The Money Supply of New Zealand, 1935-1948

Abstract

The money supply of a country constitutes a valuable study from the point of view of both practical and theoretical economics. On the one hand, accurate information about the amount and composition of the money supply is certainly desirable for modern central banking practice and, at a time when the volume of public purchasing power has rapidly increased in many countries, can be of especial assistance for judgment and policy. On the other hand, in return for its guidance and discipline monetary theory can gain much from such an examination for the verification, extension, and perhaps revision of the relevant parts of its analytical equipment. The results of a study of the New Zealand money supply are here presented. Part 1 explains the object and nature of the investigation and deals with the introductory work of definition. The object of this thesis is to study the money supply or stock of New Zealand from 1935 to 1948 surveying, firstly, those items included according to a definition of money later discussed and, secondly, those other items acting as immediate causes of changes in amount of the supply. Except for briefly dealing with the velocity of circulation of bank demand deposits, this examination does not include study of the volume of the money flow during the period. Specifically, this study - (a) first proposes a definition for the money supply of New Zealand; and then (b) surveys the items accordingly included in this supply and their aggregates over the period; (c) gives reasons for excluding certain items from the supply; (d) shows how changes in the aggregate money stock can be fairly exactly ascribed to movements in certain other items external to it; (e) surveys the individual operation of these causes of changes over the period and their combined effect; and with respect to each item (f) discusses statistical information and other matters relevant to the examination. By means of this investigation and during its course it is intended to present a case for the validity and value of the whole method of analysis, in relation to both its purpose and to the complete real monetary set-up of the country. It may be stressed at the outset that primary attention is given to the facts and figures of money in New Zealand, with only short comments being offered on monetary events and policy over the period.