Frowen, Stephen F. and Kouris, George
The Existence of a World Demand for Money Function: Preliminary Results
Weltinflation bei flexiblen Wechselkursen
Einwände gegen die Wirksamkeit der Fiskalpolitik. Ein Beitrag zur Kontroverse zwischen Keynesianern und Monetaristen
Über die Unmöglichkeit einer monetaristischen Geldpolitik
Verwässerungsschutzklauseln bei Wandelschuldverschreibungen
Von Rosen, Rüdiger
Die Rolle des Internationalen Währungsfonds nach der Teilreform des Währungssystems
Geldmenge und Mindestreserven Aktiven und Passiven als Bemessungsgrundlage?
Deutscher Bundestag: Wissenschaftliche Dienste (Hrsg.)
Wirtschaftsordnungsdebatte in der Bundesrepublik Deutschland Auswahlbibliographie -
Läufer, K. A. und Von Lucius, W. D. und Richter, P.
Ökonometrie des Zinssatzes
Frowen, Stephen F. and Kouris, George
The Existence of a World Demand-for-Money Function under Fixed and Flexible Exchange Rates: Preliminary Results
At a national level a demand-for-money function can be used as a guideline for the effectiveness of monetary policy. Once a quantitative relationship between money stock, income and the interest rate is established, then we can assess the contractionary effect of interest rate increases on money cash balances as well as the necessary expansion of the money stock to given GNP increases. At an international level the pertinence of such a function is relevant only under fixed exchange rates because the currencies are freely convertible and one can virtually talk about a common currency. Although the fixed exchange rate period now belongs to the past, our study is still not of historical importance alone, since it is not unlikely that this practice might reappear in the future. Besides, so long as there are groups of countries, such as E.E.C., which aim at a monetary union at a future date the findings of this paper could be of some importance. Contrary to past studies on the same subject, aggregation remains at the national level although the application of our model relates to a group often countries. The specification adopted allows for specific shift variables which represent, in the main, heterogeneities that exist between countries. Also, the sample size is increased to several hundreds of observations which enable us to claim asymptotic properties for our parameter estimates and easy sub-division of the sample in order to test the stability of the function. Our main findings are: firstly, interest rate plays an important role in the world demand-for-money function, especially when expressed by the euro-dollar rate. Secondly, both a static and a dynamic formulation are significant, with the latter performing better. Thirdly, the stability of the world demand-for-money function over time and under fixed exchange rates is not to be taken for granted, while under flexible exchange rates it almost breaks down. This implies that world inflation cannot easily be regulated by controlling the world money supply. These results are some what in contrast to those obtained by similar studies on the world demand-for-money using merely time-series data. The significance of the interest-rate elasticity is obscured in these studies, especially in the simple static model, while the stability of the function cannot readily be tested due to lack of degrees of freedom.
Worldwide Inflation under Flexible Exchange Rates
Basically, a system of flexible exchange rates can lead to the same, a lower or a higher world inflation rate than the world inflation rate in a system of fixed exchange rates. The question examined by the article is under what special conditions is a system of flexible exchange rates more inflationary than a system of fixed exchange rates. lf a certain type of inflation theory, namely the monetary explanation of inflation, is chosen as the relevant inflation theory, the question must be formulated: under what special behaviour assumptions within the system of flexible exchange rates is the growth rate of the world quantity of money greater than in the system of fixed exchange rates. This relatively higher growth rate of the world quantity of money may result from two categories of causes. On the one hand, the system of flexible exchange rates may lead in certain countries to diminished national monetary discipline. On the other hand, acting via certain automatic mechanisms or rigidities, that system in general may produce a systematic, higher world quantity of money. In particular, three reasons for a greater inflationary tendency are examined. The first reason is the desire to reduce the rate of unemployment by way of a higher inflation rate, in so far as the central bank believes in the existence of a Phillips curve and in so far as the optimal choice on the trade-off line results in a higher inflation rate. The second reason relates to a special type of behaviour by the central bank, which pursues an interest-oriented monetary policy of such nature that it permits no reduction of the nominal interest rate as long as the real interest falls in consequence of a higher inflation rate in the rest of the world, or that it endeavours to adjust its own nominal interest rate to that of foreign countries. The third reason is a possible reduction of the desired reserves to be held during the period of transition from a system of fixed exchange rates to one of flexible exchange rates, in so far as an attempt is made to achieve that reduction by way of a higher national price-level.
