KREDIT und KAPITAL - Issue 4/1983


Contents


Articles

Nölling, Wilhelm
Internationale Verschuldung - Wege aus der Krise

Pohl, Rüdiger
Nicht-neutrale Inflation

Allsbrock, Odgen O. Jr. and Gilliam, Kenneth, P.
An Industrial Interpretation of Inflationary Unemployment

Sinn, Hans Werner
Pro und contra Crowding-Out. Zur Stichhaltigkeit dreier populärer Argumente

Borchert, Werner
Einige außenwirtschaftliche Aspekte staatlicher Verschuldung

Langfeld, Enno
Kann eine monetäre Schätzgleichung zur Verbesserung der Konjunkturprognosen beitragen? Erwiderung zum Beitrag von Charles C. Roberts

Hesberg, Dieter
Risikovorsorge durch Kreditausfall- und Zinsänderungsrückstellungen im Jahresabschluß von Banken

Neldner, Manfred
Portfoliostruktur der Geschäftsbanken und Geldumlaufgeschwindigkeit. Der empirische Befund für die Bundesrepublik Deutschland


Reports

Von Rosen, Rüdiger
Gedämpfter Optimismus aus der IWF-Jahresversammlung 1983


Book Reviews

Woytanowskyj, S. and Judt, E and Wagner, M.
Marketing der Konsumenten-Kredite
(Erich Priewasser)

Klein, Ernst
Deutsche Bankengeschichte von den Anfängen bis zum Ende des Alten Reiches (1806)
(Jürgen Maura)

Von Bonin, Konrad
Zentralbanken zwischen funktioneller Unabhängigkeit und politischer Autonomie. Dargestellt an der Bank von England, der Bank von Frankreich und der Deutschen Bundesbank
(Rolf Caesar)


Handwörterbuch der Wirtschaftswissenschaft
(Manfred Piel)


Summaries

Nölling, Wilhelm
„International Debt - Ways Out of the Crisis“

The efforts made so far to overcome the international debt crisis have been characterized by a large number of pragmatic ad hoc measures which were able to prevent the worst. It is doubtful, however, whether the crisis can be mastered in this way. A prerequisite for this would be the relieving effects of a revitalization of the world economy, the occurrence of which is uncertain. The currently discussed alternative solutions, which can be classified into three basic types, must be seen against this background of feared inadequate economic growth. In the case of the internal banking solution, the banks are expected to adopt pure banking approaches which call for helping out with new credits in the event of payment difficulties and for writing off old credits in the event of insolvency. The problems of this solution lie in the fact that more allowance for losses would be needed than can be coped with without spectacular bank failures, since at the present time probably every country that has defaulted ought to be declared at least partially insolvent. The conversion solutions set out to diminish the burden on the banks systematically against the writing down of problematical old debts by interposing conversion agencies, in order to make room again in the balance sheets for "traditional transactions" in the international sphere. The endeavours to find a comprehensive solution, however, have already demonstrated the danger of substantial losses of outstanding debts, which should dissuade the banks from new credit business. Furthermore, this approach involves considerable capital needs. Moreover, disincentive effects for the debtor countries cannot be excluded. In the case of the solution with supplies of liquidity, the object is to restore the debt-servicing capacity of the problem countries less by debt conversion and adjustment than by expansion. This approach is problematical, above all for political reasons, since the industrial countries will probably not agree either to money creation in favour of the developing countries or to an increase in development aid. It follows then that continuation of the current pragmatic crisis management does not appear unreasonable, if the procedure is augmented by objective-consonant supplies of liquidity. The decisive factor for the success of all efforts, however, remains the enduring revitalization of the economy.

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Pohl, Rüdiger
„Non-neutral Inflation“

Inflation theory recognizes that in the equilibrium of a stationary economy the inflation rate and the money supply growth rate are equal. This relationship, however, does not constitute an inflation theory, for it does not exclude the case of the money supply growth rate, and hence the price-change rate, being zero or negative. The central problem of inflation theory consists in demonstrating why the money supply growth rate, and hence the inflation rate, is positive. In the "new classical macroeconomics", inflation has no effect, i.e. it is neutral. Since therefore all price-change rates have identical real effects, the central problem of inflation theory remains unsolved. For the monetary authorities there is no reason to give a positive rate of change in the price level preference over a zero or negative rate. In contrast, in this essay models with non-neutral inflation (under rational expectations) are examined with respect to how far they give access to the central problem of inflation theory. If inflation has real effects, this may induce the monetary authorities to prefer certain price level change rates to others account of the implied real effects. It proves, however, that many macroeconomic models which offer substantiating arguments for the real effects of an inflation are nevertheless evidently unsuitable for solving the central problem of inflation theory. In some models the optimal inflation rate is zero, in others an optimum presupposes only stabilization of the inflation rate (at any level). However, one model is discussed, in which autonomous wage and price fixing is included, which exerts an effect on the aggregated wage and price level. In this model, the optimal price level change rate is positive.

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Allsbrock, Odgen O. Jr. and Gilliam, Kenneth, P.
„An Industrial Interpretation of Inflationary Unemployment“

This paper advances the hypothesis that recurring business cycles may spawn increasingly severe phases of concurrent inflation and recession. The model employed is the Keynes-Hicks-Hansen-Smith paradigm. By including the pricing and output behavior of firms which become gradually more monopolistically competitive as business cycles unfold, a case is made for increasingly severe output restriction, via advertising, and subsequently increasingly higher price levels during successive recessions. Evidence now exists that this hypothesis is tenable. In one study, the average surviving firm during recession gained approximately half a percent of market share compared to more than double that for a surviving firm which increased advertising costs by 28 % or more.

