Chapter 20. Chapter 20

Data Exercises
Chapter 20
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Are all countries equally insured against negative shocks to their money supplies? We will explore this question using data provided by the International Monetary Fund (IMF). Go to International Monetary Fund to access the full dataset.

To access the data:

1. Go to International Monetary Fund and select "Data".

2. Scroll to the middle of the page and select “International financial statistics (IFS).”

3. Select “Data tables” and then “Monetary data based on standardized report forms (SRFs).”

4. Above the country selector, choose “Money (national definitions) and collect M1 data for Denmark, Bolivia, Morocco, Iceland, and Japan using the drop-down menu. The values will be in local currency, so convert to dollars using 9, 10, 10, 110, and 111 for exchange rates, respectively.

5. Return to “International financial statistics (IFS),” select “Data tables,” and then “Reserves” under “Data by country.”

6. Collect reserve data for Denmark, Bolivia, Morocco, Iceland, and Japan using the drop-down menu. Again, be sure to convert to dollars.

7. Return to “International financial statistics (IFS),” select “Data tables,” and then “External sector” under “Data by country.”

8. Collect asset data for Denmark, Bolivia, Morocco, Iceland, and Japan using the drop-down menu. Again, be sure to convert to dollars.

Question

a. Complete the table using data from the IMF, rounding to two decimal places:

Assets (liabilities) Base Money Supply Official Reserve Assets
Denmark $J9PCTR+CTyM/fhjaXZocyaXIqw59xu+b68ZCsQ48wa55+7fY9B8O9YmN6aFDMwJx $Hr4DOFYyQlQ3r1C8s+LU8UzoTsM/IPMBw+lmz20Re5WeVjCPjphnn2+5XC8= $DAuEj2AWgnY+1/tnH7U5I7OY0GI0bGo8teiBgJQzhbuzKTJCs2Nt8m2JLjw=
Bolivia $kHhJdtLqLx+1nYr6QN6lUrwa2UmnPuIa3067BR87y+h2D3GlWjdDvatGBM0= $FdbaL8dmH1i+u/B39nUDxo1+TFAhudztI1uxVl4N4hNbpmb1JSviGkwobd4= $gar+sOn0j4mTf77CB9l5FWTlR1OF8LshWlVejrb7FxGiBF1VMAt3ecP0Q1k=
Morocco $aYq+UqAxHphJttcjRW3SqzJZMlPxgyLX4S6atmy4L80Nh2OqvNm3qifs204= $0hy6yqPzLg3K4tq5m9PZhpIkSx7eeK+rYYlu3OtKN+glJfruaF0s8/l+XCw= $bwD3MimkRidybff+GI+/o2nnDqIIuCiM3/Esa9MGr6uX2bnHB9ZhcfgutZk=
Iceland $KOIpUxLKEbgagtNGozVFZbpKbQmG9kta0/WnNXGEX+qdCDIHpQ1DSmpufBM= $RzJ5qiOujoIJQy4zNS4KmLLNklfYiuh/nvhZoKxYoIr6SnCTNq9dNsuZtT4= $LgzoafJepVkikEeROroWMsgimHM6owPjjcdW2XCLJsTnKK5IjZKpMmx4hFA=
Japan $DCZ58kEGa5fZob0BDgSuLApH+F9K4jBVo4Tv9QHXmzXtBCQJJwgRgEqCII2jj99+ $R/jcsByBSzIQMQMOFukkV2lwbNDD+g+DnByuNCcZ6O1nyWo1XlJfVPW+NjEIFjNN $I1RwoBKrkXEMafNw6CmIx8AfeRYF7N8HeLn2PuO3p25z+g0JGxcNCr+QQ+ce1ZNU
Enter the values into the table as presented in the data on the IMF website. Round to the second decimal place.

Question 20.1

Japan has total assets of $7,873,219.96 million.
All values provided by the IMF are in millions of U.S. dollars. Thus, $1000 million as seen on the IMF website represents $1 billion, $1000 billion represents $1 trillion, and so on.
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Question

c. Calculate the backing ratio for each country to four decimal places:

Assets (liabilities) Base Money Supply Official Reserve Assets Backing Ratio
Denmark $909,229.56 $88,424.09 $62,917.12 WsTQ4HfxkTHMGfk6HwntZ72XjTA=
Bolivia $21,939.72 $6,181.50 $11,600.79 cMLPd1rX60Gt7A2LbrajApUM/6o=
Morocco $34,747.63 $70690.14 $22,253.86 LDk15YkVbkfptMbeSIGEwwwdBcc=
Iceland $37,725.97 $3904.12 $4,972.95 mks9ls6CKWDtVRGqNKucqhs3FRM=
Japan $7,873,219.96 $5,820,235.14 $1,207,019.19 ggDM+gZDN2VfpyokxRhbyOGsue4=
Recall that the backing ratio can be found by dividing reserves by the money supply.

Question 20.2

A backing ratio of 0.3148 would indicate an ability to absorb a 31% decline in the money supply (rounded to nearest percent).
Recall that the backing ratio indicates the fraction of the money supply that is backed by reserves on the central bank balance sheet.
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Question 20.3

Morocco has the lowest backing ratio and a pegged exchange rate.
Recall which countries have a pegged exchange rate and how the backing ratio determines a country’s ability to manage a negative shock to its money supply.
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