Está en la página 1de 8

American Journal of Business, Economics and Management

2015; 3(3): 113-116
Published online April 20, 2015 (

Assessment of Money Supply in Circulation: Some
Topical Issues
A. A. Ismailov
Tashkent Financial Institute, Department of Banking, Tashkent City, Uzbekistan

Email address

To cite this article
A. A. Ismailov. Assessment of Money Supply in Circulation: Some Topical Issues. American Journal of Business, Economics
and Management. Vol. 3, No. 3, 2015, pp. 113-116.


In the economic literature there are controversial questions about the assessment and management of money supply in
circulation. A group of scientists and economists believe that there is no need to analyze the short-term fluctuations in the
money supply, because short-term fluctuations in the money supply are largely dependent on seasonal factors. In addition,
there is no consensus among scientists and economists about the choice of a particular monetary aggregate as an indicator of
monetary policy. This paper analyzes the current issues of assessment of money supply in circulation.
Money, Money Supply, Monetary Aggregate, Cash, Supply of Money, Demand for Money, Transaction Deposits, Targeting

monetary units are widely used:
1. Introduction M0 – the cash issued by the Central bank;
In this paper, there has been carried out a comparative and M1 - M0 + demand deposits + traveler's checks + credit
critical analysis of the existing approaches to the assessment
of the money supply. M2 - M1 + time deposits + savings deposits;
M3 –M2 + deposit certificates + savings certificates + state
The author formulated scientific conclusions and
developed specific proposals to improve the assessment of
money supply in circulation. In particular, the author In the USA corporate securities are also considered in
concluded that the inclusion of short-term fluctuations in the structure of monetary aggregates. They are considered in
money supply is important in those countries where there is structure of the monetary aggregates L.
applied the targeting of the money supply. In our opinion, the need of quantitative measurement of
money supply is defined by the following factors:
1. In system of the macroeconomic analysis the monetary
2. Main Part analysis is important. And money supply is the main
monetary indicator.
Assessment and management of the money supply are the
key issues of monetary policy. Since assessment of the 2. The offer of money is object of monetary and credit
regulation of the economy. Therefore there is a need of
money supply allows us to estimate the demand for money,
providing an optimum level of money supply.
the deviation of the money supply from demand for it,
changes in the level of monetization of the economy, to 3. Low level of provision of the economy with money will
assess the population’s propensity to save and accumulate. lead to the delay of macroeconomic growth rate. And the
Also, the assessment of the money supply allows us to appearance of additional money in circulation promotes
estimate the monetary gaps. strengthening of inflationary processes.
Quantitative measurement of money is widely put into 4. The central bank, providing the stable growth of money
supply, positively influences on development of the national
practice and on the basis of it the level of money supply is
estimated. It is most often used monetary aggregates as
quantitative measuring instruments of money supply. Changes in the money supply and its growth rate influence
In the international banking practice the following on important economic variables, they can also affect the

A.114 A. Ismailov: Assessment of Money Supply in Circulation: Some Topical Issues .

