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Monetary Economics Assignment 1
Monetary Economics Assignment 1
Monetary Economics Assignment 1
Assignment 1
M2: Also known as Broad Money, it is an indicator used to measure money supply in the economy and
includes currency in circulation, other deposits with State Bank of Pakistan (such as unclaimed deposits
and NBFIs deposits with SBP), demand and time deposits (including resident foreign currency deposits)
with scheduled banks. M2 is the key economic indicator used to forecast inflation.
M3: A measure of money supply that includes M2 as well as large time deposits, institutional money
market funds, short-term repurchase agreements and other larger liquid assets. The definition of their
M3 is changing from year to year, as initially they were using Deposits of NBFIs, then moved to deposits
of Federal Banks for Co-operatives (FBC) (during FY03), and now to deposits of Punjab Public
Cooperative Banks (PPCB). This definition suffers from a serious problem of double counting as M2
definition of monetary aggregate includes the deposits of all scheduled banks (including FCB in past and
PPCB at present).
Values:
2014
2013
2012
2011
2010
M1 (Million PKR)
7,684,158
6,672,408
5,526,428
4,852,502
4,131,206
M2 (Million PKR)
9,778,624
8,668,480
7,433,179
6,555,481
5,615,061
M3 (Million PKR)
12,428,816
11,077,597
9,460,909
8,394,741
7,218,663
Monetary Economics
Assignment 1
2)
Commercial banks
1
Bank Al Habib
Bank Alfalah
Faysal Bank
JS Bank
SILKBANK Limited
10
SCB Pakistan
Money market
mutual funds
UBL Money Market
Fund
Atlas Money Market
Fund
NAFA Money Market
Fund
Faysal Money Market
Fund
Lakson Money Market
Fund
HBL Money Market
Fund
HBL Islamic Money
Market Fund
PIML Islamic Money
Market Fund
Primus Daily Reserve
Fund
House Building
Finance Company
3)
2014
2013
2012
2011
2010
M1 multiplier
14.52031
14.08737
13.98047
13.91986
14.30355
M2 multiplier
18.4781
18.30166
18.80407
18.80501
19.44112
M3 multiplier
23.48602
23.388
23.93371
24.0811
24.9933
Formula used:
Multipliern = Mn/M0
5%
5%
5%
5%
5%
Monetary Economics
Assignment 1
5)
Velocity of circulation:
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Velocity: M1
9.984553
9.459729
8.743972
8.70156
8.133868
7.206826
7.085836
7.629419
7.164987
5.539319
4.914653
4.918519
4.473009
3.810709
3.348702
4.750407
4.42413
2.448931
2.602395
2.430508
2.208501
1.962221
1.78474
1.538819
1.394174
Velocity: M2
7.026676
6.260326
5.238887
4.791083
4.148672
3.697547
3.381896
3.212996
2.852946
2.781642
2.59318
2.454135
2.226735
2.027985
1.847226
2.6011
2.383424
2.103031
1.891198
1.770941
1.624875
1.452477
1.32692
1.184478
1.095558
Velocity: M3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1.52036
1.38641
1.263914
1.134244
1.042525
0.926882
0.861953
Monetary Economics
Assignment 1
Monetary Economics
Assignment 1
References:
Stability of Money Demand Function in Pakistan, Muhammad Omer SBP Working Paper
Series, No. 36, August 2010
http://www.sbp.org.pk/publications/wpapers/2010/wp36.pdf
(All websites accessed on 12th Sept 2014 and 13th Sept 2014)