Abstract
The early pages of this thesis present a theoretical study of the theory of money supply. The theoretical analysis has been developed in order to show the importance of money supply and to emphasise the relationship between the monetary base and the controlability of money supply. This thesis argues that the changes in the Lebanese money supply are dependent on the activities of the Bank of Lebanon, the commercial banks, the public, and the foreign sector. A macro-economic model has been developed so as to include these activities and to show their influence on the money supply in the Lebanon through the adjusted monetary base and the money multipliers; short-run and long-run multiplier. The empirical work of my thesis (1965-1974) is an investigation showing the link between the monetary base which is dependent on changes in commercial banks' reserves and their net foreign assets, and the money multipliers in the Lebanon. According to my empirical results, both the short-run and the long-run money multipliers have an elasticity of less than one, and changes in commercial banks' net foreign assets are dependent on and responsive to changes in the Lebanese balance of payments, and less responsive to changes in the differences between the Euro-dollar rates and the Bank of Lebanon discount rates. The last sections of this thesis argue that monetary policy in the Lebanon has not been used efficiently by the Bank of Lebanon in order to control the expansion in the adjusted monetary base for the period 1965-1974. The Bank of Lebanon must have a certain strategy for controlling the monetary expansion; one of the suggested methods is the establishment of a strong government bond market so as to enable the Bank of Lebanon to make use of open-market operations in order to control the monetary base and money supply.