-.png)
Money Supply Growth in Economies
Ehsan Soltani
During the COVID-19 pandemic, the growth rate of the money supply (measured by broad money aggregates such as M2 or M3) increased in major advanced economies, while it remained relatively stable in many emerging markets and developing countries. From January 2020 to January 2022, the money supply surged in the United States by 40.1%, in the Euro Area and the United Kingdom by around 20%, in Japan by 11.4%, and in Switzerland by 8.2%. Over the same period, the money supply in China and India increased by 20.2% and 22.6%, respectively, returning to levels similar to those observed in 2019 and 2023.
However, in 2022 and 2023, the money supply decreased in the United States, the United Kingdom, and Switzerland, or remained relatively unchanged in the Euro Area and Japan. Meanwhile, it continued to increase by an average annual rate of around 10% in China and India.
Top 10 Merchandise Exports Markets of China
China played a dominant role in the global money supply growth over the last two decades, propelled by robust economic expansion, capital formation, and manufactured exports. China's economy experienced an annual growth rate of 8.4% between 2000 and 2022, in contrast to approximately 3% for the rest of the world excluding China. During the same period, China's manufacturing exports rose by 13.1% annually, while the rest of the world experienced a growth rate of 4.7%. Additionally, China's inflation rate was slightly more than half of the global average.
In 2022, China's 30.7% share of the global money supply mirrored its significant footprint in the global economy, as evidenced by its 28.9% share in gross capital formation, 30.5% in manufacturing value added, and 28.2% in manufacturing exports.
The growth of broad money in India has outpaced that of China since 2017. Between 2000 and 2016, broad money experienced an average annual growth rate (CAGR) of 16.4% in China, compared to 14.3% in India. However, from 2016 to 2023, China's broad money grew at an average annual rate (CAGR) of 9.5%, which was 10.5% less than that of India. Given India's growing demand for economic expansion, there is an increasing need for a larger money supply. Consequently, it is anticipated that money supply in India will continue to grow at a faster pace in the future.
