Impact of Money Supply - 3063 Words

European Journal of Scientific Research ISSN 1450-216X Vol.41 No.2 (2010), pp.314-322  © EuroJournals Publishing, Inc. 2010 http://www.eurojournals.com/ejsr.htm Impact of Money Supply on Current Account: Extent of Pakistan Sulaiman D. Mohammad Department of Economics, Federal Urdu University, Karachi E-mail: Sulaiman1959@gmail.com Abstract The purpose of this research is to find out the empirical association among money supply, current account, exchange rate, and industrial production, for this purpose we have used (Johansen, 1988) co integration technique to analyze the long run relationship and Error Correction model to estimate the short run dynamics by using annual data for the period of 1975 to 2008. The domestic variables support†¦show more content†¦Moreover, results emphasize the rising significance of China for its adjacent economies (Tomasz J. Kozluk Aaron N. Mehrotra ). (Lu Min) analyzed a two sectors in a small open economy. Applying general equilibrium approach of expectation they examined current account sensitivity to monetary policy shocks depend on the elasticity of substitution among investment, consumption and risk aversion and in case of a small open economy, current acco unt efficiently react to technological shocks. In case of France, Italy, UK, the monetary policy shocks impact on balance of trade as a result with Expenditure-switching effect and also found a little support J-curve effect (Soyoung Kim). Money supply can be defined in Pakistan that the financial assets are highly liquid among other variables. M2 money supply variable is usually considered as proxy of money supply in most of the cases and it has a closed substitution of liquid asset as well as show the financial assets have used as medium of exchange ( Mahmood-ul-Hasan Khan Fida Hussain). J-curve theory explains the sensitivity of trade variables import and export due to devaluation or depreciation of currency. at first the depreciation in currency leads to deficit in current account and expansive import, but later on access in international market having ease competing with foreign producers cause reduce cost after some period, consequently the volume of export and price ofShow Mo reRelatedIMPACT OF MONEY SUPPLY ON THE ECONOMIC GROWTH OF NIGERIA6890 Words   |  28 PagesTHE IMPACT OF MONEY SUPPLY ON THE ECONOMIC GROWTH OF NIGERIA CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY In the critical observation of the recent Nigerian economic position, there has been a great divergence between the rate at which money is supplied and the exact impact it has on the general price level, which results in inflation and deflation on one hand, and the output growth (productivity) on the other hand. Although, it had occurred to our mind that NigerianRead MoreProblem Set 5 Essay929 Words   |  4 PagesProblem Set 5 1.   Ã‚  Ã‚  Ã‚  Ã‚  What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain. The money supply in an economy is the benchmark by which interest rates are determined. The supply of money is directly tied into the amount of money that can be loaned and borrowed in various capacities. The more money there is to loan, the less â€Å"expensive†Read MoreThe Monetary Policy Roller Coaster1193 Words   |  5 Pagesnegative impacts associated with the high levels of inflation, such as, the loss of purchasing power just to name the big one. But what happens when there is a deflation? 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