Is the money multiplier relevant in a small, open economy? Empirical evidence from Fiji

Abstract

The paper reports the results of a quantitative analysis of the linkages in Fiji between reserve money, known as the monetary base (MB) and the money supply, and tests whether the familiar money multiplier is of any policy relevance to this small country under its fixed exchange rate regime. The paper examines the relationship between monetary aggregates and the monetary base in Fiji. It is established that the conventional money multiplier concept is not empirically valid in the case of a small, open economy with a fixed exchange rate regime. Show more