Reserve Money, Money Stock and Money Multiplier, 1960-1988

The author's analysis of the sources of change in money supply brings out the diminishing contribution of the money multiplier in inducing monetary expansion and the enhanced role of reserve money. In the context of the erratic behaviour of currency and the already high level of reserve requirements, the importance of reserve money together with the reduced scope for influencing the credit creating capabilities of the banking sector point to new areas of policy reasearch and action.