Methodology

 

Currency Inside Banks

CATEGORY: Sustainable Economic Opportunity
Sub-category: Economic Management
Indicator name: Currency Inside Banks
Data provider: The Economist Intelligence Unit (EIU); The International Monetary Fund (IMF)
Data source: Country Data Tool (EIU); International Financial Statistics (IFS) Yearbook
Publication years used in the Ibrahim Index of African Governance (IIAG): 2000-2008
Websites:
http://www.eiu.com/ 
and
http://www.imfstatistics.org/imf/

Definition of the indicator:

Official data measuring the total stock of currency held within banks as a proportion of the money supply in an economy.

For details of methodology, please see: 

http://www.imfstatistics.org/imf/IFSMoney.htm

Technical notes:

  • This indicator was introduced as ‘Contract-Intensive Money’ by Christopher Clague, Philip Keefer, Stephen Knack, and Mancur Olson in ‘Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic performance’,  Journal of Economic Growth, 4 (June 1999).
  • The IIAG uses the ‘Contract-Intensive Money’ formulation [(M2-C)/M2 ] to approximate the extent to which currency is held inside banks, thereby indicating the degree of trust the people have in their banking system.
  • ‘M2’ is a broad measure of Money Supply (defined as the sum of currency outside deposit money banks and demand deposits other than those of the central government, as well as time, savings, and foreign currency deposits of resident sectors other than central government), and ‘C’ is Currency Held Outside Deposit Money Banks.
  • The formula used to calculate this indicator produces results in the range of 0 to 100, with a low score being good, and a high score being bad. That is to say, it measures currency outside banks. As the 2009 IIAG measures currency inside banks,  the results from the above calculation were first normalized, using the Min-Max method to transform the data to a scale of 0 to 100, and then subtracted from 100, so that the higher the score the better the performance.
  • The latest available data are for 2008, with the exceptions of Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Malawi, Senegal, Togo and Zimbabwe, for which the latest available data are for 2007. For Ethiopia, Ghana and Rwanda the latest available data are for 2006. For Guinea, the latest available data are for 2005. Where data are unavailable, estimates are made using mean substitution and/or extrapolation.  This also applies for Ethiopia, Ghana, Guinea and Rwanda in 2007/08 and Guinea in 2006/07.
  • Data are unavailable for all years for the Central African Republic, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Sierra Leone and Somalia.

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