AUSTRALIAN MONEY SUPPLY ANALYSIS: Direct Controls and the Relationship Between the Monetary Base, Secondary Reserves and the Money Supply

Abstract

A comparison of the standard deviation of the difference in growth rates of the momentary base and money for the U.S. and Australia indicates much larger variation in the latter case. The larger Australian deviation is explained by differing institutional frameworks within and through which monetary policy functions in the two countries and by the somewhat greater reliance on direct controls as monetary policy instruments in Australia. When allowance is made for the unique Australian institutional context, reasonably close and stable relationships are found between the monetary base and money and between a liquidity augmented monetary base and money.