Financial Structure and Monetary Rules
The Rationality of "Rational Expectations"
Marktorganisationsbestimmte Kosten und Transaktionskosten als börsenpolitische Kategorien - Grundsätzliche Überlegungen zur Weiterentwicklung des Anlegerschutzes aus ökonomischer Sicht
Kann eine monetäre Schätzgleichung zur Verbesserung der Geldpolitik beitragen?
Roberts, Charles C.
Kann eine monetäre Schätzgleichung zur Verbesserung der Geldpolitik beitragen? - Kommentar zum Beitrag von Enno Langfeldt
Lang, Peter and Ohr, Renate
Wechselkurssystem und Philips-Kurve - Neue ökonometrisch fundierte Thesen zur aktuellen Diskussion um die "beste" Währungsordnung
Wechselkurssystem und Philips-Kurve: Erwiderung und Kommentar
Inflationary Expectations and the Demand for Money: "The Greek Experience" - A Comment and Some Different Results
Brissimis, Sophocles N. and Leventakis, John A.
Inflationary Expectations and the Demand for Money: The Greek Experience, A Comment and Some Different Results A Reply
Zum Kapitalverkehr zwischen deutschen und ausländischen Kreditinstituten
HWS Handwörterbuch der Sparkassen
Frisch, Helmut und Schwödiauer, Gerhard (Hrsg.)
The Economics of Flexible Exchange Rates
Ein ökonometrisches Modell zur Produktions- und Preiserklärung in der deutschen Industrie
Financial Structure and Monetary Rules
The structure of the American banking and financial system is changing rapidly and radically, because of new technology, institutional innovation, and deregulation. In particular, legal ceilings on deposit interest rates are disappearing, even on checking accounts. Proposals to pay interest on bank reserves at a rate indexed to the central bank discount rate, and in turn to index the discount rate to market rates, may be adopted. These changes alter the properties of the monetary system, in response both to central bank operations and to non-policy shocks. A short-hand summary is that they make the Hicksian "LM' curve very steep. Different monetary rules distribute differently, among interest rates, output, and prices, the effects of various kinds of shocks. These distributions are significantly altered when the financial structure changes. Both the desirability of structural reforms and if they are adopted, the suitability of particular rules of monetary policy depend on these alterations in the properties of the system.
The Rationality of 'Rational Expectations'
Whereas the construct "equilibrium of expectations" and the notions of "induced revisions of expectations" and "convergence of expectations" are useful in the analysis of adjustment processes, the strong form of "rational expectations" is found to be an untenable hypothesis. That anticipated changes in policy may have no effects on production is not questioned, but the explanation by hypothesizing identical interpretations of all available information on the basis of identical theories entertained by all agents and analysts is unacceptable. The auxiliary hypothesis that economic agents, public and private, can derive rational expectations from consulting statistical time series and relying on statistical averages is equally irrational.
Costs and Transaction Costs determined by Market Organization as Categories in Stock Exchange Policy
Frequently, no agreement can be reached between jurists and economists on whether and in what manner the protection of investors should be augmented. The author confronts the self-critical thesis of Hopt on the further development of the protection of investors from the legal standpoint with two economic approaches: first, the general principle of organization theory derived from the theory of property rights, which states that arrangements must always be made in such a way that transactions costs are minimized; and secondly, a stock exchange policy concept developed for the Commission of the European Communities, which calls for minimization of the costs determined by the market organization. The second approach proves suitable to help formulate the first in more concrete terms and clarify its field of application. Above all, however, it can present systematically the effects of investor-protection measures on costs determined by the market organization and thus facilitate the jurists' debate. The stock exchange policy approach leads to a reticent assessment of specific investor-protection regulations intended to give the investor direct protection against a quite specific risk, and calls for augmentation of indirect investor-protection arrangements which, as is shown in detail, have been firmly established for a long time in the stock exchange organization and in individual security trading firms.
Can a Monetary Estimating Equation Contribute to Improvement of Trade Cycle Forecasts?
The single-equation model in which changes in the money supply M 1 and the price level are used as explanatory variables responsible for changes in real domestic expenditures proved in the period from 1975 - 1981 to have a prediction accuracy superior to that of other forecasts. Particularly in phases of marked cyclical fluctuations, the model's forecasting errors are smaller. The forecasting efficiency of the model can be additionally improved by indirect allowances for weather and labour effects. Despite considerable changes in general economic conditions and despite revision of the statistical base data, the assumption that the parameters of the estimating equation remain relatively stable over time cannot be refuted.
Roberts, Charles C.
