Kouri, Pentti J. K.
Die Hypothese konterkarierender Kapitalströme
Der internationale Inflationsmechanismus und die Reform des Weltwährungssystems
Umverteilung von Sonderziehungsrechten als Instrument der Entwicklungshilfefinanzierung
IMF Special Drawing Rights and Economic Aid to Less Developed Countries
Monetäre Wirkungen eines Multiwährungs-Interventionssystems mit Saldenausgleich - Untersucht am Beispiel der europäischen Währungsschlange
Optimale Abgrenzung von Währungsgebieten: Ein Literaturüberblick
Die Zinsabhängigkeit der Geldnachfrage. Eine theoretische und empirische Analyse (Wolfgang Schröder)
Die schweizerische Wechselkurspolitik nach dem Zweiten Weltkrieg (Rolf Caesar)
Die Schweizer Banken. Geschichte - Theorie - Statistik (Henning Osthues-Albrecht)
Kouri, Pentti J. K.
"The Hypothesis of Mutually Countervailing Capital Flows"
Starting out from a monetary theory of the balance of payments, the contribution analyses the interrelationship of monetary policy and capital movements for the Federal Republic of Germany. It shows what possibilities exist in an open economy with liberalized capital movements and fixed exchange rates to pursue an autonomous monetary policy and what the consequences of such a policy are.
The basis of the empirical analysis is an econometric model which, under the hypothesis of high capital mobility, proceeds from the assumption that capital movements into and out of the Federal Republic and the domestic interest level are dependent on the stock of wealth and income at home and abroad, the interest level abroad, exchange rate expectations, changes in the net domestic accounts receivable of the central bank and the balance on current account. These two estimating equations - the capital movements equation and the interest equation - show that in open economies with fixed exchange rates short-term equilibrium of the finance markets is established via adjustments of the domestic interest rate and by inflows and outflows of foreign capital. If capital mobility is high, where exchange rates are fixed the adjustment is effected for the most part via capital movements.
The estimates obtained with the capital movement and interest equations demonstrate clearly that monetary policy measures in the Federal Republic are counteracted to a considerable extent by capital inflows from abroad. However, since the regression coefficient for these mutually countervailing effects is significantly smaller than one in principle it is possible for the Bundesbank to control the supply of money, if it neutralizes the effects of balance-of-payments surpluses or deficits. This, in turn, makes it clear that the necessity for intervention on the foreign exchange market results not so much from disequilibria in foreign trade as from the attempt to pursue an autonomous monetary policy and the necessity of neutralizing disturbances of the capital account. Autonomous monetary policy, freedom of capital flows and fixed exchange rates, can be reconciled with each other - as the study shows - only with great difficulty, if at all.
"The International Inflation Mechanism and the Reform of the World Monetary System"
In the past few years a worldwide tendency towards acceleration of the rate of inflation has been evident, coupled with an international levelling off of the rates of change in the value of money.
This contribution attempts to substantiate the thesis that this phenomenon is attributable to marked monetary expansion on the basis of strong growth of international liquidity. It is shown that this relationship cannot be explained conclusively with the help of Keynesian foreign trade theory, since in monetary and fiscal policy and upward and downward revaluation the individual economies have instruments at their disposal with which they can extricate themselves from the worldwide inflation mechanism.
Unlike the Keynesian efficiency analysis of foreign trade determinants, which is oriented to the income flows in the individual economies, the monetaristic interpretation regards the world economy - provided the national currencies are interlinked by fixed exchange rates - as a system in which the quantity of money, price level and interest rates are centrally determined: The quantity of money by the growth of international liquidity, prices and interest rates via international price relationships. In an individual economy, the demand for money, which is dependent on the development of incomes, always finds a corresponding supply of money through the international finance markets. The national central bank can determine, solely by the policy it adopts, what share the foreign-trade and domestic-trade components have in the central bank money that is created. From the monetaristic view point, upward and downward revaluations are also measures which in themselves are capable in the short run of breaking the bonds of international price interdependence.
