether the monetary and fiscal policies of the past half-century have been of some benefit. However, we question whether this trend is good for all Americans and whether it is sustainable in perpetuity. This paper concludes with possible areas of interest warranting additional investigation to enable us to better understand the economy and develop effective financial strategies.

Impact of Sub-Economic on Money Supply in Nigeria: An Autoregressive Distribution Lag (ARDL) Approach

The escalation in dollar rates and the price instability in the Nigerian economy went through some significant structural and institutional changes such as the liberalization of the external trade, the elimination of price and interest rate controls, and the adoption of a managed float exchange rate system as well as the changes in monetary policy including innovations in the banking sector. Hence, the study examines the impact of financial development on money demand in Nigeria by means of ARDL approach. It examined the quarterly returns of M2, exchange rate (EXR), inflation rate (IFR), currency in credits to private sector (CPS) and circulation (CIC). The data span from 1991 to 2018. The study utilizes regression model techniques where the regression model’s residual is tested for Cointegration using Engle-Granger residual approach, the significances of the variable’s co-movement are checked by pairwise Granger Causality tests and ARDL and VECM are estimated in order to account for the short run and long run relationship among the variables. From the empirical results, Engle-Granger residuals and pairwise Granger Causality tests confirm cointegration among variables. The ARDL and VECM confirm the long run relation between money demand (M2) and financial development variables: CPS and CIC. ARDL models (short run relationship) are estimated for exchange rate and inflation rate. Long run (VECM) analysis has confirmed significance of financial development variables (CPS and CIC) with positive sign;implies that money demand function is stable in long run. The VECM granger causality results reveal that bidirectional causality exists between currency in circulation and money demand in both short and long run. Unidirectional causal relationship exists between credits to private sector and money demand in both short and long run. Hence, government should pay more attention on financial development and ensure a coordination of both fiscal and monetary policy.

The Impact of Money Supply on the Economy:A Panel Study on Selected Countries

This study investigates the impact of money supply on economic growth rate,inflation rate,exchange rate and real interest rate.We used a panel of 217 countries from 1960 to 2020 and four different models to address these questions.The empirical results support the quantity theory of money.In addition,the study found evidence for a negative relationship between real interest rate and inflation and between money supply and real interest rate.Finally,our results show that lagged money growth rate is positively correlated with GDP growth rate but money growth rate is negatively correlated with GDP growth rate.

Effect of Money Supply on Real Output and Price in China

Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks afler filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People＇s Bank of China＇ s policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China.

New Version of IS-LM:Neoclassical Monetarism

This study argues three policies for economies.The aim of those policies is to increase total demand by money supply.Global economy currently faces lack of money in markets and recession effect.First,neomerchantalism is to use national currency in bilateral trade.Second,limited money supply is to supply money to sub-regions of economy.Third,neoclassical monetary uses channels in monetary supply.Channels in NCM policy are financial banks and firms.Financial banks and firms distribute money into business markets.Global economies may apply propositions of NCM currently to refresh economies with money.

The interaction effect of foreign capital inflows and financial development on economic welfare in sub-Saharan Africa

This study examines the interaction effects of foreign capital inflows and financial development on economic welfare in sub-Saharan Africa(SSA).Estimates based on the system-GMM estimator using panel data on 23 SSA countries for 2000 to 2013 establish several results.First,the interaction between foreign capital inflows and financial development positively affects economic welfare in SSA.However,this effect was negative after one year.Second,the partial indirect effects of foreign capital inflows on economic welfare,conditional on the level of financial development,are positive,though they become negative after one year.Third,the total effect of foreign capital inflows on economic welfare is positive.The effect becomes negative after a year,though the predominant source of financial development is domestic credit.The consistency of these results indicates the importance of financial development in transmitting foreign capital to economic welfare enhancement.Developing the SSA’s financial sector to meet specific welfare-enhancing demands may potentially convert a large share of capital inflows into improved economic welfare and eliminate the negative effects.

Cointegration and Causality Relationship Between Stock Market,Money Market and Foreign Exchange Market in Pakistan

This paper examines the relationship between stock market(KSE-100), money market(M2 and 180 days T-bill rate), and foreign exchange market(ER: PKR/USD) in Pakistan by using monthly data covering the period from 2000:M1 to 2015:M12. The study investigates long-run equilibrium relationship between these three financial markets by employing Johansen and Juselius[1]cointegration tests. Long-run and short-run causality relationship between stock market and other macroeconomic variables is also established by employing vector error correction model(VECM) and pairwise granger causality tests. The results of multivariate cointegration test(trace test) indicate a one cointegrating vector, and the significant normalized cointegrating coefficients are evident of long run equilibrium relationship between all the selected variables. Negative and significant ECT(-1) for all variables during full sample period witness the presence of long-run causality connection among variables, while during the military regime and democratic regime, significant difference of long-run causal connections are identified across the regimes. Moreover, the results of granger causality test also indicate that there are significant variations in the causality relationship among variables across the regimes. Therefore, it is essential for forecasting, planning and policy making to consider the importance of political governance system while analyzing the historical cointegration among financial market and make the necessary adjustments accordingly.

The Research on the Decision-making Mechanism of China′s Monetary Policy Regulation

The article adopts the quarterly data of the monetary and macroeconomics variables from 1978～1999, applies the asymmetrical information game analysis, the regression and cointegration error-correction model, to investigate on the decision-making mechanism of money supply and money regulation project. It suggests the regulation process which central bank controls with instruments of the monetary policy and the mode detail of its operation.

Local Government Borrowing’s Expansionary Monetary Effect and Its Policy Synergy

All governments face increasingly frequent issues arising from aggregate supply and demand against currency circulation and financial stability,and public finance and banking authorities employ a variety of policy instruments to keep the economy stable and coordinated.How to avoid policy conflicts and maximize effectiveness in policy portfolio of local government borrowing,which is taken as a major macro-control instrument,is a subject that needs in-depth study.This paper probes into local government borrowing’s monetary effect and transmission mechanism and its best synergistic model with monetary policy by the construction of a NK-DSGE model covering financial frictions,multi-period bonds and borrowing rules.The findings are as follows.(1)The shocks of one-percent local government borrowing(bond duration=5 years)push up the money multiplier by 0.39%to produce expansionary monetary effect,and the longer the bond duration,the greater the effect.(2)In the context of physical and financial shocks,monetary policy adopts a moderately tight reverse synergy with local government borrowing,effectively restraining its expansionary monetary effect for better economic stability and recovery.(3)For bonds with longer maturities,raising the risk sensitivity of local government borrowing rules benefits the improvement of welfare.

Credit creation

With the development of financial markets and the rise of modern shadow banking system,new agents and new means of credit creation are constantly emerging,and their effects on the financial system and macro-economic system are also obscure.Following historical clues,this paper conducts a review and analysis of the literature on credit creation from the perspective of money so as to render some help for the understanding of credit creation in modern financial system.