Money and banking : assignment

MONEY AND BANKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
2...................................................................................................................................................1
3...................................................................................................................................................1
a. Calculating the narrow and the broad money growth rate......................................................1
b. Computation of rate of inflation..............................................................................................2
c. Calculation of the growth rate percentage of real GDP..........................................................3
d. Plotting the inflation rate against the narrow and the broad money ......................................4
e. Calculation of the correlation coefficient in between the narrow and the broad money ........5
f. Plotting the real interest rate of deposit ..................................................................................6
g. Plotting the real interest rate of loan ......................................................................................7
4.a Structure and performance of banking/financial system......................................................8
4.b Key regulatory and supervisory measures of banking systems............................................9
4.c Presence of Islamic banking and financial institutions.........................................................9
4.c Objectives and instruments of choice in the conduct of monetary policy for price stability
...................................................................................................................................................10
4.d Discussing the extent to which monetary policy has been successful in keeping inflation
low and stable............................................................................................................................10
5. Outlining the view relating to the use of the monetary policy for resolving thev banking
problems across the globe. .......................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
APPENDIX....................................................................................................................................13

INTRODUCTION
Money and banking are replicated as central component in study of macroeconomics as
this helps in attaining objectives of economic growth, low inflation and unemployment. The
present report is based on consideration of Singapore's banking/financial system, monetary
policy, exchange rate policy along with dynamic behaviour of inflation. It will articulate about
data collection related to nominal GDP, CPI, Deposit rate of interest along with nominal rate of
interest as well. In the same series, this will calculate the broad and narrow money growth rate,
inflation rate its plot and calculating correlation coefficient among narrow or broad money
growth. It will represent structure along with performance of banking/financial system with
discussion of the ownership, composition and management of commercial and non banking
financial institutions.
2.
Attached in appendix
3.
a. Calculating the narrow and the broad money growth rate
Year
Broad
Money
[currency units] Growth rate (in %)
1998 112.09
1999 119.30 6.43%
2000 103.44 -13.29%
2001 113.09 9.33%
2002 109.52 -3.15%
2003 115.29 5.26%
2004 107.24 -6.98%
2005 103.64 -3.36%
2006 111.73 7.80%
1

2007 109.70 -1.81%
2008 122.59 11.75%
2009 132.64 8.20%
2010 125.05 -5.73%
2011 127.73 2.15%
2012 130.87 2.46%
2013 130.17 -0.53%
2014 129.81 -0.28%
2015 124.44 -4.14%
2016 131.35 5.55%
2017 129.69 -1.26%
b. Computation of rate of inflation
Year
GDP
deflator CPI
1998 4.72 0.27%
1999 4.16 0.02%
2000 4.45 1.36%
2001 3.72 0.01%
2002 3.44 -0.39%
2003 4.01 0.51%
2004 5.69 1.66%
2

2005 5.79 0.43%
2006 5.76 0.96%
2007 5.37 2.10%
2008 8.02 6.63%
2009 2.38 0.60%
2010 4.23 2.82%
2011 5.41 5.25%
2012 3.55 4.58%
2013 2.27 2.36%
2014 2.02 0.01%
2015 1.99 -0.01%
2016 1.85 -0.01%
2017 3.07 0.58%
Interpretation- From the above analysis it can be interpreted that the consumer price
index which is the tool that is used for measuring the inflation shows the declining value in the
inflation rate. This clearly reflects the monetary policy adopted introduced by the Singapore
government has achieved the aim of maintaining the low rate of inflation from one period to
another.
3

c. Calculation of the growth rate percentage of real GDP
d. Plotting the inflation rate against the narrow and the broad money
Regression analysis
Regression Statistics
Multiple R 0.152723
4

