Money Supply in Bahrain , 1974 – 2007
نویسنده
چکیده
Bahrain is a very small oil-exporting country in the Middle East with a fixed exchange rate against the US dollar and has no restricton capital flows. Because its economy evolves around the oil sector, its economy is thought to be vulnerable to oil price movements. It is feared that the recent oil price hike would feed from foreign assets to monetary base and money supply to inflation. Empirical results show that the central Bank of Bahrain since 1990 had neutralized successfully the effect of foreign assets on monetary base and money supply. There was no exception for the recent shocks either. Only the domestic policy variables have had an impact on the monetary base. Except some exceptional years, money supply growth had been remarkably low and steady which helped to maintain stable price level. Empirical results show that the steady growth rates of money were achieved through the maneuvering of both monetary base and money multiplier.
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