Contents

Articles

*De Haan, Jakob and Zelhorst, Dick
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Financial Deregulation and the Stability of the Demand for Money in Australia

*Fischer, Andreas M. and Maurer, Martin
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Are Preliminary Monetary Announcements in Switzerland Rational?

*Schempp, Ulrich
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Gestaltungsmerkmale einer erfolgsversprechenden Devisenmarktspaltung

*Büchel, Helmut
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Eine exakte und geschlossene Bewertungsformel für geometrische Average-Rate Optionen

*Stehle, Richard and Hartmond, Anette
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Durchschnittsrenditen deutscher Aktien 1954 -1988

* Bomhoff, Eduard J. *

Currency Convertibility: When and How? A Contribution to the Bulgarian Debate

* Raffelhüschen, Bernd
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Anreizwirkungen des Systems der sozialen Alterssicherung. Eine dynamische Simulationsanalyse (Jochen Michaelis)

*Bieta, Volker
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"Economic Policies with Asymmetric Information as a Result of the "Incentive" Structure of a Policy- Making Body; Economic Guidance by "Pooling Equilibria" or "Separating Equilibria" "

Game theory methods have increasingly been accepted in economic theory analysis in recent years. Special attention has in this context been paid to the evaluation of the economic policies in a Barro-Gordon economy using both simple repetitive game methods and considering various information structures. Assuming the existence of an asymmetric information structure, the present variant of the Barro-Gordon model shows for a central bank in a game situation and for a centralized private sector to what extent the "incentive" structure of economic policy- making bodies permits the economy to be guided through special types of equilibria in "signalling games".

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*De Haan, Jakob and Zelhorst, Dick
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"Financial Deregulation and the Stability of the Demand for Money in Australia"

A common feature of most studies on the demand or money is that a long-run equilibrium money demand function is presumed beforehand. Recently, however, there has been a shift from presuming this relationship towards searching for it by testing whether monetary aggregates are cointegrated with key macroeconomic variables like GDP and the interest rate. In this paper we examine for the case of Australia of M1 and M3 are cointegrated with these macroeconomic variables. It turns out that for the sample period 1960.1-1989.2 neither M1 nor M3 is cointegrated with key macroeconomic variables. However, in the period 1960.1-1983.4 - i.e. before various deregulation measures took place - there is evidence suggesting that M3 was cointegrated with real GDP and the interest rate.

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*Fischer, Andreas M. and Maurer, Martin
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"Are Preliminary Monetary Announcements in Switzerland Rational?

Several hypotheses regarding the information content of preliminary M1, M2 and M3 estimates are examined for Switzerland. Our tests are unable to reject the rational forecast hypothesis for the preliminary M1 figures. Both the errors-in-variables and rational forecast hypotheses are rejected for the preliminary figures of M2 and m3, suggesting that these estimates are inefficient. Seasonal factors, long-term interest rates and exchange rates are found to be leading indicator for M2 and M3 revisions.

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*Schempp, Ulrich
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"Arrangement Characteristics of a Promising Split in the Foreign Exchange Market"

Up to now, split foreign exchange markets have been understood in German- language literature as a control system rather than an exchange rate arrangement. Dual exchange rates produce interesting perspectives when they are correctly organized and managed.

The amount of control necessary can be kept down to a reasonable level, and this is precisely what can avoid the danger of a black market. Reserved control however presupposes that the intervention policy of the Central Bank makes use of the chances resulting from the existence of two foreign exchange markets. The monetary system can then be secured against speculative interference, and the autonomy of the monetary policy increase.

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Büchel, Helmut
"Geometric Average- Rate Options An Exact Closed- End Evaluation Formula"
This contribution seeks to evaluate geometric average-rate options. It develops a closed-end evaluation formula, easy to programme, which differs significantly from the formula published by Kemna and Vorst in 1990. It turns out, among other things, that the variance of the geometric average rate is a quadratic function of the residual lifetime of the option, when a constant rate of variances is assumed for the rate of the underlyings. If the period at the base of the geometric average is reduced to one day, the resultant special cases represent the classis formulae for European options.

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*Stehle, Richard and Hartmond, Anette
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"Average Yields Recorded for German Shares between 1854 and 1988"

In the period 1954/ end- 1988, noticeably higher average yields were recorded for capital invested in German shares compared with capital invested in fixed-interest securities, especially when taxes and inflation are included. Consequently, it would not at all be justified to speak about a "paradox of yield". For the USA, similar results have been observed for a considerably longer period if time. A comparison of investment made in the aforementioned period 1954/ 1988 shows that the yield of the German shares was better on average that that on the Us shares.

The analysis shows that the results vary widely depending on the choice of the shares , the investment strategy employed and on the period under review. The assumptions that are feasible in these respects are discussed in detail. Those assumptions are of fundamental importance also for forecasts of future yields; the resultant estimates concerning long-term average yields in future are between 8 % and 12 %.

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"Currency Convertibility: When and How?"

In this paper I list the traditional advantages of currency convertibility with special emphasis on the point that liberalization of international trade will help to adjust domestic relative prices to their correct world values. This is especially important for the formerly socialist countries in Central and Eastern Europe, because of their history of subsidization of inputs, consumer products, and energy. The introduction of Western-style accounting concepts also requires useful relative prices: the paper argues that political pressures in favour of continuation of subsidies will be easier to overcome if a convertible currency forces domestic relative prices to adjust to international standards.

After discussion of a number of possible scenarios for currency convertibility, including Professor Meltzer's suggestion to follow the Hong Kong example of 100 % international reserve backing for the domestic money, I conclude the paper with a plea for full convertibility on current account, combined with the targeting of some domestic nominal magnitude. In the first stage, domestic wages might be the most appropriate target, to be replaced by nominal income or inflation when the income velocity of money has stabilized sufficiently to make monetary targeting feasible.

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