Tema10

Lecture 10 Money supply

1. Masa monetar
2. Sistemul monetar al Republicii Moldova
3. Ecuaia de schimb monetar

1. The monetary mass and monetary system

of the Republic of Moldova
2 Monetary system of the Republic of
Moldova
3.Monetary exchange equation

1. Masa monetar
Masa monetar reprezint un indicator care
reprezint toate instrumentele de plat ce
exist la un moment dat ntr-o economie. La
nivelul economiei persoanele fizice i juridice
aparin att sectorului bancar ct i nebancar,
de aceea n acest indicator sunt incluse toate
instrumentele de plat pe care le deine
populaia i agenii economici la un moment
dat n cadrul economiei. Msurarea masei
monetare se efectueaz prin diferite modaliti
una dintre care este calcularea agregatelor
monetare de ctre Banca Central. Sunt
stabilite unele criterii dup care se efectueaz
structurarea indicatorilor i agregatelor
monetare. Aceste criterii vizeaz urmtoarele
sfere:
circuitul pe care l deservete masa monetar;
determinarea strict a componentelor
agregatelor monetare;
gradul de lichiditate a componentelor
agregatelor monetare;
viteza de rotaie a diferitor tipuri de
instrumente de plat;
factorii ce influeneaz asupra componentelor
masei monetare.
Pentru a asigura un circuit normal a
mijloacelor bneti, mrimea masei monetare,
trebuie s corespund strict necesitilor pieei
de bunuri i servicii. Dac masa monetar
depete necesitile economiei apare un
fenomen care este urmrit cu atenie de ctre
specialitii economici - inflaia
Legea rotaiei monetare determin, din punct
de vedre teoretic, mrimea masei monetare
necesar pentru asigurarea decurgerii normale
a rotaiei monetare.
1 2 3 4
M
5
(1)
1 suma preurilor tuturor mrfurilor i
serviciilor existente pe pia;
2 suma plilor, care urmeaz s fie fcute n
perioada respectiv, pentru mrfurile realizate

1. The monetary mass

The monetary mass is an indicator that
represents all the payment instruments that
exist at a given moment of time in an economy.
At the economy level, natural and legal persons
(individuals and economic entities) belong to
both the bank and non-banking sector, that is
why this indicator includes all the payment
instruments held by people and businesses at a
given moment within the economy. The
measuring of monetary mass can be performed
in different ways, one of which is the
computing of monetary aggregates by the
Central Bank. There have been set out some
criteria in compliance with which the
structuring of indicators and of monetary
aggregates is carried out. These criteria cover
the following spheres:
- The circuit served by the money supply;
- Strict determination of the components of
monetary aggregates;
- Degree of liquidity of the components of
monetary aggregates;
- Velocity of different types of payment
instruments;
- Factors influencing the components of money
supply.
To ensure a normal flow of funds, the size of
money supply should strictly correspond to the
market needs for goods and services. If the
mass of money exceeds the economy needs,
then a phenomenon that is being closely
tracked by economic experts appears the
inflation.
The Law of monetary velocity determines,
from the theoretical point of view, the size of
the money supply needed to ensure the normal
flow of monetary rotation.
1 2 3 4
M
5
(1)
1 the sum of prices for all goods and services
1

n perioada trecut;
3 suma plilor ce se anuleaz reciproc;
4 suma plilor, care vor fi efectuate n
perioada viitoare, pentru mrfurile realizate n
prezent;
5 viteza medie de rotaie a unitii monetare
(numrul actelor de vnzare-cumprare
deservite n mediu de unitatea monetar n
perioada respectiv);
M masa monetar.
Structura masei monetare este destul de
complex dar cu diferene de calcul pentru
diferite ri. Masa monetar este compus din:
- moneda efectiv;
- moneda de cont;
- depunerile la termen i n vederea
economisirii;
- alte active, cu grad mai mare sau mai mic de
lichiditate.
Moneda efectiv reprezint activul cel mai
lichid, fiind una din componentele de baz ale
masei monetare. Acest activ astzi i pierde
din importan din simplul motiv c att
persoanele fizice, ct i persoanele juridice
sunt adepi pentru moneda electronic i tot
mai puini poart n portmoneul su bani
numerar.
Moneda de cont disponibilitile n conturile
curente sau la vedere. Deintorii cardurilor se
folosesc de aceste disponibiliti reprezentnd
tot aceeai lichiditate ca i numerarul, fr
riscuri suplimentare la plat, n afar de
deprecierea monedei naionale care se poate
rsfrnge i asupra deintorilor
disponibilitilor n conturile curente sau la
vedere.
Depozitele la termen i n vederea
economisirii ce sunt constituite la bnci i n
casele de economii. Ele pot fi retrase dup un
preaviz la banc sau la asociaia de economii,
ns gradul de lichiditate ale acestor
componente ale masei monetare sunt de un
nivel sczut.
Alte active activele plasate n diferite titluri,
emise i puse n circulaie pe piaa financiarmonetar, reprezentnd deficiene la momentul
cnd persoanele ar avea nevoie imediat de
lichiditi fiind influenai de diferii factori n
procesul transformrii titlurilor sau creanelor
n instrumente imediat lichide.