5%. 2014. increasing of aggregate M3 the amount of transaction deposits occupy inflation rate etc. in the assessment policy. only in 54% of monetary aggregates and macroeconomic indicators. the financing indicator of monetary policy. in the money supply one has been using monetary Uzbekistan the specific should not pay much aggregate M3as an indicator weight of transaction attention to short-term of monetary policy. as of while making assessment of the Bundesbank. The share aggregate M0 to GDP was as months of the current fiscal of cash in the monetary follows: in Russia . M2 and M3. aggregate M1 increased China . there is a high growth rate. since 1988 January 1. The deposits in total volume of fluctuations in the money Central Bank of Uzbekistan deposits of commercial supply. in certain months of certificates has a relatively weight in the total money the financial year. As a deposit and savings a relatively large specific result. of monetary policy (5). Germany .Mishkinis right in the According to R. in monetary aggregate M1 as money supply and. In particular.Miller and countries. At the same a sharp increase in the from 20.Mishkin believes that Germany's central bank . significance of cash has In addition. the value of this quantity of money in 1960 to more than 30% at indicator comprises in circulation due to various the end of 1992"(5). many countries developed countries.9% and Currently.050. in the countries with economies in an indicator of monetary final analysis. cases central banks were specific weight of each including the economic able to achieve their goals component in the total activity of population. Currently. concluded that in countries of the state budget expenses This is due to the fact that in with economies in out of Central Bank’s the structure of the monetary transition. has been using monetary banks amounted to 45.Bernsdeclared about the aggregate M2 and M3. year occurs.9%.11. in many taking into account short. By 1993 it had the ratio of cash by due to the fact that in certain risen to $ 1. price 8. aggregate M1 (4). supply is applied.10. cash use money supply targeting. the European increases for goods and in Canada . Since. So.Van-Hoose.6% (7). In the banks of developed F. transition. but instead long. cash occupies a money supply is important For example. Now credit expansion of This is because in the commercial banks has an . in this case Bank will not be able to of the money supply in the use of M2 as a monetary keep the growth rate of the circulation there must taken indicator cannot really money supply within the into account the growth rate assess the impact of money specified parameters.4% term changes should be aggregate M2 as an indicator (6).8. This is per capita.8%. circulation: "in the US the However.3. For example. exceed 30%.9%. But the national economy (1). in 1973 in the relatively large specific in those countries where the US the amount of cash in weight in the total volume of targeting of the money circulation was around $ 325 money supply. (3). in the US . it is necessary to use high growth rate of the In our opinion. and transaction deposits For example. Central Bank uses monetary services of natural aggregate M3(6)as an From the above it can be monopolies. For example. the use of commercial banks of the US adjustment of data on the monetary aggregate M1as an and Western Europe the money supply leads to indicator of monetary policy specific weight of significantly different of the US Federal Reserve is transaction deposits in total results when new data volume of deposits does not due to an increase in cash in appears. of the components of the supply on the basic Therefore. analyzed (2). in France - reasons. including sense that the seasonal D. in our opinion.6. supply. of the monetary aggregate F. the US Federal occupy a relatively low achievement of the main Reserve under the leadership specific weight in the total volume of the monetary development objectives of A.5% at the end of time. quite probably. grown as it is or as a countries with economies in term fluctuations in the component of the index M1. the Central transition. transition to the regulation in countries with economies In the economic literature of the money supply as the in transition cash and there are different basic regime of its policy transaction deposits occupy approaches to the and the object of control a relatively large specific assessment of the money became the monetary weight in the total volume supply. volume of money supply. where cash and credits.

and demand for . Keynes. That is. In M.emission character. money depends not only on the main part of money in the nominal income. noted the nominal and real sizes. but circulation is the results of also on the level of interest credit expansion of rates (12). the nominal size of money supply directly depends on price level. as the results of which inflationary processes intensify. Freidman. commercial banks. risks to be insolvent (9). the assessment of level of credit expansion of commercial banks places an important role. in a free banking system any bank. According to Mises. In Keynes’s opinion. while estimating the money supply in circulation. one of prominent scientists- economists of Huerta de Soto considers that if to support 100 percentage coefficient of reservation. generalizing the factors that affect quantity of money in circulation. M. Thatcher’s opinion. But many scientists-economists criticized this idea of M. M. It is necessary to emphasize that too high level of credit expansion of commercial banks will lead the increase of money supply. The world famous scientist-economist J. For example. the quantity of money and the credits grew too fast and as a result of it the prices of assets raised (10). it can lead to death of a banking system (11). unilaterally expanding the credit by reduction of a cash reserve below reasonable level. Therefore. in the period of her being the prime minister. Freidman also recognized an important role of credit expansion of banks in the formation of the money supply. Therefore he suggested to introduce100 percentage reservations of deposits of commercial banks.

American Journal of Business. Economics and Management 2015. 3(3): 113-116 115 .

