KREDIT und KAPITAL - Issue 2/1978



Freeman, George E.
Developments in Canadian Monetary Policy

Hoffmeyer, Erik und Hansen, Leif
Danish Monetary Policy During the Last Decade

Koivisto, Mauno
Monetary Policy in Finland: The Last Ten Years

Dewald, William G. und Marchon, Maurice N.
A Modified Federal Reserve of St. Louis Spending Equation for Canada, France, Germany, Italy, the United Kingdom and the United States

Zehetner, Franz
Konstruktionsprobleme kombinierter Währungsklauseln


Priewasser, Erich
Die Anwendungsfähigkeit von Operations Research-/Management Science-Modellen im Bankbetrieb

Book Reviews

Bley, Siegfried
Börsen der Welt
(Rüdiger von Rosen)

Borner, Silvio
Die amerikanische Stabilitätspolitik seit 1946
(Werner Glastetter)

Köhler, Claus
(Gerhard Zweig)

Müller, Norbert W.
Anspruchsverhalten sozialer Gruppen und Inflation
(Rüdiger Pohl)


Freeman, George E.
“Recent Developments in Canadian Monetary Policy”

In 1973 Canada, like many other countries, found itself unexpectedly caught up in an inflationary boom of worldwide dimensions. By 1975 the boom in Canada had given way to mild recession, but by then the economy was experiencing a wage and price explosion of alarming proportions. Thus Canada faced the prospect of continuing high inflation for some time to come, substantially higher inflation than that of its major trading partner, the United States. It was in this environment that the Bank of Canada adopted the practice of setting explicit money growth targets as operating guides for the implementation of monetary policy, and indicated that these targets would have to be lowered gradually over time if there was to be an eventual return to domestic price stability. In Canada, where credit and capital flows both domestically and internationally are relatively free of direct restriction and where a floating exchange rate regime has been in effect since 1970, monetary policy has customarily been implemented through the impact of cash reserve management on short-term interest rates. Essentially the same techniques are now used to resist undesired deviations in the growth rate of the money stock (M1) and thus implicitly in the trend of nominal demand. Since 1975 the Bank's monetary growth targets have been lowered in two successive steps. The growth of national expenditure has also slackened considerably, and although real economic growth has been weaker than had been hoped, there has been a substantial continuing decline in Canada's underlying rate of inflation. Although the usefulness for policy purposes of the relationship between money demand and income is subject to limitations of various kinds and is no substitute for the exercise of broad economic judgment in central bank decision-making, Canadian experience suggests that the pursuit of monetary targets can play a useful role in efforts to improve the performance record of monetary policy.


Hoffmeyer, Erik and Hansen, Leif
„Danish Monetary Policy During the Last Decade“

Priorities of the general economic aims of monetary policy shifted during the period under review because considerations of external stability, especially after the currency crisis in 1969, outweighed considerations of internal stability. After 1965 the main feature of monetary-policy formulation has been a system of voluntary agreements (notably of quantitative nature) concluded between Danmarks Nationalbank and the organisations of the money and capital market institutions. Notwithstanding this system, however, it was a characteristic feature of the monetary policy pursued in those years that heavy reliance was placed on market mechanisms, notably in respect of interest policy. The general economic trend on which monetary policy was based may be divided into two periods: 1965 - 1973 and 1974 - 1977. More particularly, the swing from surpluses to large deficits on government budgets between the two periods gave rise to significant changes in monetary-policy instruments and target variables. The principal conclusion is that the monetary policy pursued during the period under review contributed significantly towards external stability and, to some extent, also towards internal stability by means of the high level of interest rates. Monetary policy thus discharged its main function. It may be argued, however, that the better monetary policy succeeds in ensuring the financing of the external payments deficits, the more difficult it is to win political acceptance of necessary adjustments in other fields of economic policy, so that it might have been preferable to pursue a less restrictive monetary policy in order to elicit such adjustments. However, with the meagre foreign-exchange reserves held by Denmark such a policy would soon have led to chaos - as borne out by the events experienced in 1968 and 1975. Monetary policy thus appears to have been overworked, especially in the last few years, which, among other things, has caused a persistent need to introduce new monetary-policy instruments which, however, gradually wear out. It appears, however, that there is growing political understanding of these problems and that this should lead to a shift of emphasis from monetary policy towards fiscal and incomes policy.


Koivisto, Mauno
“Monetary Policy in Finland: The Last Ten Years”

During the past ten years Finland has attempted to break away from the spiral of devaluation and inflation which has plagued the Finnish economy throughout the post-war period. The overall policy strategy has been rested on three main pillars: (1) a large devaluation at the beginning of the period coupled with a comprehensive stabilization programme and growth-promoting measures to restore competitiveness and to promote further diversification of the economy, (2) the development and use of active counter-cyclical policy weapons to reduce fluctuations in demand and (3) the use of monetary and exchange rate policy to break the expectational basis of the inflation-devaluation spiral. After sketching the economic and institutional setting in which economic policy is conducted, the implementation of this strategy in three sub-periods is reviewed. The first sub-period, running from 1967 to 1971, was characterized by devaluation and stabilization. The second, extending from 1972 to 1974, was a time of strong expansion. The third sub-period, running from 1975 to 1977, saw the adoption of a restrictive policy in order to check the growth of foreign debt and to dampen inflation. An attempt is made to draw lessons from the experience of the past decade. The difficulty of pursuing an active counter-cyclical policy and the importance of achieving structural stability are stressed. The problems created by the rigidity of relative prices, relative incomes and relative wages are also considered as is the importance of expectations.