existing on the market;

2 - the amount of payments to be made in the
current period, for goods sold in the previous
period;
3 the sum of payments that cancel each
other;
4 the amount of payments to be made in the
next period, for goods sold in the present;
5 the average velocity for a monetary unit
(the number of sale and purchase documents
(instances) served on average by the monetary
unit during the respective period);
M the money supply.
The structure of the money supply is quite
complex, and the calculus differences for
different countries must be considered. The
money supply consists of:
- Monetary base (narrow money / the effective
currency);
- Checking accounts;
- Time deposits and saving deposits;
- Other assets with higher or lower degrees of
liquidity.
The Effective currency is the most liquid
asset, being one of the basic components of the
mass of money. Nowadays this asset loses
ground just because both individuals and legal
persons are backers (partisans) of electronic
money, and the number of those who carry in
their wallets cash, decreases each day.
Checking accounts - the funds in the current
accounts or in the demand deposits. The
owners of cards use these funds with the same
liquidity as cash, without additional risks at the
moment of payment, except the national
currency depreciation that can turn up upon the
owners of demand deposits and checking
accounts.
Time and saving deposits that are settled at
commercial and saving banks. They may be
withdrawn by a notice to the bank or to the
association of savings, but the degree of
liquidity of these components of money supply
is quite low.

Other assets - assets invested in different

securities, issued and put in circulation on the
financial-monetary market, but which share
2

Caracteristica general a agregatelor masei

monetare.
n majoritatea rilor cu economie de pia n
calitate de mecanism de reglare a masei
monetare sunt utilizate agregatele monetare.
Agregate monetare reprezint un indicatori ce
caracterizeaz mrimea i structura masei
monetare. Toate activele ce figureaz ntr-un
agregat monetar au acelai nivel de lichiditate.
Indicatorii sau agregatele monetare sunt
stabilite n dependen de urmtoarele criterii:
eficacitatea agregatelor monetare, pot fi
controlai i existena evidenei statistice. n
Republica Moldova se folosesc urmtoarele
patru agregate monetare:
M0 mijloacele bneti n numerar
(bancnotele, monetele i mijloacele bneti n
conturile de decontare);
M1 include agregatul M0 i depunerile la
vedere n bncile comerciale;
M2 - include agregatul M1 i depunerile la
termen n bncile comerciale;
M3 include agregatul M2 i alte titluri;
M3 reprezentnd masa monetar n circulaie
la un moment dat ntr-o economie, ce trebuie
s corespund cerinelor pieei.
Nivelul masei monetare poate fi dedus din
ecuaia schimburilor:
MV=PT, ( 2.)
M = PT/V ( 3.)
Unde: M masa monetar;
P nivelul preurilor;
T volumul tranzaciilor;
V viteza de rotaie a banilor.
Variaia masei monetare poate apare numai
dac variaz preurile i volumul tranzaciilor.
Factorii ce determin ( influeneaz ) masa
monetar:
cantitatea masei monetare se determin de
autoritatea monetar a rii (Banca Central) i
este n strns corelare cu producia de mrfuri
i servicii.
viteza de rotaie a banilor se determin:
1. P.N.B. sau V.N./ Masa monetar (agregatul
M2 sau M3)
unde: P.N.B. produsul naional brut; V. N.
venitul naional.
viteza de circulaie a banilor n circuitul
plilor = mrimea mijloacele conturile
bancare / mrimea medie a masei monetare n

