Tuesday, January 06, 2009

The Disappearing Money Multiplier


I caught this over on the Greg Mankiw blog. I am a professor of economics at Harvard University. You can visit his blog and bookmark it by following the link.

Feel free to add you comment and analysis.

Econ prof Bill Seyfried of Rollins College emails me:
Here's an interesting fact that you may not have seen yet. The M1 money multiplier just slipped below 1. So each $1 increase in reserves (monetary base) results in the money supply increasing by $0.95 (OK, so banks have substantially increased their holding of excess reserves while the M1 money supply hasn't changed by much).
Thanks.

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