Monetary Ratios in a Modern Regime: Why the Monetary Base Still Matters

10 Pages Posted: 8 May 2020

See all articles by Anthony J. Evans

Anthony J. Evans

ESCP Europe; ESCP Europe - Department of Economics

Date Written: February 2017


A recent paper Bank of England paper cast doubt on the ‘textbook’ model of the money multiplier. However, this criticism is inconsistent and misleading. It understates the importance of the central bank's control over the monetary base, and how this influences the money supply. The confusion suggests that it would be more fruitful to conduct analysis using the currency‐deposit ratio and reserve‐deposit ratio rather than the money multiplier, and evidence from 1998–2013 is provided. This article explains how these ratios depend on the monetary regime, and the distinction between inside and outside money. Although a modern regime alters the way that money creation occurs, the monetary base still matters.

Keywords: monetarism, monetary aggregates, money multiplier

Suggested Citation

Evans, Anthony J., Monetary Ratios in a Modern Regime: Why the Monetary Base Still Matters (February 2017). Economic Affairs, Vol. 37, Issue 1, pp. 102-111, 2017, Available at SSRN: or

Anthony J. Evans (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011


ESCP Europe - Department of Economics ( email )

United Kingdom


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