Alternative Measures of the Monetary Base: What Are the Differences and Are They Important?

‘The idea of adjusting the monetary base to reflect changes in reserve requirements was proposed initially by Karl Brunner (1961) in an effort to formulate an “empirically significant theory” of the money supply process. Brunner called this adjustment “liberated reserves.” He was the first to compile data on the adjusted monetary base and empirically investigate the relationship between his measure and the money supply. This research agenda was pursued by both him and Allan Meltzer in a number of articles dealing with the money supply process and monetary policy. 2See Andersen and Jordan (1968).