KREDIT und KAPITAL - Issue 1/1997


Contents


Articles

Schwiete, Mark and Weigand, Jürgen
Bankbeteiligungen und das Verschuldensverhalten deutscher Unternehmen

Bernholz, Peter
Paper Money Inflation, Prices, Gresham's Law and Exchange Rates in Ming China

Smant, David J. C. and Melger, Jeroen
Monetary and Non- Monetary Analyses of Inflation in a Small Open Country

Patzig, Wolfgang
Handelsfrequenz und Nichtmengenanpassung

Clostermann, Jörg and Scharnagl and Seitz, Franz
Begründung der monetaristischen Geldmengenregel mit Hilfe einer Formalisierung des Konjunkturmodells von Milton Friedman

Uhrig, Marliese and Walter, Ulrich
Ein neuer Ansatz zur Bestimmung der Zinsstruktur - Theorie und empirische Ergebnisse für den deutschen Rentenmarkt


Reports

Kaufmann, Friedrich
Besonderheiten der Finanzierung kleiner und mittlerer Unternehmen - Ein Überblick über die Problemlage

Wesche, Katrin
Konstanz Seminar on Monetary Theory and Monetary Policy 1996


Book Reviews

Dowd, Kevin
Laissez- faire Banking (Manfred Neldner)


Summaries

Schwiete, Mark and Weigand, Jürgen
"Bank Equity Participations and the Corporate Financial Behaviour of German Firms"

The paper discusses the financial behaviour of German stock corporations. Starting from agency theory, which attributes real deviations from Modigliani / Miller's theorem of the irrelevance of the financial policy to asymmetric information and the existence of agency costs, empirically testable hypotheses are derived for potential determinants of corporate leverage. Special account is taken of features of the German financial system, such as a bank's possibility of acquiring equity participations in industrial enterprises. For the sample of German stock corporations the results of regression analysis are significantly different from those reported in the literature for US firms. The financial behaviour of the German sample corporations resembles that of Japanese corporations. The empirical findings indicate that the corporate financial behaviour in bank-oriented financial systems is different from that in market-oriented systems. However, these results are not due to bank participations. Other factors like dose long-term bank-firm relationships appear to be more important.

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Bernholz, Peter
"Paper Money Inflation, Prices, Gresham's Law and Exchange Rates in Ming China"

In the present article the Ming paper money inflation of 1368 - 1448 is analyzed with the intention to test whether the theory of a complete inflationary cycle is applicable not only to Western historical cases but also to this much earlier and culturally different historical episode. A complete inflationary cycle begins with the introduction of paper money to finance a budget deficit and its use by the public besides specie. It later drives the specie out of circulation (Gresham's law). After that inflation begins and accelerates. Specie money returns and substitutes the paper money, which finally vanishes from circulation. It is shown that these and other qualitative characteristics were present during the Ming inflation.

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Smant, David J. C. and Melger, Jeroen
"Monetary and Non-Monetary Analyses of Inflation in a Small Open Country"

This paper (re)evaluates monetary and non-monetary inflation models for the Netherlands. In particular, we examine whether a P-star model - representing a textbook macroeconomic relationship between money and prices - should be rejected in favour of a popular socio-political model based on cost-push factors. We argue that the P-star model can be used for a small economy with fixed exchange rates and conclude that the P-star model need not be rejected on theoretical grounds. We also show that based on in-sample fit and out-of-sample forecasting the monetary model is not outperformed by the socio-political model. Thus, the P-star model need not be rejected on empirical grounds. Basic monetary economics suggests that we should prefer the monetary inflation model. We conclude with some observations on the political-economy aspects of the public debate on inflation and its determinants.

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Patzig, Wolfgang
"Justifying the Monetaristic Rule of Money Supply by Formalizing the Business Cycle Model of Milton Friedman"

In this article, the verbal business cycle model of Milton Friedman gets formalised by using a mixed difference-differential-equation. Going beyond the initial attempt of Laidler, an additional dependence of the velocity of circulation on the inflation rate is modelled. Concerning the statements of Friedman, the mathematical testing leads to similar results. Given an elasticity of the velocity of circulation that is high enough in relation to the rate of inflation - the discretionary use of monetary policy may lead to fluctuations of nominal demand. Excluding the special case of constant real wages, this results in variations of real income. The higher the elasticity of circulation velocity and/or nominal wages in regard to the Inflation rate, the more probable oscillating solutions leading to instable results get. The higher the degree of price-flexibility of a market system, the more likely the achievement of long-term-stability gets. Concerning possibilities of money supply control -especially in countries with an increasing degree of price-inflexibilities - but also in regard to measures of price-decontrol within transformation processes this is an important result.

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Clostermann, Jörg and Scharnagl and Seitz, Franz
"Net Monetary Assets versus Monetary Supply M3 - A Reply"

In their article "Monetäres Reinvermögen versus Geldmenge M3", Neumann and Weigand suggest to the Deutsche Bundesbank that in future, when interest rate policy decisions are being taken, more attention should be paid to the effects of the Bank's policies on business activity. To measure the impact of monetary policy on economic activity, they advise the Bundesbank to use net monetary assets (Monetäres Reinvermögen) - a concept which they have devised. Contrary to what Neumann and Weigand maintain, however, the predictive quality of this aggregate is unsatisfactory, and its interest weights are theoretically ill substantiated. Another point is that the real net monetary assets cannot be controlled by the central bank. In view of these considerations, any monetary policy strategy along the lines advocated by Neumann and Weigand would rest on a very uncertain foundation. Furthermore, our analyses show that, in contrast to the empirical findings of Neumann and Weigand, a stable demand for money as embodied in M3 can still be identified.

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Uhrig, Marliese and Walter, Ulrich
"A New Approach for Determining the Term Structure of Interest Rates Theory and Empirical Results for the German Bond Market"

In this paper we introduce a two-step procedure for the estimation of the term structure of interest rates. In the first step we use a quadratic-linear programming approach in order to determine a discrete discount function. If higher standards are demanded, e. g. a term structure which is several times continuously differentiable, we approximate the corresponding discrete term structure in a second step with splines. Subsequent to a discussion of the procedure, the proposed method is applied within an empirical study for the German market for the sample period 1980 through 1993. The empirical results emphasize the explanatory power of the proposed method. In particular, an out-of-the-sample test proofs the high quality of the method for pricing new issues.

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Reports

Kaufmann, Friedrich
"Special Phenomenons in the Financing of Small and Medium-Sized Business - A Survey of Problems"

Compared with bigger companies, small and medium-sized business are facing special financing phenomenons and constraints. The main characteristics of their loan-financing schemes are higher transaction costs per unit of capital employed and the wide-spread main-bank principle. This poses the danger of dependence, but also helps overcome information asymmetries. More unfavourable is the situation in respect of financing by genuine venture capital. A lack in the willingness to disclose, big information problems, an inappropriate taxation-law framework and the market risk aversion of banks and investors form impediments to lively stock-exchange trading. The key problem small and medium-sized business face in raising venture capital is in obtaining rates of return on capital invested that are commensurate with the higher risks they bear.

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