Can a Monetary Estimating Equation Contribute to Improvement of Monetary Policy? Comment on the Article by E. Langfeldt
Langfeldt determines an estimator which explains the change in the last domestic use of goods and service (price-adjusted) on the basis of the change in the money supply and the rise in prices. True, the estimator passes all the conventional econometric tests, but as the change in the target magnitude is very much dependent on the trend of the explanatory variables in the same period, the forecasting efficiency of the model cannot be much better than the prediction accuracy for the two variables (and, of course, the one [M 1] can be considered to a certain extent to be a magnitude that can be influenced by economic policy). In the light of the theoretical approach on which the model is based and in view of the fact that in the long run the circulation velocity of money tends rather to decrease, Langfeldt's model specification with a constant link-relative is difficult to interpret: For the level coefficients he arrives at a value that deviates significantly from zero and implies an autonomous growth of 31/2 %. Hardly anyone would assign such a high value to the autonomous growth forces of the West German economy for the nineteen eighties; hence the conclusion seems unavoidable that the model would rather tend to underestimate the growth-inhibiting effect of restrictive monetary policy measures. But Langfeldt's specification, too, makes it strikingly evident that the restoration of price stability by monetary restrictions has drastically negative and enduring effects on growth and employment. In this respect, Langfeldt's estimating equation can be considered a contribution to the improvement of monetary policy: as a warning against monetaristic experiments.
Lang, Peter and Ohr, Renate
Exchange Rate System and Philips Curve - New Econometrically Founded Theses to the Actual - Discussion on the "Best" Currency System
The point of departure of our study is the econometrical analysis of Carl-Ludwig Holtfrerich in Kredit und Kapital, No. 1/1982. Holtfrerich finds out that for the Federal Republic of Germany fixed exchange rates create better preconditions for a stability-oriented employment policy than flexible exchange rates. His conclusions are based on an econometric analysis which to our opinion includes some inconsistencies. Especially the fixation of the research periods from 1955 - 1969 as period of fixed exchange rates and from 1970 - 1979 as period of floating, is not economically plausible and distorts the interpretation of the dates, because they do not reflect correctly the changes in the international currency system. So it seems better to us to take the period from 1966 to 1973 (Break-down of the Bretton-Woods-System) as representative for the fixed exchange rates and the period from 1974 to 1981 as representative for the flexible exchange rates. During fixed exchange rates we ascertain a market trade-off between inflation and unemployment, whereas during the floating system no significant connection can be proved. Therefore during fixed exchange rates a reduction of unemployment is combined with higher rates of inflation than during flexible exchange rates. Our additional analysis of the "original Trade-off-trade-off shows, that during the Bretton-Woods-System increases in labour costs are joined with smaller pushes of inflation than in the recent years of floating. But this effect is compensated by the extremely strong trade-off between the development of labour costs and unemployment during fixed parities and the perfect absence of such a trade-off during flexible exchange rates. Therefore in contrast to Holtfrerich we conclude, that for the Federal Republic of Germany the conditions for a stability-oriented employment policy are better under a regime of flexible exchange rates than under fixed parities.
Exchange Rate System and Trade-off Curve: Reply and Comment
The author takes issue with the critical objections to his essay in No. 1/1982. He draws attention to the high macroeconomic costs of unemployment which have had to be paid in recent years by countries under the influence of monetaristic policy and which exceeded even the expectations of monetarists. He sees a weakness of the Philipps curve function of the monetarist type that is given preference by M. J. M. Neumann in the fact that, in contrast to the simple Philipps curve approach of the Keynesian type, it contains variables whose trends are not, or only with great difficulty, susceptible of empirical determination: the "natural unemployment rate" and the "price change expectation variable". In particular, he discusses the three questions raised by Neumann's reply: 1. When did a structural break occur on, the labour market of the Federal Republic of Germany'? 2. At what numerical value of b is the biggest trade-off between inflation and unemployment obtained? 3. How can long-term and short-term Philipps curves be identified? The author then discusses the article by P. Lang and R. Ohr: 1. the lag between import price increases and their actual impact on the domestic inflation rate; 2. the question of why 1970 was chosen as the beginning of the period of flexible exchange rates; 3. the objection to smaller degrees of freedom. In conclusion, he deals critically with the alternative estimates of Philipps curves proposed by Lang and Ohr.
Inflationary Expectations and the Demand for Money: The Greek Experience A Comment and Some Different Results
This note addresses two points in the Brissimies and Leventakis (1981) paper. First, we argue that the authors have committed a serious theoretical error in, unknowingly, identifying rational expectations with perfect foresight. We show that, under their assumptions, their results are biased and inconsistent. Second, we re-examine their conclusion that "the market for M l is segmented from the markets for either financial or real assets". A careful examination of the data and a correctly specified money demand equation support the exactly opposite hypothesis with a high degree of confidence.
Capital Movements Between German and Foreign Banks
This article emphasizes the increasing international linkages between the various national money- and capital-markets. This is due, first of all, to innovations and new procedures in international banking. Thus a special transmission channel resp. the capital movements between domestic and foreign banks are analysed. A great variety in the pattern of behaviour of the institutionally disaggregated German banks as well as in the capital-flow in time has been detected. For the purpose of a stabilized national banking system changes of bank regulations and supervision seem desirable as well as possible.