Contents

Articles

*Jarchow, Hans-Joachim
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Ein Geldangebots-/Geldnachfrage-Modell für flexible Wechselkurse und Zentralbankpolitik

*Svindland, Eirik
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Über Konjunkturprognosen auf der Grundlage einer monetären Schätzgleichung. Eine Fallstudie

*Horn, Gustav-Adolf
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Preisstabilisierende Geldpolitik

*Schierenbeck, Henner
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Zur Integration von Betriebsergebnis- und Effektivzinsrechnung bei Disagiokrediten mit Festzinsvereinbarung

*Kruschwitz, Lutz
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Bezugsrechtsemissionen in optionstheoretischer Sicht

*Fischer, Bernhard und Trapp, Peter
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Geld- und Finanzpolitik in Argentinien: Der Weg in die finanzielle Repression

*Canaris, Claus-Wilhelm
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Bankvertragsrecht

(Werner Terpitz)

*Lachmann, Werner
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Wirtschaftspolitik im Ungleichgewicht. Eine Analyse fiskalischer und monetärer Maßnahmen des Staates in einem mikroökonomisch fundierten Makroungleichsgewichtsmodell

(Wilfried Fuhrmann)

*Frowen, Stephen F. (Hrsg.)
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Controlling Industrial Economies, Essays in Honour of Christopher Thomas Saunders

(Manfred Borchert)

*Krayenbühl, Thomas E.
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Country Risk, Assessment and Monitoring

(J. G. Dobrovolny)

*Wolf, Bernhard
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Zur Bedeutung der finanziellen Infrastruktur in Entwicklungsländern

(Heiko Körner)

*Jarchow, Hans-Joachim
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A Money Supply/Money Demand Model for Flexible Exchange Rates and Central Bank Policy

This article sets out to link up money supply/money demand analysis with the short-term financial market approach of exchange rate theory. This financial market approach, extended by inclusion of the commercial banking sector, offers the possibility to determine the equilibrium values of money supply, interest rate and exchange rate simultaneously in a model and to derive their changes due to central bank policy (monetary policy measures and foreign exchange market interventions).
In the case of monetary policy measures such as the adjusted monetary base and a lowering of the discount rate or the minimum reserve ratio, a money supply increase occurs coupled with a lowering of the interest rate (i. e. a qualitatively equal result as in the case of the usual money supply/money demand analysis), and a depreciation of the domestic currency. The traditional adjustment processes on the money market have superimposed on them exchange-rate-induced demand and supply changes and their impact on the money supply and interest rate are quantitatively modified. In this connection, it also becomes clear that, given exchange rate flexibility, as opposed to exchange rate stability, an interest rate cut triggered by expansive monetary policy is damped as a rule (providing that there is stabilizing exchange rate speculation).
Foreign exchange market interventions, which cannot be given suitable treatment in a traditional money supply/money demand analysis where the foreign exchange market is excluded, are analysed under the assumption that the effects of intervention policy on the adjusted monetary base (e.g. by open-market operations of the central bank with government securities) are sterilized. It proves that even under this assumption, changes in the money supply have to be reckoned with. Moreover, it is found that, for instance, sterilized intervention purchases of foreign exchange bring about, as expected, a depreciation (as long as domestic credit instruments and foreign instruments are not regarded as perfect substitutes), and in addition an interest rate increase occurs as a rule, although an interest rate reduction cannot be precluded a priori.

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*Svindland, Eirik
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On Trade Cycle Forecasts Based on a Monetary Estimating Equation

The tested Kiel estimating equation is wrongly specified, if it is understood as a dynamic version of the simple quantity theory. Its alternative monetaristic conception as the reduced form of an impulse model contains no statement on real development in conjunction with a specific steady growth of the monetary supply. This Argumentation is based on a weak hypothesis concerning structural constancy - the numerical values of the parameters may vary with the algebraic sign remaining unchanged. Estimates and applications for short-range forecasts should take account of this variability. The information on monetary policy time lags implies that the assumed lag relationships lie within a single year. Consequently, estimates were also made on the basis of quarterly data. In comparison with the preceding quarter, good adjustment of the estimating equation to seasonal annual cycles was found. The quarterly data compared to the preceding year, however, exhibit a mixture of seasonal and cyclical fluctuations, which are not covered by the estimating equation. Cyclical fluctuations of the annual data, on the other hand, are well approximated. In all three cases, both the retrospective adjustment of the equation to the data and the result of the forecasting experiments are considerably better, if fresh data are used for shifting instead of prolonging the estimation interval. Since the changes in the estimation interval also occasion many changes in the algebraic signs of the parameters, correspondence of the data with the given monetaristic substantiation of the equation is very questionable. For the annual data equation, particularly interesting interrelationships were found between parameter changes and changes in the macroeconomic problems. As a forecasting instrument based on time-series analysis, the equation must be used with the same caution as all other extrapolations of time-series patterns.

