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November/December 1996, 
Vol. 78, No. 6
Posted 1996-11-01

Measuring the Adjusted Monetary Base in an Era of Financial Change

by Richard G. Anderson and Robert H. Rasche

The St. Louis adjusted monetary base equals the sum of the monetary (or source) base and the reserve adjustment magnitude (RAM). This article presents a revised measure of the monetary base and a new RAM. The revised measure of the monetary base differs from previous measures by including all Federal Reserve Bank deposits held by domestic depository institutions; previous measures have excluded the aggregate amount of depository institutions’ required clearing balance contracts with Federal Reserve Banks. The new RAM recognizes that, since the Monetary Control Act of 1980, an increasing proportion of depository institutions have not significantly changed their demand for base money (vault cash and deposits at Federal Reserve Banks) relative to transactions deposits following changes in statutory reserve requirements.