Money supply. Endogenous or exogenous variable? With reference to Iraq
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Author(s)Falah Hasan ThwainiLink to ORCID Index: https://orcid.org/0000-0002-5692-4064
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Ahmed Abdulzahra HamdanLink to ORCID Index: https://orcid.org/0000-0002-0935-0539
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DOIhttp://dx.doi.org/10.21511/bbs.12(4-1).2017.03
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Article InfoVolume 12 2017, Issue #4, pp. 144-153
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3215 Downloads
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The issue of whether money supply is a dependent or an independent variable remains a debating one, especially with the ongoing development and innovation of institutions, tools, and financial, monetary, and banking derivatives. In general, we can say that there are two trends of thought about the issue under consideration. The first trend views money supply as an exogenous variable because the monetary authority can control and monitor it. The second one views money supply as an endogenous variable because Federal Bank has no ability to affect it, especially when nominal or money income is changed and reflected on money multiplier and money supply, and also when the monetary authority cannot restrict the monetary expansion as a result of different factors related to the economy structure or related to other non-economic factors.
- Keywords
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JEL Classification (Paper profile tab)E51, E52
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References13
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Tables2
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Figures3
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- Figure 1. The accommodationist model of the money supply process
- Figure 2. The structuralist model of the money supply process
- Figure 3. Components of the monetary base for the period 2004–2015
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- Table 1. Selected variables for Iraqi economy (1993–2002) / millions of dinars
- Table 2. Selected variables for Iraq economy (2004–2015) / billions of dinars
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How excessive endogenous money supply can contribute to global financial crises
Serhii Shvets 
doi: http://dx.doi.org/10.21511/bbs.16(3).2021.03
Banks and Bank Systems Volume 16, 2021 Issue #3 pp. 23-33 Views: 1036 Downloads: 572 TO CITE АНОТАЦІЯFinancial crises have become a challenge for sustainable growth, given the frequency and intensity of crisis shocks and their destructive consequences in recent decades. The paper aims to study how the endogenously generated excess money supply can contribute to global financial crises. The creation of money supply is examined from the perspective of the Quantity Theory of Money (QTM) and endogenous money, namely Horizontalism, Structuralism, and Modern Money Theory. Given that prices are not flexible in the short term, increased volatility in the money market prevents a short-term ready balance between money supply and output. The overall result of money supply accommodation can be unpredictable if monetary authorities and commercial banks do not pool their interests, and the money demand volatility becomes extremely high. The study of the correlation between money supply and output allowed distinguishing between neutral countries in the creation of extra liquid assets and countries that can be a potential trigger for excessive money supply volatility. Monitoring the dynamics of M3 and GDP showed that before the significant crisis periods of 1997–1998, 2007–2008, and 2019–2020, the growth of money supply was more than 8%. The established critical level confirms the potential contribution of endogenously created excess money supply to global financial crises.
