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Currency System and Money Supply

  • Y. C. Jao

Abstract

In recent years there has been a growing interest in money supply both as an analytical concept and a policy variable. It is well known that in comparative static analysis, changes in money stock generate multiplier effects on nominal income, though the size of this may vary considerably according to the behavioural assumptions of the underlying model.1 In the long run money, whether treated as a factor input or consumer good, may produce non-neutral effects on the equilibrium growth path of the economy.2 Quite apart from the contemporary revival of the Quantity Theory, therefore, money supply is of great importance whether viewed from cyclical stabilisation or from secular growth. While the purely theoretical aspects of money supply cannot be treated here, it will evidently be of interest to analyse the determination of money supply in Hong Kong, its special characteristics and the role of the banking system in this process of determination. The present chapter is concerned with these problems.

Keywords

Banking System Commercial Bank Money Supply Banking Sector Trade Credit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes and References

  1. 1.
    Some years ago I used a money supply equation in computing the nominal national income of Hong Kong for 1965–8. See Y. C. Jao, ‘Money Supply in Hong Kong, 1954–68’, Hong Kong Economic Papers (April 1970) pp. 24–48. Subsequent independent studies using alternative methods have yielded results quite close to mine.Google Scholar
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  5. 2.
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    The distinction between ‘inside’ and ‘outside’ money was first made by J. G. Gurley and E. S. Shaw, Money in a Theory of Finance (Washington, 1960) pp. 72–3.Google Scholar
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  34. 20.
    See, inter alla, G. L. M. Clauson, ‘The British Colonial Currency System’, Economic Journal (Apr 1944) pp. 1–25Google Scholar
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  45. 22.
    The use of this method to the analysis of money supply in Hong Kong for 1955–66 is contained in the unpublished World Bank report on Hong Kong dated Nov 1966. The estimates of money supply are seriously inadequate because the monetary liabilities of the ‘authorised’ banks only are included. For an earlier application of the same approach to money supply in Hong Kong, see F. H. H. King, Money in British East Asia (London, 1956) pp. 118–23.Google Scholar
  46. 23.
    J. J. Polak, ‘Monetary Analysis of Income Formation and Payments Problems’, IMF Staff Papers, Vol. VI (1957–8) pp. 1–50.CrossRefGoogle Scholar
  47. 24.
    See for example S. C. Tsiang, ‘The Role of Money in Trade-Balance Stability: Synthesis of the Elasticity and Absorption Approaches’, American Economic Review (December 1961) pp. 912–36.Google Scholar

Copyright information

© Y. C. Jao 1974

Authors and Affiliations

  • Y. C. Jao
    • 1
  1. 1.University of Hong kongChina

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