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Sinn, Hans Werner
“Pro and Contra Crowding Out - On the Soundness of Three Popular Arguments”

Three assertions repeatedly brought forward to demonstrate the inefficiency of Keynesian demand policy are criticized in this essay. The first is that demand policy to combat the current recession is ineffective because adequate supply is lacking. This argument fails to appreciate that voluntary underemployment must be demand induced if, as would seem to be the actual case in the Federal Republic of Germany, the trend of the real wage rate does not lie above that obtaining prior to the recession. The second argument is that credit-financed spending programmes are less suitable for stimulating economic activity than such programmes financed by tax increases, because credit financing imposes a greater burden on the capital markets. This assertion presupposes implicitly a wealth-dependent demand for money, which lacks all empirical and theoretical justification. Without any wealth-dependence of the demand for money, both measures are on a par with each other with respect to crowding out private investments. Lastly it is argued that under flexible exchange rates and perfect international capital movements, government demand policy would be completely offset by counteracting exchange rate changes. The problem with this predication is that it can apply only if non-speculative exchange rate expectations are assumed in addition. Under the conventional assumption of speculative exchange rate expectations, Keynesian demand policy remains effective despite perfect capital mobility.

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Borchert, Werner
“Some International Economic Aspects of Public Debt”

The economic policy debate in recent times has centred around investment volume, public expenditures and the balance of payments. While people are generally aware of the interdependent relationship between investment activity and government activity, the global relationship between public spending and the balance of payments is regularly underestimated or not registered at all. This article therefore concentrates on the examination of this relationship. Public expenditures are financed by way of taxes, credits or securities. Each of these forms of financing has a quite specific influence on the liquidity of an economy and on the interest level, and via the latter also on the balance of payments. This has an impact not only on the interest-dependent, short-term (but also long-term) capital movements, but also, via the capital account, on the current account, and finally via current account on the national income. But public expenditures can also be financed by borrowing abroad. Such foreign credits have similar effects on the balance of payments as borrowing at home. Particularly in recent years, all these effects have influenced the behaviour of private economic entities so that for the liquidity policy of an economy it is of decisive importance to adjust to such effects on behaviour. For monetary policy this then means that at the present time not only quantitative, but especially qualitative objectives must pursued.

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Hesberg, Dieter
“Risk Safeguards by Way of Reserves for Credit Losses and Interest Rate Changes”

The only sight restriction of the permissibility of undisclosed reserves provided for in the first proposal of the EC Commission for a banking guideline gives occasion to examine the forms of special risk safeguards in banking and the possible manner of showing them in the accounts. The credit loss and interest rate risks that have to be offset over long periods and are of a significant magnitude for banks are currently taken into account by more or less overall allowances in the determination and application of surpluses; in conventional financial statements of banks they are not shown in a manner in keeping with their importance. Reserves for credit losses and interest-rate risks are therefore proposed. Their allocation and withdrawal can be effected in a risk-consonant, objective-oriented manner with standardized specifications which prelude individual, subjective-judgment. Appropriate rules enable function-dependent risk safeguards, the presentation of which in the annual financial statement combines aspects of both and dynamic balance-sheet theory.

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Neldner, Manfred
„Portfolio Structure of Commercial Banks and the Velocity of the Circulation of Money - The Empirical Findings for the Federal Republic of Germany“

Nowadays the quantity of money serves predominantly as an intermediate objective magnitude for monetary policy. Other potential intermediate objective magnitudes such as the volume of bank credit, however, are given only marginal consideration, although it has often been asserted that that portion of the money supply which is put into circulation in the course of granting bank credits influences economic activity far more than the portion deriving from, say, sales of securities by banks. The extent to which the portfolio structure of the banking sector actually influences the development of production and income is investigated statistically with a simple model approach. The question is examined of whether the velocity of circulation increases when banks expand the credits granted in proportion to their security holdings, and whether it decreases when the portfolio structure is shifted in favour of security holdings. A study based on the period from 1968 to 1980 shows that the manner in which money is brought into circulation is by no means insignificant for the course of economic activity. True, the intensity of the impact of the portfolio structure effect appears to vary considerably over time. But at latest from the second third of the nineteen-seventies onwards, the relationship between the changes in portfolio structure and those in the velocity of circulation are so marked, that in the future a rational monetary policy will hardly be able to get along without paying more attention than hitherto to the assets side of bank balance sheets.

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Reports

Von Rosen, Rüdiger
„Moderate Optimism at the ‘83 IMF-Annual Meeting“

At the centre of this year's annual meeting of the International Monetary Fund and the World Bank were discussions on the world economic situation, the international debt situation, the future policy of the IMF under the "enlarged access", the refinancing of that credit facility and the lending programmes of the World Bank Group. Although solving the urgent refinancing questions was ultimately not possible, mainly because of their protracted treatment in the U.S. Congress and differing American ideas, the other member countries were able to reach wide-ranging agreement on previously diverging positions in all areas. The package of loans arranged by commercial banks and governments in favour of Brazil is probably one of the annual meeting's most important events of immediate significance. Together with the economic recovery under way in several industrial countries and the improving external situation of many developing countries, it contributed much to the moderately optimistic conclusion of the annual meeting.

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