Contents

Articles

*Woll, Artus and Faulwasser, Bernd and Ramb, Bernd-Thomas
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Zur Zeitstabilität des Phillips-Theorems

*Jarchow, Hans-Joachim and Möller, Herbert
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Geldbasiskonzepte und Geldmenge (II)

*Friedman, Benjamin M.
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The Theoretical Nondebate About Monetarism

*Frowen, Stephen F. and Arestis, Philip
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The Dynamic Impacts of Government Expenditure and the Monetary Base of Aggregate Income: The West German Case, 1965 to 1974

*Jüttner, D. J. P and Bird, R. G.
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Financing Problems on Small Firms in the Manufactoring Sector: The Australian Case.

*Judt, Ewald
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Public Relations der Kreditinstitute

*Jüttner, Heinrich
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Förderung und Schutz deutscher Direktinvestitionen in Entwicklungsländern (Albrecht Weber)

*Kracht, Peter J.
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Die Geldnachfrage der Produktionsunternehmen - Theoretische und empirische Überprüfung ausgewählter Hypothesen über die Bestimmungsfaktoren der Geldnachfrage (Hans-Hermann Francke)

*Roth, Jürgen
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Der internationale Konjunkturzusammenhang bei flexiblen Wechselkursen (Hartmut Rudloff)

*Woll, Artus and Faulwasser, Bernd and Ramb, Bernd-Thomas
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"The Temporal Stability of the Phillips Theorem"

The question of whether the Phillips theorem exhibits a stable trade-off between the economic policy objective of full employment and price level stability is the subject of theoretical and empirical debate. Available empirical appraisals of theoretical positions deliver contradictory results. Above all, they are not in a position to carry out a systematic study of the stability of the implied relationships. To remedy this defect, in this article the stability of Phillips relations is tested with the help of the econometric "moving sub-period" method.

The "moving subperiod method" sets out from the assumption that the choice of the observation period has a substantial influence on the results of empirical tests. In order to check systematically in what subperiods significant and stable relations exist, the entire period under study is covered with overlapping subperiods for each of which the regression estimate is calculated individually. From the trend of the resulting correlation coefficients it is possible to read off when the explanatory content of the relations is significant and stable.

With the help of this method - on the basis of quarterly data - the Phillips theorem is tested for the Federal Republic of Germany in the period from 1953 to 1974. Various labour market aggregates and price expectations are used as explanatory variable of the inflation rate. From the two groups of exogenous variables, characteristic paths of the explanatory relationships are selected and compared.

The results show that no explanatory magnitude has a permanent, stable and unequivocal relation to the inflation rate. Particularly for the relationship between underemployment and inflation, there is no stable trade-off overtime. This objective conflict, therefore - despite all incantations - cannot serve as a basis for politically rational action.

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*Jarchow, Hans-Joachim and Möller, Herbert
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"Monetary Base Concepts and the Quantity of Money (II.)"

The second part of our studies centred around the econometric testing of the hypotheses arrived at in the first part on the basis of the theoretical relationships. We worked with a two-equation model, using, monthly and quarterly data for the Federal Republic of Germany from January 1965 to January 1973. Apart from the fact that plausible values were obtained for the income and interest elasticity of the demand for money - as a by-product, so to speak - we were able to demonstrate some important theoretical differences for alternative money supply functions, depending on whether the concept of the monetary base (Bm), the adjusted base (B') or the extended base (Be) is regarded as exogenously determined. For example, we were able to show that the money supply multipliers respond to changes in the loan rate and bank rate relatively insensitively when Be is used and relatively sensitively when B' is used. This also partly explains the fact that changes in Be have a comparatively marked effect on the trend of the quantity of money and exert a dominating influence on it. When applying B' and Bm, on the other hand, we found a strong absorption effect acting via the interest rate and resulting in the rate of change in the quantity of money remaining significantly smaller than the rate of change in the monetary base after conclusion of the adaption process. Hence it is also not surprising that the influence of the income trend via the demand for money has a substantially greater effect on the trend of the quantity of money when using B' and Bm than when Be is taken as the exogenously controlled magnitude. Lastly, on the basis of the estimates, it proved that for all three monetary base concepts the adjustment processes were completed on average after about 12 months, but exhibited different time profiles. While the main effect of a change in the extended base Be is exerted within mine months, that of the adjusted base B' is concluded earlier. In the case of B', an initial monetarization effect can be distinguished clearly from an ensuing credit-granting effect.

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*Friedman, Benjamin M.
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"The Theoretical Nondebate about Monetarism"

The distinction between empirical propositions and theoretical ones is essentially important in making an assessment of the monetarist debate. As key participants in the debate have progressively elaborated exactly what they think on particular questions, it has become increasingly clear that the distinguishing content of monetarism is a set of empirical propositions. Those lessons which economists have thus far learned and accepted from monetarism, as well as those questions which remain in dispute, all concern primarily empirical issues.

Of Thomas Mayer's twelve characteristically monetarist propositions, eleven are clearly either empirical or preferential in their distinguishing content. The twelfth, "the monetarist model of the transmission process," combines essentially empirical issues which are in dispute (the stability of the demand-for-money relationship, and the relative degree of measurement difficulty associated with money versus interest rates) and theoretical issues which, on close inspection, are not in dispute (the range of assets for which the net excess demand responds to changes in the public's holdings of money balances, and reliance on asset Stock effects and relative price effects). Indeed, the transmission mechanism, or structural model, specified in Brunner's and Meltzer's "monetarist model" is essentially indistinguishable from that specified in Tobin's "Keynesian" model.

The net impact of many years of theoretical contributions on both sides of the monetarist debate has been to clarify the issues sufficiently to demonstrate that there is actually but little theoretical disagreement. The content of the debate has been empirical all along and remains empirical.

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*Frowen, Stephen F. and Arestis, Philip
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"The Dynamic Impacts of Government Expenditure and the Monetary Base on Aggregate Income: The West German Case"

This paper deals with the dynamic impacts of government expenditure and the monetary base on Aggregate income; thus some light is thrown on the dynamic paths through which these instruments of economic policy affect the economy in the short run.

A simple dynamic macroeconomic model is developed with the money supply being endogenously determined by a short-term rate of interest, the discount rate and the monetary base. The short-term rate of interest is determined by the supply of and demand for money, the latter being a function of the level of income, short-term interest rates and the lagged money stock. The short-term interest rate is assumed to influence the long-term rate via a stable term structure of interest rates. The model further assumes that the level of both construction investment and fixed capital formation is influenced by the long-term interest rate, whereas consumption expenditure is a function of the money stock.

The empirical performance of this model is sufficiently satisfactory to obtain a fundamental dynamic equation - which is found to be stable - from which the time paths of the effects of changes in government expenditure and the monetary base on the gross national product are derived. With the exception of the first two quarters, the effect of changes in the monetary base on the gross national product is stronger than that of changes in government expenditure. The latter, though, has a more immediate impact which, however, is dispersed with far greater speed than that of the monetary base.

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*Judt, Ewald
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"Public Relations of Banks (Literature survey)"

This survey of literature sets out to present an overview of the most important publications on the public relations of banks. As there is a vast number of publications on this subject, this article can only cover a selection, mainly from the German literature.

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