What is MONEY SUPPLY?

What variables should I consider when analyzing if Money Supply (or Deposits) have been growing over time?

• Question: What variables should I consider when analyzing if Deposits or Money Supply have been growing over time? How may I really know if the amount of money in an economy (or Money Supply or maybe even an approximation using the Deposits held in all financial institutions in an economy) has been growing over time? I mean, if I just look at them, they may be growing, yes, but they may be doing so because the economy as a whole (GDP) is growing too! How can I know if they really have been growing over time? Specifically, I want to do an analysis of Money Supply (or Deposits) before and after certain even (in my case, the implementation of a tax whose ultimate purpose was to increase money supply and deposits), and see if that event changed Money Supply (or Deposits) in anything (if the tax was or not effective and changed the behavior of money supply). What variables should I consider when analyzing if Deposits or Money Supply have been growing over time? If making some sort of econometric analysis to determine if money supply or deposits had any kind of different behavior before and after that event (the implementation of that tax), what independent variables would you recommend? What things DO affect money supply and should be in my model? I would appreciate as many good answers as possible. Even if one of them is giving me the name of another more technical oriented forum to post this question. Thanks in advance!

• Answer:

  It's a long journey......You have not taken off, just check YOUR fuel tank or abandon the plane.