R Square 0.023324
Adjusted R Square -0.03413
Standard Error 0.065537
Observations 19
ANOVA
df SS MS F
Significance
F
Regression 1 0.001744 0.001744 0.405983 0.532503
Residual 17 0.073018 0.004295
Total 18 0.074761
Coefficients
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 0.002024 0.019251 0.105133 0.917501 -0.03859 0.04264 -0.03859 0.04264
CPI 0.493873 0.775106 0.637168 0.532503 -1.14146 2.129203 -1.14146 2.129203
e. Calculation of the correlation coefficient in between the narrow and the broad money
Year
Growth
in
broad
money
Growth
in Real
GDP
1999 6.43% 13.26%
2000 -13.29% 2.10%
2001 9.33% 8.54%
2002 -3.16% 10.47%
2003 5.27% -8.21%
2004 -6.98% -18.16%
2005 -3.36% 7.13%
2006 7.81% 12.95%
2007 -1.82% 25.28%
2008 11.75% -32.18%
2009 8.20% 227.02%
2010 -5.72% -31.99%
2011 2.14% -10.65%
2012 2.46% 56.90%
2013 -0.53% 61.16%
2014 -0.28% 13.53%
2015 -4.14% -2.28%
5

2016 5.55% 8.21%
2017 -1.26% -36.98%
Particulars Growth in broad money Growth in Real GDP
Growth in broad money 1 .27
Growth in Real GDP .27 1
f. Plotting the real interest rate of deposit
Year
Growth
in
deposit
rate of
interest
1999 -63.4%
2000 1.7%
2001 -11.2%
2002 -42.8%
2003 -42.2%
2004 -19.7%
2005 9.3%
2006 29.3%
2007 -7.2%
2008 -20.8%
2009 -30.2%
2010 -29.6%
2011 -18.2%
2012 -19.3%
2013 3.1%
2014 0.0%
2015 28.6%
2016 5.6%
2017 -26.3%
6

g. Plotting the real interest rate of loan
Year
Growth in
loan
interest
rate
1999 13.14%
2000 -80.00%
2001 299.88%
2002 -17.27%
2003 6.86%
2004 -85.88%
2005 198.51%
2006 17.46%
2007 -114.20%
2008 -1490.68%
2009 -74.26%
2010 202.30%
2011 -24.82%
2012 17.82%
2013 16.82%
7

2014 0.03%
2015 -69.70%
2016 216.52%
2017 -18.87%
Interpretation- From the above table it can be interpreted that the rate of interest on the deposit
resulted as fluctuating as the graph is depicting the increase and the decrease in the interest rates.
4.a Structure and performance of banking/financial system
The banking sector in Singapore has presence of three tier structure which consists of
special features of its banking systems, rules and laws which gives impact on business as well.
The ownership, management and composition of non banking financial institutions and
commercial banks. The local banks have approx 55% share of domestic banking assets which are
profitable and even well capitalised. They are also liquid and adequately provisioned with
context of exposure of non performing asset along with conservative in different practices of
management (Ingham, Coutts and Konzelmann, 2016). There was major move in local banking
sector was the consolidation of previously 6 local banks into the present 3 main local banks as
DBS, OCBC and UOB.
8

