The Money Supply Multiplier in Bangladesh

Akhtar Hossain

 

Abstract

This paper develops a simple money multiplier model of the money supply and examines the behaviour of each of the components of the money multiplier for the period 1972 to 1993. Empirical results suggest that although the deposit-currency ratio equation is stable, the equations of the time-deposit ratio and the excess reserves-deposit ratio are unstable. Both the narrow and broad money multiplier equations are also found unstable. The paper concludes with a discussion on the implications of instability in the money multiplier for monetary policy through monetary targeting.

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