The Money Multiplier Framework

Abstract

The purpose of this chapter is to derive expressions for the basic money multipliers referred to throughout the text. There are two reasons we devote an entire chapter to these derivations. First, it is best, for ease of reference, to place all these mechanical calculations in one readily accessible chapter rather than to scatter them throughout the text as they come up. Second, the multipliers we forecast for the new post-1980 definitions of the money stock are not, conceptually speaking, identical to the pre-1980 multipliers. Since the differences have not as yet been discussed in the existing literature, we discuss them here.