The money supply process and the transmission mechanism in the Greek economy.

Abstract

This thesis is concerned with the money supply process and the transmission mechanism of monetary changes in the Greek Economy. The first chapter of the thesis presents a survey of the theory of the money stock determination. After a discussion of the problems surrounding the definition of money, the old and new views on the money stock determination are examined. The survey ends with an examination of the concept of the monetary base and the problem of its control by the authorities. The second chapter provides a detailed account of the money supply process in the Greek economy, by examining both theoretically and empirically the dependence of the money multiplier upon interest rates. The third chapter represents an empirical analysis of the question on whether the Greek authorities have been controlling the cash base of the system or/and its domestic component. Chapter four discusses some theoretical aspects of the transmission mechanism of monetary policy and provides some preliminary empirical evidence regarding the potential importance of money in influencing economic activity in the Greek economy. Finally, the last chapter of the thesis presents a detailed theoretical model which takes into account the institutional peculiarities of the Greek financial system and, in the context of this model, examines the mechanisms through which the policy instruments affect the main endogenous variables of the system.