the most [5] Resolution of the Cabinet The adequacy of the Figure 1.: INFRA-M. 2013.M. 2013the inflation was 6. .4 the credit investment of [8] Author's calculations cash monetary circulation 6 Azerbaijan 18. money in circulation results Tajikistan and Kyrgyzstan from credit expansion of loans occupy a very low banks.M. This loans from commercial banks take a relatively large policy of the Central bank. in many countries with economies in [2] Mishkin F.D.Collection relatively high rate of of legislation of the household savings. 44. The level of loans of of Ministers of the important of these is the low deposit base of western commercial banks in USA. 2 Russia 42. 8 Kyrgyzstan 11. from mentioned. Academy. 4 Kazakhstan 31. 2003. . As can be appropriate. . In data presented in Table#1.P. Economic theory of money. important as the main part of Especially in Azerbaijan.8 commercial banks is the according to the website 7 Tajikistan 13. Trans. Van Hoose relation to gross domestic product system of the money D. 1 Ukraine 61.#3. the calculation of short. the gross domestic commercial and financial Based on the above.6 exceeding the established [7] European Central bank. Policy: Theory and important in the evaluation the lack of long-term Practice. . . This is due to issuing long-term bonds. For example in supply is important in those banking. Russia.L. –P. In countries with Annual Report 2013. Policy: Theory and developed stock market Practice.Trans. Trans. 358- generally recognized 359.. it can be base. such conditions. Conclusion indicators.D. Besides.R. Unfortunately. Japan Republic of Uzbekistan level of development of the commercial banks is also and South Korea in relation to #63 dated February 4.2 economies in transition. relatively low level of 3.D. credit issuance of example. English.R. in many countries with In developed countries.P. specific weight in relation to GDP. from of commercial banks.M .M . . The growth rate of credit References investments and the stability [1] Miller R.: OOO "I.Matovnikova’s For Williams". Source: Central bank of Uzbekistan many factors.ecb. close interrelation between 5 Byelorussia 57.: INFRA-M.M. by the results of countries where targeting of # COUNTRIES 2011 2000. .5%.: Moscow level of credit issuance of allows banks to attract Financial-Industrial commercial banks is long-term resources by Academy. the www. concluded that the level of term resources. banks have weak resource markets. 3 Armenia 33. from in transition(13) English.: Moscow and management of the resources in Russia is a Financial-Industrial money in circulation. as of important. . countries is not a the assessment of level of determining factor in the credit expansion of growth of money in commercial banks is very circulation. January 1. there is a lack of long. 95. - As results of research of Tashkent. Monetary economies in transition. [6] Miller R.. it would be in the analyzed countries. . 50. money supply in circulation.8 In developed countries.S. the money supply. . English.4 observed. banking transition. money grow this explained Republic of Uzbekistan. the monetary offer is applied. . banks (Figure 1). the the indicator of monetary relatively low. 355.7 and economic activity is main source of growth of www. Van Hoose of its growth depend on the D.L. to use the the level of credit issue of seenfromFigure#1. Monetary commercial banks is very M. Modern money and stability of the resource base banking. 2011. 2011.6 target range (15).cbu. banking system. [4] Moiseev S. Modern money and in some countries with economies term fluctuations of money supply. The level of credit famous scientists-economists investments of commercial banks in and a poor regulatory note. mainly by high inflation Table 1. 2013(16) 2003 "On measures to financial instability of the improve the regulatory In many countries with mechanism of monetary enterprises and the economies in transition. indicates that the credit specific weight in relation When assessing the issue of banks in these to GDP. in the monetary aggregate M1 as commercial banks is analyzed countries. relatively low. This is transactional deposits have Source: Central bank of Uzbekistan explained by the relatively rather big specific weight in high level of credit investments of commercial the total amount of deposits As can be seen from the of commercial banks." . 2000. in [3] Moiseev S. It is important to note that phenomenon(14).

Ismailov: Assessment of Money Supply in Circulation: Some Topical Issues .116 A. A.

Translation from Tashkent: IPMI.Journal 2008.I.Informational Interest and -analytical review. Uzbekistan. . .55.. www. [15] M.181.-P. Translation from English- Chelyabinsk: Sotsiyum. .184..P.. 3. 2013.2014.- New-York: Harper [16] Annual Reportof the Collins.-The Central Bank ofthe [12] Jesus Huerta de Soto. Cash [14] Main circulation: the current indicatorsofdevelopment stage and prospects of of the monetary system development // Money ofthe Republic of and Credit. Russian Federation.#2. development of the monetary system of the [13] J M Keynes..33. P. 2014.: Gelios P. [17] Main indicators of 2008.Russia's Translation from English. The General Republic of Theory of Employment. 199. economic circles. 1993.- Money. Dawning Street Years.-Tashkent: IPMI. ARB.P.- Moscow. bank credit and Moscow. Uzbekistan.Moscow. . term resources. “Moneyand Credit”. [10] Jesus Huerta de Soto.. . 2014. Y. Bank of Russia.P. – M.- [11] Thatcher M.11. - English.[9] Luntovsky G. banking systemandlong- Chelyabinsk: Sotsiyum.cbr. - Money. 36.297. Money.P.668.Matovnikov. Informational-analytical review. bank credit and economic circles.№ 2013. The P.P.