Against this theoretical background, Section II discusses possibilities of eradicating the international inflation mechanism by a reform of the world monetary system. In this respect an unfavourable judgment is reached on the reform conception of the so-called "Committee of Twenty" in the IMF, which continues to adhere to fixed but adjustable parities. In comparison, flexible exchange rates seem a better solution, since they allow to the greatest possible extent for the diverging interests of the various countries with regard to attainment of the conflicting objectives of price stability and a high level of employment. True, they cannot prevent an inflation due to domestic economic causes, but they do eliminate foreign influences on the national price level and changes in that level.
"Redistribution of Special Drawing Rights as an Instrument for Financing Development Aid ("Link")"
The developing countries are demanding that the industrial countries make over 25-75% of their special drawing rights (SDR) for the purpose of financing development aid. The debate on this "link" has been concentrated up to the present on the question of possible adverse consequences; on the other hand there is hardly any mention of special advantages over conventional development aid. Many of the arguments for or against the "link" are not specific, but depict economic effects which may emanate from development aid in general. Probably the most important argument against the "link" is the inherent danger of inflation. However, considering the current volume in which SDRs are created, the possible inflationary effects of their redistribution for financing development aid are quantitatively insignificant. But in such case there can also be no notable quantitative advantage for the developing countries; at most the increase in development aid would amount to about 3% of the annual aid provided by the DAC alone. Very probably there would not even be this slight increase, since a compensatory - or even more than compensatory - reduction in the development aid given hitherto can be reckoned with.
Since so far there is also no proof of the alleged advantageousness of multilaterazion of development aid (hand in hand with "link" aid), even from the angle of developing countries' interest there is no apparent reason for introducing a link between SDRs and development aid. For the industrial countries such a link might even afford an opportunity to reduce the burden imposed on them hitherto by development aid payments. This is possibly one of the reasons why various industrial countries have already given up their original opposition to the link.
"IMF Special Drawing Rights and Economic Aid to Less Developed Countries"
The issue of a 'link' between the Special Drawing Rights scheme in the IMF and development assistance to developing countries has been the subject of considerable controversy since the scheme's inception in 1970. The opponents of the 'link' have stressed the necessity of preserving the character of the SDR facility as a reserve-creative system without any in-built mechanism for the transfer of real resources among specific groups of participants; in their view, introduction of the 'link' would run the risk of impinging upon other important sources of assistance to developing nations, make the provisions of the SDR scheme more difficult to implement, and add to world inflationary pressures. While admitting the need to avoid these dangers, other experts have expressed doubts that the SDR liquidity mechanism can, or indeed should, be expected to remain 'neutral' with respect to international resource transfers, given that large differences in incomes, economic structures, and rates of savings and capital formation continue to prevail between the economically advanced and less advanced participants. The present study addresses itself to the main issues arising out of this debate in the light of actual experience with the SDR facility and against the broad background of the post-war economic aid effort.
Using published data on SDR usage by various groups of participants, the first section attempts an appraisal of the resource flows between the developed and less developed participants that are likely to result from the operation of the SDR scheme in its present form; the results are then compared with other major sources of official development aid. The second section considers the main criticisms that have been levelled against traditional forms of aid. In the third section, the discussion focuses on the techniques, and problems, of allotting larger amounts of SDR units to the less developed participants directly. Finally, the merits of an 'organic link', i' e' method of SDR financing of development projects through existing capital market channels, are discussed with reference to the external debt burden of the developing nations.
The findings of the study provide support for the view that the SDR scheme, as it is presently constituted, cannot realistically be expected to remain "neutral" with respect to real resource transfers between high and low-income participants; if the pattern of SDR usage established in the early stages of the scheme's existence were to prevail, the net potential resource gains to the less developed countries as a group might lie between 7 and 10 per cent of any particular SDR allocation. Second, for the 'direct link' to add significantly to such resource flows, it would appear necessary to alter drastically the present basis for SDR allocations. Finally, the chief merit of the 'organic' form of the link is that it would provide a technically feasible method for increasing the concessionary element in future development lending.
