International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

An Analysis of the Recent US Countercyclical Monetary Policy
Chu V. Nguyen, Susan M. Henney

The inverse relationships between the narrowest money multiplier and cash holding by the public and reserve held by banks as well as the positive causality between multiplier and transaction deposits are algebraically illustrated. Also, data from the Board of Governors of the Federal Reserve System (Fed) is used to assess the current state of the US banking sector. Given the current state of the US banking system, pursuing contractionary policy would incur large losses leading to a significant reduction in the Fed’s financial contributions to the Treasury. This, in turn, will increase US borrowings and create a heavier burden on the US government and taxpayers.

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