KREDIT und KAPITAL - Issue 2/1997


Contents


Articles

Guender, Alfred and Moersch, Mathias
On the Existence of a Credit Channel of Monetary Policy in Germany

Hartmann, Philipp
Capital Adequacy and Foreign Exchange Risk Regulation - Theoretical Considerations and Recent Developments in Industrial Countries

Breuer, Wolfgang
Kreditgenossenschaften, Managementsteuerung und der Markt für Unternehmenskontrolle

Hirth, Hans
Handelsfrequenz und Nichtmengenanpassung


Reports

Werner, Richard A.
Towards a New Monetary Paradigm: A Quantity Theorem of Disaggregated Credit, with Evidence from Japan


Book Reviews

Lord, Thomas
Die Performance der Europäischen Währungsordnung. Eine Analyse der Interessenstrukturen im EWS (Susanne Cassel)

Menkhoff, Lukas
Spekulative Verhaltensweisen auf Devisenmärkten (Beate Reszat)


Summaries

Guender, Alfred and Moersch, Mathias
"On the Existence of a Credit Channel of Monetary Policy in Germany"

This paper analyzes the credit channel of monetary policy in Germany. It finds little evidence for the existence of a credit channel, while confirming the standard Channel of monetary transmission which works through bank liabilities. The findings suggest that, first, monetary policy shocks are largely transmitted through Bank liabilities rather than assets. Second, after a policy tightening loans as a share of overall assets increase temporarily. The absence of a credit channel is consistent with a strong Hausbank relationship, in which banks insulate loan portfolios from monetary policy shocks.

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Hartmann, Philipp
"Capital Adequacy and Foreign Exchange Risk Regulation: Theoretical Considerations and Recent Developments in Industrial Countries"

Capital adequacy regulations put forward by the Basle Committee on Banking Supervision have virtually become an international standard of prudential regulation. Recent decisions by the Group of Ten and the European Union extend this approach to market risks, including foreign exchange risk. The present paper provides a discussion of exposure limits, as implied by capital adequacy requirements, mainly focusing on the example of currency risk. Some theoretical issues are addressed in the paper together with descriptions and comparisons of existing and future regulations, in 15 industrial countries. It turns out that previous forex exposures limits in many industrial countries were more restrictive than could be expected from purely prudential considerations. However, the newly adopted minimum requirements should lead to an alleviation of existing regulations. Furthermore, a change of approach by the Basle Committee, allowing banks to use their own risk management models, creates a coordination problem between G- 10 and EU regulations, which requires an amendment (CAD II) of the 1992 Capital Adequacy Directive. It is also argued that prudential limits are not the appropriate instrument to fight speculative capital flows in developed financial markets.

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Breuer, Wolfgang
"Credit Co-operatives, Management Steering and the Market for Corporate Control"

The choice of a company 's - in this case a bank's - legal form of incorporation may be interpreted as a means for demonstrating in a credible manner that management-steering interventions will either be made or not. Incorporating especially in the legal form of a co-operative means deliberately renouncing the use of market forces for corporate control purposes as a method of management-disciplining, which may give credit co-operatives a net efficiency advantage over banks incorporated as public limited companies (AGs) in the eyes of the respected shareholders. Compared with the management of public limited banks, for instance, the management of credit co-operatives is better able, in the absence of take-over threats, to pursue economic power-building and growth objectives, which may be beneficial, ex post, for the co-operative's shareholders because of the shift in market shares between the two forms of credit in that is associated with oligopolistic market structures. However, basic to the occurrence of such a positive effect is a sufficiently large volume of the co-operative's transactions with non-members.

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Hirth, Hans
"Trading Frequency and Non-Pricetaking"

In light of non-pricetaking, account has to be taken of effects not only on current, but also on future prices. This intertemporal link, together with rational expectations of all market participants, results in the trading frequency determining current prices. It turns out that, with a higher trading frequency, current prices tend to draw closer to those prices that would be the outcome of optimised risk allocation. At the same time, the liquidity of the market increases when measured by the insensitivity of prices to fluctuations in the volume of transactions.

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Reports

Werner, Richard A.
"Towards a New Monetary Paradigm: A Quantity Theorem of Disaggregated Credit, with Evidence from Japan"

Three important ,,anomalies" that have occurred in the 1980s in several countries, including Scandinavia and Japan, have challenged the traditional monetary model: (1) the observed velocity decline and consequent instability of the money demand Function; (2) significant asset price rises, often referred to as ,,bubbles" and (3) enormous capital outflows from Japan in the 1980s and a sudden reversal in the early 1990s. In this paper, a simple model is proposed that encompasses traditional theory and manages to explain the three main anomalies. It centres on a "quantity theory" framework of credit-money circulation, which is disaggregated into "real" and financial transactions. Excess credit creation in the "financial circulation" is shown to be responsible for asset price booms, the observed velocity decline and, in an open economy extension, foreign investment. Empirical evidence from Japan supports the model. Implications for theory, further research and policy are explored.

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