"Monetary Effects of a Multi-Currency Intervention System with Settlement of Net Surpluses and Deficits - A study illustrated by the European Floating Block"
As a result of the adoption of block floating in the EEC, the participating countries have regained a substantial portion of their autonomy with respect to stabilization policy. There is no question, however, that this has made national monetary policy completely independent of monetary developments in European partner countries. This is mainly due to the fact that under certain conditions the intervention and settlement agreements in force within the community may have direct and, so to speak, "automatic" consequences for supplies of liquidity in Community currencies and hence for the monetary policy of the affected countries. This study deals with the monetary effects of such a system as it, has existed in the EEC since 1972. First, it considers the fundamental modus operandi of the European floating block system. Then follows an analysis of the effects this system may have on international supplies of money. First, the effects are analysed for normal operation of the system, using a simplified example, and then for application of various exceptional arrangements. It proves that in most cases, even after the financing of the settlement of surpluses and deficits, considerable net expansive or contractive effects on the international circulation of money in the affected currencies still remain ("pure net liquidity effects"). In some cases interim liquidity-increasing or liquidity-skimming effects occur, which are cancelled out, however, by the mode of financing the settlement of surpluses and deficits ("time-lag effects"). These changes in the international supply of Community currencies take full effect on the national supply of money. From the standpoint of monetary policy-makers, both the net liquidity effects and the time-lag effects are probably undesirable, as they run counter to the strategy of monetary policy; only in certain special cases can the effects of the European floating block be considered welcome. The question there fore arises of whether the central banks of the countries concerned should attempt to prevent or compensate for the effects of the system. While there seems to be hardly any prospect of success in the case of the time-lag effects, monetary policy measures to counter the net liquidity effects are quite possible. But this influences only the effects, not the causes of the intervention, and there is a risk of repetition of the entire process. Exchange rate policy measures might be a remedy, but would break up the system itself. In the final analysis, the European floating block system once again raises the old problem of the incompatibility of fixed exchange rates on the one hand and different economic development in various countries on the other. In its present inadequate form it is more likely, also in the future, to contribute to jeopardization rather than strengthening of European integration.
"Optimal Currency Areas - A Survey of the Literature"
The article provides an introduction to the theoretical concept of optimal currency areas and deals with its development and the criticism devoted to it. The first part deals throughly with the basic treatises by Mundell, McKinnon and Kenen. It emphasizes the fact that the approaches of the first two of these authors do not, strictly speaking, have a common denominator, but represent two mutually complementary criteria and treat the problem of how far an optimal currency area should extend from two different angles, Mundell concentrating on the real and McKinnon on the monetary aspect of the economy. Kenen's contribution submits a third criterion, the diversification of an economy, for debate.
In the second part of the article, various further developments are discussed. Fleming's attempt to determine the advantages and disadvantages of a currency union as compared with a system of currencies with adjustable pegs, Sohmen's emphasis on convertibility of a currency as against unilateral treatment of exchange rate fluctuations in various currency systems, and lastly, Aliber's approach, which systematically introduces uncertainty considerations into the analysis and arrives at a trade-off between greater efficiency of fixed exchange rates and greater independence of monetary policy with flexible rates. The welfare-theoretical contributions of Jerome Stein, Lanyi, Grubel and De Cecco lie on a different plane; especially Lanyi's analysis is discussed thoroughly.
The article closes with a ventilation of some recent contributions by Laffer and Mundell, who marshal arguments for fixed exchange rates, and of the criticism levelled by Balassa and Haberler. As the upshot of this theoretical development it can be said that the future fruitfulness of the conception of an optimal currency area will probably be limited. As Swoboda remarks, the issue in the future will be the definition of viable currency areas. However, the debate on the optimal currency area has led to differentiated analyses and given rise to some results which have differentiated the simple question "fixed or floating exchange rates" and adapted it more closely to the needs of practical monetary policy.