cpi&wpi, money, and banks chapter 22, 26 物價指數, 貨幣與銀行

CPI&WPI, Money, AND Banks CHAPTER 22,

26

物價指數 , 貨幣與銀行

The Consumer Price Index 消費者物價指數消費者物價指數（ CPI ）是應用最廣泛的通貨膨脹指標，也是各國央行十分關切的經濟數據。CPI 的計算方式是，就消費者的立場，衡量一籃固定財貨與勞務的價格，並與某個基期間的物價水準作比較。舉例來說，1999 年 7 月份的物價水準為 130.5 ，這意味該籃固定財貨與勞務的價格高於基期水準達 30.5% 。比較兩段不同期間的CPI ，我們便可以知道該期間物價上漲幅度。

The Consumer Price Index 消費者物價指數For a simple economy that consumes only oranges and haircuts, we can calculate the CPI.

The CPI basket is 10 oranges and 5 haircuts.

Item Quantity Price Cost of CPI basket

Oranges 10 $1.00 $10

Haircuts 5 $8.00 $40

Cost of CPI basket at base period prices $50

The Consumer Price Index 消費者物價指數This table shows the prices in the base period.

The cost of the CPI basket in the base period was $50.


Oranges 10 $1.00 $10

Haircuts 5 $8.00 $40


The Consumer Price Index 消費者物價指數


Oranges 10 $2.00 $20

Haircuts 5 $10.00 $50


This table shows the prices in the current period.

The cost of the CPI basket in the current period is $70.

The Consumer Price Index 消費者物價指數The CPI is calculated using the formula:

CPI = (Cost of basket in current period/Cost of basket in base period) 100.

Using the numbers for the simple example, the CPI is

CPI = ($70/$50) 100 = 140.

The CPI is 40 percent higher in the current period than in the base period.

The Consumer Price Index 消費者物價指數Measuring Inflation

The main purpose of the CPI is to measure inflation.

The inflation rate 通膨率 is the percentage change in the price level from one year to the next.

The inflation formula is:

Inflation rate = [(CPI this year – CPI last year)/CPI last year] 100.

The Consumer Price Index 消費者物價指數Figure 22.13 shows the CPI and the inflation rate, 1973–2003.

Wholesale Price Index 躉售物價指數

躉售物價指數是用來衡量生產者所面對的採購品的物價狀況衡量指標 , 即它是從生產者的層面來衡量物價。 WPI 所衡量的是採購物價的情況 , 因此與 CPI 最大的差異便在於 WPI 的衡量因子中只包括財貨在內 , 不包含勞務在內 , 而 CPI 則含括了最終的商品及勞務在內。

What is Money? 何謂貨幣？

Money is any commodity or token （憑證） that is generally acceptable as a means of payment.

Money has three other functions:

Medium of exchange 交易媒介 Unit of account 計算單位 Store of value 價值儲藏

What is Money? 　何謂貨幣？

Medium of ExchangeA medium of exchange is an object that is generally accepted in exchange for goods and services.

In the absence of money, people would need to exchange goods and services directly, which is called barter （物物交換） .

Barter requires a double coincidence of wants, which is rare, so barter is costly.

Unit of AccountA unit of account is an agreed measure for stating the prices of goods and services.


Store of Value

As a store of value, money can be held for a time and later exchanged for goods and services.

Money in the United States Today

Money in the United States consists of

Currency 通貨 Deposits 存款 at banks and other depository institutions

Currency is the general term for bills and coins.


廣義貨幣供給 M1 and 　狹義貨幣供給 M2.

M1 = 通貨＋存款貨幣（活存＋支票） .

M2 ＝ M1 ＋準貨幣 .

The main measures of money in Taiwan are M1a and M1b,M2,M3.

M1a ＝通貨＋存款貨幣（活存＋支票）

M1b ＝ M1a ＋活期儲蓄存款

M2= M1b + 定存＋定儲＋郵簿儲金

M3 ＝ M2+ 信託基金


The items in M1 clearly meet the definition of money; the items in M2 do not do so quite so clearly but still are quite liquid.

Liquidity 流動性 is the property of being instantly convertible into a means of payment with little loss of value.

Depository Institutions 金融機構

A depository institution is a firm that accepts deposits from households and firms and uses the deposits to make loans to other households and firms.

The deposits of three types of depository institution make up the nation’s money:

Commercial banks 商銀 Thrift institutions 【美】互助儲蓄銀行 Money market mutual funds 貨幣市場共同基金


Commercial Banks 商銀

A commercial bank is a private firm that is licensed to receive deposits and make loans.

A commercial bank’s balance sheet summarizes its business and lists the bank’s assets, liabilities, and net worth.

The objective of a commercial bank is to maximize the net worth of its stockholders.