deficiencies when people would need

immediate liquidities, being influenced by
various factors during the process of
transformation of securities or receivables into
instruments of instant liquidities.
General characteristics of money supply
aggregates.
In the majority of countries with market
economies, the monetary aggregates play the
role of the main adjusting mechanism (levers)
of the money supply. The monetary aggregates
represent an indicator characterizing the size
and structure of money supply. All assets
belonging to a certain monetary aggregate have
the same level of liquidity. The Indicators or
the monetary aggregates are established
depending on the following criteria: the
possibility to control the effectiveness of
monetary aggregates and the existence of
statistical evidence. The four following
monetary aggregates are used in Republic of
Moldova:
M0 funds in cash (notes, coins and funds in
settlement accounts);
M1 includes the M0 aggregate and also the
demand deposits in commercial banks;
M2 includes the M1 aggregate and also the
time deposits in commercial banks;
M3 includes the M2 aggregate and also
other securities;
M3 represent the money supply in circulation
in an economy at a given moment of time,
which must meet (correspond to) the market
requirements.
The level of money supply can be inferred
from the swap equation:
MV = PT, (2.)
M = PT / V (3.)
Where: M - money supply;
P price level;
T volume of transactions;
V velocity of money circulation.
Changes in money supply can occur only if
the prices and the volume of transactions
varies.
Factors that affect the money supply:
The quantity of money supply is determined by
the country's monetary authority (Central
Bank) and it is in close correlation with the
production of goods and services.
The money velocity is determined:
G.N.P. or N.I. / Money Supply (M2 or M3
3

circulaie
Acest indicator reflect legtura ntre circulaia
monetar i procesul de dezvoltare economic.
Viteza de rotaie a masei monetare este invers
proporional cu mrimea masei monetare din
circulaie. Dac sporete viteza de circulaie a
masei monetare crete masa monetar.
Sporirea masei monetare la aceeai cantitate de
mrfuri i servicii duce la devalorizarea ei.
Mrimea multiplicatorului monetar care
reprezint un indicator al sntii monetare a
bncilor. Multiplicatorul monetar sau al
creditului indic numai maximum de moned
ce poate fi creat de ctre bnci, suma real
fiind determinat de situaia lichiditii
bncilor, aceasta depinznd de preferina
publicului pentru numerar i de politica Bncii
Centrale. Formula de calcul este urmtoarea:
K = 1/r + b r b, unde
r rezervele obligatorii;
b preferina pentru numerar.
Multiplicatorul monetar sau al creditelor este
un instrument analitic, care permite exprimarea
cantitativ a creaiei monetare a bncilor
comerciale, practic reprezentnd o creaie a
monedei scripturale.
Masa monetar este calculat de banca central
i mrimea acesteia depinde de decizia acesteia
din urm de a pune cantitatea necesar pentru
circulaia normal a economiei. Dac
cantitatea acesteia este peste necesitile
economiei Banca central va retrage o parte
din masa monetar n circulaie astfel
ameliornd i controlnd nivelul inflaiei n
economie.
10.2Sistemul monetar al Republicii Moldova
Sistemul monetar al Republicii Moldova
Sistemul monetar contemporan al Republicii
Moldova a aprut n noiembrie 1993, odat cu
punerea n circulaie a unitii monetare
naionale. Cadrul instituional al acestui sistem
a aprut n 1991, odat cu aprobarea de ctre
Parlament a legilor Cu privire la Banca
Naional de Stat a Republicii Moldova i
Cu privire la bnci i activitate bancar. n
baza acestor legi n 1991, n a doua jumtate a
anului, a fost creat un sistem bancar din dou
niveluri:
Banca Naional a Republicii Moldova;
bncile comerciale.
La sfritul anului 1995 nceputul anului

aggregate)
where G.N.P. - Gross National Product, N.I. National Income.
money velocity in the circulation of payments
= size of funds in bank accounts / average size
of money supply in circulation.
This indicator reflects the link between the
monetary circulation and the process of
economic development.
The velocity of monetary mass is inversely
proportional to the size of money supply in
circulation. If velocity of money supply
increases, then the mass of money itself should
decrease. Increase of the money supply while
the quantity of goods and services remains the
same, leads to its devaluation (depreciation).
The size of the monetary multiplier which
represents an indicator of the monetary health
of banks. The monetary or credit multiplier
shows only the maximum amount of currency
that can be generated by banks, the actual sum
being determined by the condition of banks'
liquidity, the latter depending on the public's
preference for cash and the Central Banks
policy. The calculus formula is the following:
K = 1 / r + b - r b, where
r mandatory reserves;
b - preference for cash.
The monetary or credit multiplier is an
analytical tool that allows the quantitative
expression of the money generation by
commercial banks, virtually representing the
creation of scriptural currency (money).
10.2 Monetary system of the Republic of
Moldova
Monetary system of the Republic of Moldova
The contemporary monetary system of the
Republic of Moldova appeared in November
1993, beginning with the release of the national
monetary unit. The institutional framework of
this system appeared in 1991, with approval by
the Parliament of the laws On National Bank
of the Republic of Moldova and On banks
and banking activity. Based on these laws in
1991, in the second half of the year, was
created a banking system in two levels:
1) The National Bank of Moldova;
2) Commercial banks.

