India, Pakistan, china

Course Instructor :Sir Anwar Jalil

Jawad AhmedAtif AhmedFaiza Khan

The total supply of money in circulation in a given country's

economy at a given time.

The money supply is considered an important instrument for

controlling inflation.

There are several measures for the money supply, such as M1,

M2, M3 and M4.

M1 =Currency + demand deposits + checkable deposits(traveler checks )

M2 = M1 + small time deposits + saving deposits + money market deposits

+ money market mutual funds (MMMF-non-institutional)

M3 = M2 + large time deposits + MMMF-institutional + repurchasing

agreements + Eurodollars

M4= M3 + T-bills + commercial papers (securities)

Measuring of money supply

in

India

The classification of M1,M2,M3 and M4 was introduced by the Reserve Bank of India (RBI) in April 1977.

Prior to this till March 1968,the RBI published only one measure of the money supply, M

or defined as currency and demand deposits with the public.

Reserve Money (M0) = Currency in Circulation + Bankers' deposits with the RBI + 'Other' deposits with the RBI.

M1: Currency with the public + Deposit money of the public (Demand deposits with the banking system + ‘Other’ deposits with the RBI).

M2: M1 + Savings deposits with Post office savings banks.

M3: M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial sector + Net foreign exchange assets of the banking sector + Government’s currency liabilities to the public – Net non-monetary liabilities of the banking sector (Other than Time Deposits).

M4: M3 + All deposits with post office savings banks (excluding National Savings Certificates).

Money Supply M1 in India decreased to 21629.30 INR Billion in November of 2014 from 21684.19 INR Billion in October of 2014. Money Supply M1 in India averaged 4214.20 INR Billion from 1972 until 2014.

Money Supply M2 in India decreased to 22077.04 INR Billion in November of 2014 from 22128.78 INR Billion in October of 2014. Money Supply M2 in India averaged 7596.33 INR Billion from 1991 until 2014.

Money Supply M3 in India increased to 101437.65 INR Billion in November of 2014 from 100858.94 INR Billion in October of 2014. Money Supply M3 in India averaged 16372.91 INR Billion from 1972 until 2014.

Measuring of money supply

in

China

M1 = CASH + DEMAND DEPOSITS.

Money Supply M1 in China increased to 33510 CNY Billion in November of 2014 from 32961.77 CNY Billion in October of 2014. Money Supply M1 in China averaged 7255.16 CNY Billion from 1978 until 2014, reaching an all time high of 34150 CNY Billion in June of 2014 and a record low of 74.51 CNY Billion in June of 1978. Money Supply M1 in China is reported by the People's Bank Of China.

M2 = CASH + DEMAND DEPOSITS + small time deposits + saving deposits + money market deposits + money market mutual funds.

Money Supply M2 in China increased to 120860 CNY Billion in November of 2014 from 119923.63 CNY Billion in October of 2014. Money Supply M2 in China averaged 40866.18 CNY Billion from 1996 until 2014, reaching an all time high of 120960 CNY Billion in June of 2014 and a record low of 5840.10 CNY Billion in January of 1996. Money Supply M2 in China is reported by the People's Bank of China.

Measuring of money supply

in

Pakistan

M1 = Currency in circulation + other deposits with State Bank of Pakistan + demand deposits (including resident foreign currency deposits) with scheduled banks.

Money Supply M1 in Pakistan increased to 7741709 PKR Million in October of 2014 from 7674386 PKR Million in September of 2014. Money Supply M1 in Pakistan averaged 5078490.91 PKR Million from 2008 until 2014, reaching an all time high of 7741709 PKR Million in October of 2014 and a record low of 3168848 PKR Million in October of 2008. Money Supply M1 in Pakistan is reported by the State Bank of Pakistan.

M2 = Currency in circulation + other deposits with State Bank of Pakistan (such as unclaimed deposits and NBFIs deposits with SBP) + demand and time deposits (including resident foreign currency deposits) with scheduled banks.

Money Supply M2 in Pakistan increased to 9853065 PKR Million in October of 2014 from 9797427 PKR Million in September of 2014. Money Supply M2 in Pakistan averaged 6779476.34 PKR Million from 2008 until 2014, reaching an all time high of 9853065 PKR Million in October of 2014 and a record low of 4431502 PKR Million in July of 2008. Money Supply M2 in Pakistan is reported by the State Bank of Pakistan.

M3 = Currency in circulation + other deposits with State Bank of Pakistan (such as unclaimed deposits and NBFIs deposits with SBP) + demand and time deposits (including resident foreign currency deposits) with scheduled banks + long-term time deposits in banks.

Money Supply M3 in Pakistan increased to 12586019.37 PKR Million in October of 2014 from 12513731 PKR Million in September of 2014. Money Supply M3 in Pakistan averaged 8681030.61 PKR Million from 2008 until 2014, reaching an all time high of 12586019.37 PKR Million in October of 2014 and a record low of 5548454 PKR Million in July of 2008. Money Supply M3 in Pakistan is reported by the State Bank of Pakistan.

An increase in the supply of money typically lowers interest rates, which in turns generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production. The increased business activity raises the demand for labor. The opposite can occur if the money supply falls or when its growth rate declines.

THE END