To achieve its objective, a bank makes risky loans at an interest rate higher than that paid on deposits.

But the banks must balance profit and prudence; loans generate profit, but depositors must be able to obtain their funds when they want them.

So banks divide their funds into two parts: reserves 準備金 and loans 貸款 .

Reserves are the cash in a bank’s vault and deposits at Federal Reserve Banks （聯邦銀行 or 央行） .


Thrift Institutions

The thrift institutions are

Savings and loan associations 儲蓄與貸款協會 Savings banks 儲蓄銀行 Credit unions. 信用合作社


A savings and loan association (S&L) is a depository institution that accepts checking and savings deposits and that make personal, commercial, and home-purchase loans.

A savings bank is a depository institution owned by its depositors that accepts savings deposits and makes mainly mortgage loans 抵押借款 .

A credit union is a depository institution owned by its depositors that accepts savings deposits and makes consumer loans.


Money Market Mutual Funds

A money market fund is a fund operated by a financial institution that sells shares in the fund and uses the proceeds to buy liquid assets such as U.S. Treasury bills.貨幣市場共同基金的運作是由金融機構賣出基金的部分股份並且持有流動性資產，例如美國國庫券。

Depository Institutions

The Economic Functions of Depository Institutions

Depository institutions make a profit from the spread between the interest rate they pay on their deposits and the interest rate they charge on their loans.

This spread exists because depository institutions

Create liquidity 創造流動性 Minimize the cost of obtaining funds 使資金取得成本最小化 Minimize the cost of monitoring borrowers 監督借款者成本最小化 Pool risk 共同風險

Financial Regulation, Deregulation, and Innovation 金融管制 , 解禁和創新

Financial Regulation 金融管制Depository institutions face two types of regulations

Deposit insurance 存款保險 Balance sheet rules 資產負債表規則

Financial Regulation, Deregulation, and Innovation

Deposits at banks, S&Ls, savings banks, and credit unions are insured by the Federal Deposit Insurance Corporation (FDIC).

This insurance guarantees deposits in amounts of up to $100,000 per depositor.

This guarantee gives depository institutions the incentive to make risky loans because the depositors believe their funds to be perfectly safe; because of this incentive balance sheet regulations have been established.


There are four main balance sheet rules

Capital requirements

Reserve requirements

Deposit rules: 商銀能提供支票存款 , 其他機構只能提供儲蓄帳戶 Lending rules: 商銀是唯一可從事商業貸款之機構


Deregulation in the 1980s and 1990s

During the 1980s many restrictions on depository institutions were lifted and distinctions between banks and others depository institutions ended.

In 1994 the Riegle-Neal Interstate Banking and Branching Efficiency Act was passed, which permits U.S. banks to establish branches in any state.

This change in the law led to a wave of bank mergers.


Financial Innovation 金融創新The 1980s and 1990s have been marked by financial innovation—the development of new financial products aimed at lowering the cost of making loans or at raising the return on lending. 新的金融商品的發展即新的借貸方式，目的是降低存款成本或增加放款的利潤．

How Banks Create Money

銀行如何創造貨幣？ Reserves: Actual and Required 準備金：實際與法定The fraction of a bank’s total deposits held as reserves is the reserve ratio.銀行的總存款中有一部分被保留下來作準備金。當銀行客戶有存款或提款行為，則其準備率便會隨之改變。存款使得準備率增加，而提款將降低準備率。The required reserve ratio is the fraction that banks are required, by regulation, to keep as reserves. Required reserves are the total amount of reserves that banks are required to keep.銀行被要求之準備金相對於存款的比例銀行的法定準備金就是其存款乘上法定準備率Excess reserves equal actual reserves minus required reserves.實際準備金減去法定準備金


Creating Deposits by Making Loans

To see how banks create deposits by making loans, suppose the required reserve ratio is 25 percent.

A new deposit of $100,000 is made.

The bank keeps $25,000 in reserve and lends $75,000.

This loan is credited to someone’s bank deposit.

The person spends the deposit and another bank now has $75,000 of extra deposits.

This bank keeps $18,750 on reserve and lends $56,250.


The process continues and keeps repeating with smaller and smaller loans at each “round.”

Figure 26.2 illustrates the money creation process.

The Federal Reserve System

The Federal Reserve System, or the Fed, is the central bank of the United States.

A central bank is the public authority that regulates a nation’s depository institutions and controls the quantity of money.


The Fed’s Goals and Targets

The Fed conducts the nation’s monetary policy, which means that it adjusts the quantity of money in circulation.

The Fed’s goals are to keep inflation in check, maintain full employment, moderate the business cycle, and contribute toward achieving long-term growth.