Dewald, William G. and Marchon, Maurice N.
„A Modified Federal Reserve of St. Louis Spending Equation for Canada, France, Germany, Italy, the United Kingdom, and the United States”

This paper replicates and modifies the Federal Reserve of St. Louis spending equation. The original estimates were based on quarterly U.S. data through 1969. The results tended to confirm the monetarist hypothesis that money (currency and demand deposits) affects GNP significantly over 5 quarters but government spending has only a transitory effect. Part 1 maintains the exact St. Louis specification but extends the sample to the mid-1970s and to data for Canada, France, Germany, Italy, and the United Kingdom. The results tend to confirm that money is a significant factor affecting GNP except in the United Kingdom. Unlike the original results government spending was also estimated to affect GNP significantly in the United States and in the other countries except France and Germany. Part 2 modifies the spending equation by not constraining ends of the lag distribution, including exports as another autonomous variable, searching for best-fit lag lengths, and transforming the variables into percent changes. Monetary effects were smaller in the revised common specification but generally significant even in the United Kingdom. Government spending and export effects were also generally significant. Results were qualitatively the same under either log or nonlog specifications with the exceptions that government spending in Germany and Italy was significant only under the log specification. Errors relative to the level of GNP were about 1 percent for every country except the United Kingdom for which the error was 2 percent. In no country was the estimated lag in the effect of money on GNP longer than the 5 quarters estimated in the original St. Louis model. Other lags were also short. For the period and the countries studied the results tend to confirm that current and lagged effects of changes in money and government spending account for major movements in GNP.


Zehetner, Franz
“Problems in the Construction of Combined Currency Clauses”

In combined currency clauses, the monetary value of a claim is defined by cumulative amounts of various currencies. The object of such clauses is orientation of the monetary value of a claim to the changing values of several currencies in order to reduce the interests of creditors (minimization of Inflation loss) and debtors (maximization of Inflation gain) to a common denominator. Special Interpretation problems arise when it is impossible to deduce from the clause's definition the legal consequences which arise from the following changes in the political and monetary policy constraints affecting a specific clause :
1. One of the currencies listed in a clause is formally replaced in the course of a national currency reform by a currency with a different designation :
In this respect, it is shown that the necessary conversion ruling is not a specific problem of combined currency clauses. But in order to allow for that conversion in the formulation of the clause, an explicit adjustment ruling is recommended for all combined currency clauses.
2. Several currencies listed in a clause are merged into or replaced by a single currency in the course of the implementation of a currency unions :
Regardless of the number of listed currencies affected, it is recommended, not on economic grounds, but certainly in the interests of legal clarity, that the following explicit adjustment ruling be adopted. In the event that one, several or all currencies listed in a clause are affected by a merger of national currencies into a community currency, the relative currency amounts must be converted into the community currency at the official conversion rate on the effective date of the community currency.
3. One or more of the currencies listed in a clause become invalid, as a result, say, of the dissolution of the issuing states:
To ensure legal clarity for this case, too, it is advisable to include a clause which permits just, subsequent settlement of the proportional value of the invalid currency.
4. One or more of the currencies listed in a clause become economically practically valueless in consequence of enormous inflation rates. For this case it is shown that the proportional value of a currency so seriously affected by inflation becomes ever smaller, to the benefit of the proportional values of the other currencies. lf we reckon with only a limited number of decimal places, its proportional value will decline to finite 0. From the legal standpoint, no modification of the clause is necessary.



Priewasser, Erich
„The Applicability of Operations Research / Management Science Models in Banking“

The present phase of development in bank management theory is characterized by an abundance of model theory approaches, while on the other hand the application of quantitative methods in banks is only very hesitant. A fundamental reason for the comparatively still modest use of operations research/ management science (OR/MS) models lies in the fact that hitherto only marginal attention has been paid to the process of model implementation. This contribution sets out to analyse more closely, from among the host of environmental conditions which influence effective model implementation, the determinant model structures. In order to be able to judge the suitability of OR/MS models as planning and decision aids, it is advisable to develop certain criteria with which concrete model characteristics can be qualified. A catalogue adapted, to the peculiarities of banking operations proceeds from five groups of categories,(1) approximation of reality, (2) efficiency, (3) degree of flexibility, (4),specific user aspects and (5) cost aspects. First, the various model characteristics assignable to these five groups of criteria are weighted on the basis of a survey made in March 1977 and covering 200 management planners in German banks (response rate 30 %). Then, using this catalogue - which was varied from one type of model to the other - the various model characteristics of 6 overall planning models, 9 models for credit planning, 8 portfolio selection models and 5 marketing planning models are examined. The possibility of calculating overall suitability values is demonstrated by the example of a linear additive scoring model, although fundamental objections must be raised to this procedure. From the comparison of the requirements profile of potential users with the suitability profiles of the 28 models analysed it may be concluded that the model structures per se can no longer be a serious obstacle to model implementation. Improved preparatory and infirm vocational training, activities, the intensification of empirical decision research, a higher level of information ensured by the setting up of data banks and promotion of management geared to change permit the assumption that in future model implementation will be able to proceed under ever more favourable conditions.