It leads for strengthening capabilities of bank and building management teams and to
enhance operational effectiveness. Moreover, commercial banks in Singapore are licensed under
and governed through the banking act and even could undertake universal banking. Apart from
commercial banking, it comprises deposit taking and provision of lending and cheque services,
the banks also carry other businesses and regulated or authorised by MAS and also comprises
financial advisory services.
On basis of global financial crisis, there were stability implications through Singapore's
close integration with this system is not replicated as immediate concern, but association is
monitored closely for enhancing MAS's early warning capabilities.
4.b Key regulatory and supervisory measures of banking systems
The reforms of global regulatory framework directly seek for strengthening bank
resilience to adverse shock with raised requirements for liquidity and capital, addressing risk
posed through systematically significant financial institutions and decreasing implicit public
subsidies and enabling effective bank resolution (Monnet and Sanches, 2015). The stricter
regulations of bank in response to crisis has accompanied through intensive bank supervision and
especially for systematic important banks. This particular adjustments has presence of myriad
aspects which comprise high involvement among supervisors along with bank boards and senior
managers, broader and more stringent application of supervisory stress tests, increment in data
requirements, targeted, review of risk and high attention placed on risk culture of bank and crisis
preparedness. In addition to this, banks faced increased pressure through community of investor,
showing ongoing weak performance of different banks and shifts in risk of investor along with
perceptions.
Measure: Improvement in corporate culture of bank, remuneration practices and customers
treatment, development of non bank sector and numerous technological innovations allows bank
for improving data analytics and processes of compliance risk.
4.c Presence of Islamic banking and financial institutions
There are numerous South east Asian nations has desire for encouraging and nurturing
growth of Islamic finance. This is considered as one of the pioneers of Islamic finance with
launch of Mendaki Growth Fund as first few Islamic equity funds in the world. There MAS has
took decisions about no requirement for creating separate Isalmic banking regulatory framework.
After advice of practitioners, MAS set tune about the existing framework of different banking
9

regulations and laid emphasis on levelling the playing field among Islamic and conventional
financial services (Rothman, 2017). In this aspect,in year 2005 MAS has joined globally
prominent Islamic Financial services board as whole member after observer for whole year.
Thus, for developing Islamic finance capabilities and infrastructure, this financial activity has
continued to grow and industry players throughout the world.
4.c Objectives and instruments of choice in the conduct of monetary policy for price stability
Price stability refers to the situation where the average prices rises in the overall
economy. Monetary authority of the Singapore focuses on the wide range of the cost and the
price indicators in economy for assessing the overall stability in the prices. The monetary policy
facilitated by the Singapore helps in monitoring the developments in the rentals and the wages,
export and the import prices and also the measures relating to the utilization of the resources. It
acts as the indication in evaluating the expectations of the inflation in the future or the coming
years (Peters and Panayi, 2016). The Singapore authority has chosen for the monetary policy
strategy that is the core inflation strategy which helps in offsetting the relative changes in the
price. The strategy in relation to the monetary policy keeps on changing in the past 20 years as
the authority has developed different monetary policy for resolving the changing problems that
had been occurred in the previous years such as inflation relating to prices and the costing in the
various sectors.
4.d Discussing the extent to which monetary policy has been successful in keeping inflation low
and stable
Singapore has been succeeded in keeping the inflation low as it adopts the monetary
policy during the 1980s that aims for achieving the price stability in the medium term and had
executed through the exchange rate management. The consumer price index of the Singapore
clearly shows the maintaining of the inflation as the value of the inflation is declining year by
year and reaching to negative value which leads to a low inflation in the country. Volatility in the
consumer price index is also seen as low which is also one of the big measure of low rate of
inflation.
5. Outlining the view relating to the use of the monetary policy for resolving thev banking
problems across the globe.
Through this study on the Singapore, The various policies that relates with the financials
or money for different aspects like the banking, finance etc. are been measured which enhance
10

great knowledge in relation to the different monetary strategies that are framed by the Singapore
government for maintaining the inflation has been understood (Lavoie and Seccareccia, 2016).
The monetary policy helps greatly in responding to the various macro prudential aspects for
cooling down the housing market which to serve as the safeguard in attaining the financial
stability and the cap against the rising expectations of the inflation.
CONCLUSION
From the above report it can be concluded that the money and the banking are the most
crucial elements of the macroeconomics which helps in maintaining the stability in the overall
economy. This report summarizes the monetary policy of the Singapore government which in
turn enables the economy in reducing the inflation so that growth can be ascertained in the
future.
11