In pursuit of its goals, the Fed pays close attention to interest rates and sets a target that is consistent with its goals for the federal funds rate, which is the interest rate that the banks charge each other on overnight loans of reserves.


The Structure of the Fed

The key elements in the structure of the Fed are

The Board of Governors

The regional Federal Reserve banks

The Federal Open Market Committee.


The Board of Governors has seven members appointed by the president of the United States and confirmed by the Senate.

Board terms are for 14 years and overlap so that one position becomes vacant every 2 years.

The president appoints one member to a (renewable) four-year term as chairman.

Each of the 12 Federal Reserve Regional Banks has a nine-person board of directors and a president.


Figure 26.3 shows the regions of the Federal Reserve System.


The Federal Open Market Committee (FOMC) is the main policy-making group in the Federal Reserve System.

It consists of the members of the Board of Governors, the president of the Federal Reserve Bank of New York, and the 11 presidents of other regional Federal Reserve banks of whom, on a rotating basis, 4 are voting members.

The FOMC meets every six weeks to formulate monetary policy.

Figure 26.4 summarizes the Fed’s structure and policy tools.



The Fed’s Power Center

In practice, the chairman of the Board of Governors (since 1987 Alan Greenspan) is the center of power in the Fed.

He controls the agenda of the Board, has better contact with the Fed’s staff, and is the Fed’s spokesperson and point of contact with the federal government and with foreign central banks and governments.


The Fed’s Policy Tools

The Fed uses three monetary policy tools

Required reserve ratios

The discount rate

Open market operations


The Fed sets required reserve ratios, which are the minimum percentages of deposits that depository institutions must hold as reserves.

The Fed does not change these ratios very often.

The discount rate is the interest rate at which the Fed stands ready to lend reserves to depository institutions.

An open market operation is the purchase or sale of government securities—U.S. Treasury bills and bonds—by the Federal Reserve System in the open market.


The Fed’s Balance Sheet

On the Fed’s balance sheet, the largest and most important asset is U.S. government securities.

The most important liabilities are Federal Reserve notes in circulation and banks’ deposits.

The sum of Federal Reserve notes, coins, and banks’ deposits at the Fed is the monetary base.

Controlling the Quantity of Money

How Required Reserve Ratios Work

An increase in the required reserve ratio boosts the reserves that banks must hold, decreases their lending, and decreases the quantity of money.

How the Discount Rate Works

An increase in the discount rate raises the cost of borrowing reserves from the Fed, decreases banks’ reserves, which decreases their lending and decreases the quantity of money.


How an Open Market Operation Works

When the Fed conducts an open market operation by buying a government security, it increases banks’ reserves.

Banks loan the excess reserves.

By making loans, they create money.

The reverse occurs when the Fed sells a government security.


Although the details differ, the ultimate process of how an open market operation changes the money supply is the same regardless of whether the Fed conducts its transactions with a commercial bank or a member of the public.

An open market operation that increases banks’ reserves also increases the monetary base.

Controlling theQuantity of Money

Figure 26.5 illustrates both types of open market operation.


Bank Reserves, the Monetary Base, and the Money Multiplier

The money multiplier is the amount by which a change in the monetary base is multiplied to calculate the final change in the money supply.

An increase in currency held outside the banks is called a currency drain.

Such a drain reduces the amount of banks’ reserves, thereby decreasing the amount that banks can loan and reducing the money multiplier.


The money multiplier differs from the deposit multiplier.

The deposit multiplier shows how much a change in reserves affects deposits.

The money multiplier shows how much a change in the monetary base affects the money supply.


The Multiplier Effect of an Open Market Operation

When the Fed conducts an open market operation, the ultimate change in the money supply is larger than the initiating open market operation.

Banks use excess reserves from the open market operation to make loans so that the banks where the loans are deposited acquire excess reserves which they, in turn, then loan.


Figure 26.6 illustrates a round in the multiplier process following an open market operation.


Figure 26.7 illustrates the multiplier effect of an open market operation.


The Size of the MultiplierTo calculate the size of the money multiplier, first define:

R = reserves

C = currency in circulation

D = deposits

M = quantity of money

B = monetary base

c = ratio of currency to deposits

r = required reserve ratio


The quantity of money, M, is:

M = C + D = (1 + c) D

The monetary base, B, is:

B = R + C = (r + c) D

Divide the first equation above by the second one to get:

M/B = (1 + c)/(r + c)

or

M = [(1 + c)/(c + r)] B


The money multiplier is [(1 + c)/(c + r)]—the amount by which a change in B is multiplied to determine the resulting change in M.

With c = 0.5 and r = 0.1, the money multiplier is

1.5/0.6 = 2.5.

THE END

cpi&wpi, money, and banks chapter 22, 26 物價指數, 貨幣與銀行

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