1996 Parlamentul a aprobat dou legi noi, care

au nlocuit legile bancare din 1991: Legea cu
privire la Banca Naional a Republicii
Moldova i Legea cu privire la instituiile
financiare. Aceste legi reglementeaz ntr-o
msur mai mare, fa de legile precedente,
organizarea i efectuarea rotaiei monetare.
Scara preurilor n Republica Moldova s-a
stabilit haotic, mijloacele bneti se emit n
rotaie de Banca Naional n baza operaiilor
de credit ale acesteia.
Sistemul monetar al Republicii Moldova se
afl n dezvoltare permanent, n sensul
elaborrii i introducerii n practic a
instrumentelor monetare existente n toate
rile dezvoltate (instrumentele de
supraveghere bancar, crearea atributelor pieei
hrtiilor de valoare, implementarea
mecanismului contabil conform principiilor
internaionale, etc.).

In the late 1995 - early 1996 Parliament

approved two new laws, which replaced the
Banking Acts of 1991: Law on National Bank
10.3 Functions of the central bank
The money supply is calculated by the
central bank and its size depends on the
bank's decision to put the required
quantity for normal circulation in the
economy. If this amount is over
economys needs, the Central Bank will
withdraw some money from circulation
thus improving and controlling the
economys inflation.
of Republic of Moldova and Law on
financial institutions. These laws
regulate in a greater extent, compared to
previous laws, organization and money
rotation. The scale of prices in Moldova
has been established chaotically,
rotating funds being issued by the
National Bank under its credit
operations.
Monetary system of the Republic of
Moldova is in constant development,
with the purpose of elaboration and
applying in practice of monetary
instruments existing in all developed
countries (the instruments of banking
supervision, creation of securities
markets attributes, implementation of
accounting mechanism under the
international accounting principles,
etc..).

3 Money supply is important because it is linked to inflation by the "monetary exchange

equation":
where:
velocity = the number of times per year that money changes hands (if it is a number it is always
simply nominal GDP / money supply)
real GDP = nominal Gross Domestic Product / GDP deflator
GDP deflator = measure of inflation. Money supply may be less than or greater than the demand
of money in the economy
In other words, if the money supply grows faster than real GDP growth (described as
"unproductive debt expansion"), inflation is likely to follow ("inflation is always and everywhere
a monetary phenomenon"). This statement must be qualified slightly, due to changes in velocity.
While the monetarists presume that velocity is relatively stable, in fact velocity exhibits
variability at business-cycle frequencies, so that the velocity equation is not particularly useful as
a short run tool.
1. Legea RM "Cu privire la instituiile financiare" 21.07.1995, Nr.550-XIII.
5

2. Legea Republicii Moldova cu privire la Banca Naional a Moldovei nr.548 XIII din
21.07.1995 // Monitorul Oficial al Republicii Moldova nr.56-57 din 12.10.1995;
3. Anghelescu C., Blaga I., Avram I., Apostol Gh. Economie politic. Bucureti: Editura
Economic, 1997.
4. Bulhac C., Valeico V., Petrusin P. Bncile i relaiile economice de pia (partea I.).
Chiinu: Editura Golvo, 1994.
5. Bistriceanu Gh. Lexicon de finane, bnci, asigurri, vol.III. Bucureti: Editura
Economic, 2001.
6. Centrul pentru Dezvoltarea Rural. Curs de creditare pentru AEIC (modulul 1 i 2). Chiinu, Bizpro -Moldova, 2002. - 117 p.
7. Berea, Aurel, Stoica, Emilia, Creditul bancar - coordonate actuale i perspective, Bucureti:
Editura Expert, 2003.- p. 16.
8. Basno Cezar. Moned, credit, bnci. - Bucureti: Editura Didactic i Pedagogic, 2003.