8 Comments
May 15, 2023Liked by Brian Romanchuk

Is it a peculiarly US phenomenon - a bit like their obsession with reserve requirements? There's a paper from the Bank of England that explains there is no multiplier in the UK Sterling Framework.

https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2014/qe-and-the-bank-lending-channel-in-the-uk.pdf

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Not sure which developed economies even had formal reserve requirements when the Americans dropped them (2008?). However, American macro textbooks are popular, although not sure what is used in the UK.

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May 15, 2023Liked by Brian Romanchuk

I believe the Eurosystem still has a reserve requirement.

https://www.ecb.europa.eu/mopo/implement/mr/html/index.en.html

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Thanks for the heads up.

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May 15, 2023Liked by Brian Romanchuk

That term money multiplier has truly worn out its welcome and I hope most would know by now that banks don't lend reserves in the first place.

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The multiplier does not imply lending reserves - it is the relationship between reserves and deposits in a system with reserve requirements (which largely disappeared in the developed world once the Americans got rid of them).

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Thanks for the clarification

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The *spending* multiplier is of far more interest for its macro implications, yet weirdly that never seems to be discussed or even particularly studied by the mainstream crowd.

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