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permanently frozen by forcing asset holders to convert their bank deposits into a different instrument with a different maturity and payment profile--e.g., Government bonds--or, by blocking their withdrawal of such deposits. The conversion would be a temporary freeze, while the blocking could be a permanent one. These measures would have the consequence of reducing the stock of money and thus increasinc actual income velocity of money until converging with the equilibrium level.

Table 11: Monetary Poticy Indicators (Percentage of GDP)

||.........<br>...<br>1986|..............<br>1987|...<br>1988|....<br>.......<br>1989|..........<br>.........<br>1990|
|---|---|---|---|---|---|
|.....<br> <br>|........|................|...........||..................................|
|Stock of Base MoneyC-1+2)<br>1/|505.5|313.1|245.2|<br>171.0|<br>59.3|
|1. Currency<br>in Circulation|14.1|<br>14.1|<br>15.8|<br>16.7|<br>13.1|
|2. Deposit Money Bank's Deposits|53.0|50.2|50.0|43.8|34.2|
|3. OtherDeposit Money Bank's Deposits 2/|438.4|<br>248.8|<br>179.4|<br>108.5|<br>11.9|
|ExpansioninBaseMoney with Public<br>(a+b)3/||-151.5|<br>-53.4|<br>-52.8|<br>-81.5|
|a. Currency in Circulation||2.7|4.5|<br>3.4|6.1|
|b. Deposit Money Bank's Deposits||1.1|2.4|<br>2.6|2.2|
|Total Revenues (W1+2) 4/||1.2|3.1|2.1|4.9|
|1. Seignorage 5/||1.0|3.1|-2.7|<br>-23.2|
|2. Inflation-Tax<br>6/||0.2|-0.1|4.8|28.0|
|MEMO: (In Percent)||||||
|<br>Broad Monetary Multiplier<br>7/|19.3|30.9|41.4|59.1|134.8|
|IncOme Velocity<br>of M2 8/|102.7|103.5|98.6|98.9|125.2|
|-ncome Velocity of MI 9/|243.9|<br>224.5|<br>207.9|<br>199.8|240.5|
|End-Period Average Inflation Rate 10/||2.7|2.2|<br>10.0|<br>64.0|
|Average Annuat Inflation Rate 11/<br>..............<br>.............................<br>...|.........|0.1<br>........................|2.2<br>..|<br>4.4|23.9<br>...........<br>...............**.**...............**..**...|

Source: National Bank of Bulgaria, Monetary Survey.

Notes: (1) Corrected for price differences as explained in note (1) in Table 7. (2) Consists of DMBs' deposits held for the purpose of the clearing system. (3) Estimated as the increase In end-period stocks. (4) Estimates the NBB's revenue from seignorage ard inflation-tax levied on public money holdings. Excludes Banks, deposits with the NBB for the clearing system. It is calculated using the equation: (Dt-Dt-1-i*Dt-1)/GDPt; D is the stock of NBSs' deposits (interest- and noninterest-bearing), i is the nominal interest rate paid and GDP is the nominal GDP. (5) Estimated using the equation: (dt-dt-1)/gdp; d and gdp are, respectively, the stock of NBB's deposits and GDP at constant prices. (6) Obtained as a difference between Total Revenues and Seignorage. Includes the inflation-tax and price differential resulting from using end-period CPI for estimating the stocks at average-1989 prices and the average GDP price deflator for calculating real GDP. See Annex 1 in Thorne (1991). (7) Is the ratio of M2 to Base Money. (8) Is the ratio of real GDP to real M2. (9) Is the ratio of real GDP to real 11. (10) Estimated using the end-period Consumer Price Index. (11) Estimated using the GDP price deflator index.

Success in dealing with the monetary overhang lies in the authorities' ability to limit the effect of the excess money stock on inflation. This can be done by reducing the excess money stock using the measures mentioned before, e.g., a monetary reform. But it is unlikely that price increase would be avoided because they are necessary to correct relative price distortions. The 1 940s' international experience with monetary overhang problems indicates that countries which