Arguments against the Effectiveness of Fiscal Policy - A contribution on the controversy between Keynesians and monetarists
On the one hand this contribution emphasizes the temporary character of anticyclical fiscal policy, and on the other it deals critically with the recent arguments of the monetarists against fiscal policy, which are derived from the theory of relative prices. As far as the conventional Keynesian assessment of fiscal policy is concerned, it is evident that if the time factor is neglected, the limitations and risks of such policy are underestimated. Variations of the private and corporate income tax schedules for the purpose of influencing consumption and investment prove to be very problematical. But also purposive temporary measures to influence investment involve substantial uncertainties in terms of trade cycle policy on account of the intertemporal substitution effects and make high demands on accurate timing of the policy. The more recent monetarist thesis that the theory of relative prices contraverts the effectiveness of short-term fiscal, stabilization policy is untenable. Under realistic assumptions regarding both the make-up of anticyclical taxpolicy (including investment grants) and the structural conditions of government expenditure policy, and making allowance for the temporary character of the measures, the effects of fiscal policy according to the monetarist theory of relative prices are similar to those posited by the Keynesian impact mechanism.
On the Impossibility of a Monetarist Monetary Policy
The monetary policy concept based on neo-quantity theory includes a number of grave, theory-immanent inconsistencies which could not be eliminated even in the lively debate of recent years. Over and above this, it presupposes institutional arrangements for monetary policy and a macro-economic accounting structure which are definitely nonexistent, at least in the Federal Republic of Germany. Lastly, the neo-quantity theory campaign has been linked up to the present with front positions that are quite incomprehensible under the conditions in the Federal Republic. In this country, a counter revolution directed against one-sided fiscalism would be baying the moon, because from the end of the second world war up to 1967, German trade cycle policy was exclusively, and there after predominantly, monetary and credit policy. And the notion of stability of the private sector - provided it is not perturbed by anticyclical monetary policy -sounds even more utopian in the Federal Republic of Germany than in the U.S.A. Similarly, the only thesis of neo-quantity theory relevant to German conditions - i. e. that relating to the operating mechanism of monetary policy - cannot be accepted. The assumed money-supply process does not occur in the Federal Republic of Germany. For here the quantity of central bank money is not exogenous, not an instrument variable of the central bank, and the conventional corrections in favour of exogeneity destroy the logical relations between the so-called monetary base and the quantity of money. Furthermore, the alleged constancy of the multiplier cannot be observed any where, if due and proper measurements are made. Nor will be second pillar of the neo-quantity version of monetary policy carry the intended weight: Even a tolerably close relationship between the quantity of money - however it may be defined - and the national income cannot be demonstrated. The marked fluctuations in the velocity of money circulation cannot be explained by neo-quantity theory - and certainly defy control by monetary policy. Nota bene: Denial of the validity of the neo-quantity picture of the operating mechanism of monetary policy by no means implies denial of the effects of monetary and credit policy altogether.
Anti-Watering Clauses for Convertible Bonds
Since the 1964 issue of Siemens' convertible bonds, the terms of convertible bonds include so-called anti-watering clauses for the event of intervening capital increases. On the basis of a comparison with the economically indicated measures, the most frequent forms of protection against watering found in the terms of loans are assessed. The effects of different protective provisions on the success of investments of convertible bond holders are illustrated by the example of the 1964 Siemens' convertible bond issue. The economically indicated procedure for affording protection against watering consists in simultaneously increasing the number of shares obtainable for the convertible bond and reducing the subscription or conversion price. The full participation of the convertible bond holder in the capital increase entails systematic prejudicial treatment of the shareholders, the severity of which increases as the probability of profitable exercise of subscription or conversion rights declines. A reduction of the subscription or conversion price by the value of the subscription right entails a general worsening of the position of the convertible bondholders. Formulized reduction of the subscription price when the market share price level is higher than the subscription price results in a disadvantage for the bondholders which is even greater than in the case of a reduction of the value of the subscription right. In the case of a low market share price level compared to the subscription price, no unequivocal statement can be made regarding formulized adjustment. The systematic preference or discrimination of the bondholders in the event of participation in the capital increase or reduction of the subscription price can be eliminated by a combination of the two measures. The combination ratio depends in this case on the estimate of the value of the conversion or subscription rights. The necessity of improving protection against watering becomes evident on considering the shift of wealth in the amount of over DM 4 million at the expense of the holders of the 1964 Siemens' convertible bonds.
Von Rosen, Rüdiger
The Role of the International Monetary Fund after the Partial-Reform of the Monetary System
For some time an increasing number of voices has demanded the expansion of the International Monetary Fund with the object of enabling it to play a greater part than hitherto in the financing of existing balance-of-payments deficits, and also to exercise more far-reaching supervision functions. The report deals with three aspects of this issue:
(1) The nature and scope of the IMF' s financial activities within the frame-work of the general credit facilities and the special facilities are depicted and explained;
(2) the most important amendments to the IMF statutes are dealt with, which take effect in 1977 with respect to the exchange rate system, the role of gold and the special drawing rights, the fourth general quota increase and the temporary extension of normal facilities for drawing on the IMF;
(3) the role of the IMF in the future field of monetary policy is ventilated with regard to an expansion of balance-of-payments credits, a strict supervision of exchange rates, and the granting of credits by commercial banks and the like.
A resumée of the report shows that the IMF will probably under go a renaissance in the future and assume a stronger leadership role in world monetary policy. All the more since there is no other institution which can exert genuine pressure on the economic policy of deficit countries.