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*Horn, Gustav-Adolf
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Price-stabilizing Monetary Policy

The present article deals with the question of whether a regulatory policy of the central bank aimed at price stabilization can be successful when economic entities have rational expectations. A further line of inquiry is how far the results change when price movements are sluggish, i. e., not oriented exclusively to clearing the market.
One result that can be affirmed is that the price-stabilizing monetary policy is successful regardless of the inertia of prices. Monetary policy has real effects, however, only when the price-system tends to clear the market. The assumption of constantly cleared markets thus proves essential for the neutrality of policy rules.
Furthermore, the real effectiveness of monetary policy in this field is not based, in contrast to some monetaristic notions, on the deception of economic entities on account of the rational expectations. Hence, solely the disequilibrium-generating sluggishness of price movements is the basis for non-neutrality of central bank policy.

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*Schierenbeck, Henner
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On the Integration of Operating Statement and Effective Interest - Statement for Loans at a Discount with Fixed-rate Agreement

Especially in the case of sales finance transactions with a fixed-interest agreement, frequently a debt discount is agreed upon, which has an interest-substitution function and offers the possibility of fixing a lower, regular nominal interest rate. In such cases it is necessary for calculation of credit margins to convert the agreed discount together with the nominal interest rate into an effective interest rate. At the same time, however, the problem arises that the loan amount less discount is paid out to the customer and the bank has to book receipt of the discount in accordance with the principles of orderly accounting and balance-sheet preparation.
In the interests of a self -contained controlling cycle, both problem areas, the effective interest statement and the receipt of the discounts, have to be synchronized meaningfully in the operating statement. In other words, the issue is to ensure that the actually received (scheduled) interest surpluses including the pro rata discount correspond as exactly as possible to the interest surpluses calculated on the basis of the effective interest rates in the individual years. For only if that is achieved are the calculated credit margins subsequently contained in the operating statement in well-defined period-relevant form.
The search for discount distribution methods which serve to attain this objective as comprehensively as possible is undertaken in this article in two steps. First, it is determined what effective-interest calculation methods are, in principle, available and with what assumptions they work with regard to temporal discount distribution. The, building up on this, both the methods customary in practice for balance-sheet discount distribution and the effective-interest-oriented methods found in the theories are presented and discussed on the basis of an unvarying example. Both the methods of static effective interest calculation on a real capital and nominal capital basis and the dynamic methods of the internal and real interest rate are included. In all cases, an attempt is made to derive rules for temporal discount distribution as a function of alternative amortization terms.
The results of the analysis show that with our present knowledge none of the analysed methods is fully capable of ensuring a discount allocation with constant effective interest that satisfies all requirements. Since each of the methods presented exhibits specific advantages and disadvantages, in the individual case it is necessary to make a compromise giving the best possible combination of the criteria of practicability, balance-sheet reliability and adequacy of control of distribution rules.

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*Kruschwitz, Lutz
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Rights Issues from the Standpoint of Option Price Theory

Rights issues serve to protect old shareholders against asset losses. The amount of such an asset loss, i. e., the value of the subscription right, comprises in the traditional view the difference between the price of the old share and the "mixed price". However, the idea of the mixed prices is tenable only if it is assumed that the rights will be definitely exercised by those who acquire them. Hence the classical rights formula is based on the assumption that the placing of new shares involves no risks or at least is possible regardless of the issuing price. In this context, also take-over transactions between issuers and underwriting banks have no raison d'etre.
This article sets out to overcome the weaknesses of the traditional viewpoint with the help of option-price approaches. The analysis leads to the conclusion that even on perfect capital markets and under homogeneous expectations the issue prices of new shares are not irrelevant.

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*Fischer, Bernhard and Trapp, Peter
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Financial Policies and Financial Repression in Argentina

In the past 15 years the economic development in Argentina has been characterized by very unstable real income growth and extremely high and volatile inflation rates. This development is mainly due to an inconsistent mix of financial policies and exchange rate policy. While the maintenance of an overvaluation of the Peso was seen as an instrument to keep inflation in check, domestically, a large part of the public sector deficit was financed by money creation, which led to an acceleration of monetary expansion. Furthermore, interest rates were fixed below inflation rates most of the time in order to stimulate economic activity. As a result there were a series of balance of payment crises, forcing the government to adopt highly restrictive policies, and a sharp acceleration of inflation. Due to high inflation rates and negative real rates of interest, frequently in combination with depreciation expectations for the Peso, the market for medium- and long-term capital virtually vanished. Even the market for short-term credits and deposits became considerably smaller; the volume of bank credits and deposits in real terms declined strongly. A large number of banks and other financial institutions would not have been able to survive without government support. A revitalization of financial markets calls above all for a reduction of inflation by lowering public borrowing requirements, for a floating of the exchange rate and a gradual elimination of regulations in financial markets.

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