REFERENCES
Books and journal
Ingham, G., Coutts, K. and Konzelmann, S., 2016. Introduction:‘cranks’ and ‘brave heretics’:
rethinking money and banking after the Great Financial Crisis.
Lavoie, M. and Seccareccia, M., 2016. Money and banking(No. hal-01435719)
Monnet, C. and Sanches, D.R., 2015. Private money and banking regulation. Journal of Money,
Credit and Banking. 47(6). pp.1031-1062.
Peters, G.W. and Panayi, E., 2016. Understanding modern banking ledgers through blockchain
technologies: Future of transaction processing and smart contracts on the internet of
money. In Banking beyond banks and money (pp. 239-278). Springer, Cham.
Rothman, J., 2017. Other People's Money: How Banking Worked In The Early American
Republic. Civil War Book Review. 19(3). p.14.
12

APPENDIX
13

2a.
2
b
. 2c. 2d.
2d.
(https://data.
worldbank.o
rg/indicator/
ny.gdp.defl.
kd.zg) 2e. 2f. 2g.
Year Nominal GDP
(https://data.world
bank.org/indicator
/NY.GDP.PCAP.C
D?
end=2017&locatio
ns=MY-SG-
Z4&start=1960)
[replace this with
currency units]
N
a
r
r
o
w
M
o
n
e
y
[
c
u
r
r
e
n
c
y
u
n
i
t
s
]
Broad
(https://data.world
bank.org/indicator/
FM.LBL.BMNY.G
D.ZS?view=chart)
Money
[currency units]
CPI
(https://data.wor
ldbank.org/indic
ator/FP.CPI.TO
TL.ZG)
[replace this
with Base Year
when index
=1.0]
GDP
Deflator
[Base Year
when index
=1.0]
Re
al
G
D
P
[st
at
e
Ba
se
Ye
ar
an
d
wh
et
he
r
pu
bli
sh
ed
or
ca
lc
ul
at
Deposit Rate of
Interest
(https://data.worldban
k.org/indicator/FR.IN
R.DPST?
locations=RS)
Loan Rate
(https://data
.worldbank.
org/indicato
r/FR.INR.RI
NR?
view=chart)
of Interest

ed
]
1998 21824.04 112.09 -0.27 4.72
4,
62
2.
76
4.60 8.92
1999 21795.7 119.30 0.02 4.16
5,
23
5.
58
1.68 10.09
2000 23792.61 103.44 1.36 4.45
5,
34
5.
45
1.71 2.02
2001 21577.08 113.09 1.00 3.72
5,
80
1.
85
1.52 8.07
2002 22016.83 109.52 -0.39 3.44
6,
40
9.
56
0.87 6.68
2003 23573.63 115.29 0.51 4.01
5,
88
3.
11
0.50 7.14
2004 27405.27 107.24 1.66 5.69
4,
81
4.
70
0.40 1.01
2005 29869.85 103.64 0.43 5.79 5,
15
7.
0.44 3.01

98
2006 33579.86 111.73 0.96 5.76
5,
82
5.
79
0.57 3.53
2007 39223.58 109.70 2.10 5.37
7,
29
8.
77
0.53 -0.50
2008 39721.05 122.59 6.63 8.02
4,
95
0.
28
0.42 6.98
2009 38577.56 132.64 0.60 2.38
16
,1
88
.6
5
0.29 1.80
2010 46569.68 125.05 2.82 4.23
11
,0
09
.3
8
0.21 5.43
2011 53237.56 127.73 5.25 5.41
9,
83
6.
95
0.17 4.08
2012 54715.69 130.87 4.58 3.55
15
,4
34
.6
1
0.14 4.81
2013 56389.18 130.17 2.36 2.27 24 0.14 5.62

,8
73
.9
2
2014 56957.08 129.81 1.02 2.02
28
,2
38
.5
1
0.14 5.62
2015 54940.86 124.44 -0.52 1.99
27
,5
94
.6
1
0.18 1.70
2016 55243.13 131.35 -0.53 1.85
29
,8
61
.1
5
0.19 5.39
2017 57714.3 129.69 0.58 3.07
18
,8
17
.8
4
0.14 4.37