An Innovative Money Multiplier

Abstract

Conventional textbook treatments of money multiplier analysis are virtually devoid of any calculations of real world money supply changes, probably because the standard monetary base multiplier requires tedious calculations and is somewhat difficult to interpret. The purpose of this paper is to present a new money multiplier which is easily calculable in first differences. Applications of this new multiplier are investigated using case studies of money supply change in two periods: the Great Depression (1929–1933), and during the slow monetary growth of the early nineties (1991–1994).