Neuere Erfahrungen der Geldpolitik in der Bundesrepublik Deutschland
Alexander, Volbert and Loef, Hans Edi
Methoden und Probleme einer Geldmengensteuerung
Zur Theorie offener Volkswirtschaften
Jonson, Peter D.
Money, Prices and Output
Timberlake, Richard H. Jr.
Destabilizing Factors in Contemporary Monetary Policy
Roskamp, Karl W. and Tank, Frederick E.
Improvement in Economic Position through Risk-Taking
Die Random-Walk Hypothese bei Bank- und Industrieaktien
Die Budgetrechnung als Lenkungsinstrument der Geschäftsleistung einer Universalbank (Heinrich Strohauer)
Moderne Formen der Wohnungsbaufinanzierung aus bankwirtschaftlicher Sicht (Reinhold Falk)
"Recent Experience with Monetary Policy in the Federal Republic of Germany"
The "renaissance" of monetary theory and the accelerating trend of inflation, which is a threat to our liberal social order itself, have brought monetary policy back into the forefront of interest in the sphere of economic policy.
Since spring 1973, the change-over to floating has given the Bundesbank a broader range of action. In pursuing this policy, the Bundesbank has gone new ways to some extent. But it would undoubtedly be going too far to speak of a "new" policy, for the ultimate goals and the instruments of its policy have remained the same.
Under the changed conditions brought by floating, the Bundesbank was able to reduce the free liquidity reserves of the banks to a point approaching zero. This was necessary in order to make it clear to the banks, who assess their liquidity primarily from the business standpoint, where the macroeconomic limits to their latitude for expansion lie. Thereafter, however, the Bundesbank allowed the reformation of free liquidity reserves to stimulate the process of money creation.
An experiment venturing into terra nova is the formulation of a target for the quantity of money, which was published for the first time in December 1974. The object of setting a target is to define the limits set by stabilization policy for creation of money and induce more rationality in economic policy decisions. Even with this sort of target formulation, monetary policy cannot ignore the cyclical situation, but now it attaches more weight to the medium-run aspect with the intention of achieving greater constancy of economic development in this way.
The choice of the quantity of central bank money as the target magnitude was made in accordance with analytical and empirical expedience, and not the least of the reasons that made that choice seem obvious was the fact that is the point where money creation by the central bank and money creation by the banks meet. As an indicator, therefore, it signals not the impulses of monetary policy (as is attempted elsewhere with the monetary base), but the effected monetary expansion. Notions of the monetary base conception cannot readily be applied to the control of central bank money, because they do not reflect accurately the special responsibility of the central bank for the monetary and banking system, at least under the prevailing conditions in the Federal Republic of Germany.
Alexander, Volbert and Loef, Hans Edi
"Methods and Problems of Controlling the Quantity of Money - Empirical Simulation Tests for the Federal Republic of Germany"
The influence of the quantity of money on macroeconomic magnitudes is of relevance for the central bank with regard to monetary policy only if it can control the quantity of money. Control of the monetary base alone is not enough; on the contrary, the money quantity multiplier must either be constant or accurately forecastable. Since the m1 multiplier for the Federal Republic of Germany was by no means constant over time, this study attempts, among other things, to forecast the trend of the multiplier. The approach adopted in the study is the multiplier forecasting method proposed by Burger, Kalish and Babb. Different explanatory factors are tested to determine their influence. Since, moreover, the Bundesbank is unable to exercise precise control of the monetary base, alternative, but more effectively controllable magnitudes (liberated reserves LIZ and s o-called controllable monetary base BC) are also taken into account. For monthly values, the analysis shows that forecasts of the multipliers give values in respect of LR and BC which are useless for controlling M. There remains only control with the help of the monetary base. The forecast results relating to the multiplier concerned admit of control of the quantity of money by the Bundesbank with some limitations. It proves that interest values make no significant contribution to the forecast, and that past multiplier values give the best results. Here, as in the case of monetary base control, the most important disturbing factor is the external factor. The upshot is that to a great extent precise control of the quantity of money would have been possible from 1956 to 1967. Although from 1968 onwards accuracy of control diminished, an appropriate monetary policy would nevertheless not have been impossible in this period (up to 1973).
A switch to quarterly values considerably improves the possibility of controlling the quantity of money, but in this case, too, the adverse influence of the external component is noticeable. The adoption of largely flexible exchange rates and possible intensified use of quantity-controlling instruments of monetary policy by the Bundesbank can be expected to bring more exact control of the quantity of money.
"On the Theory of Open Economies - A revised model for macroeconomic analysis"
Scientific debate on the implications of flexible exchange is currently based almost exclusively on a model that is open to a number of weighty objections. Those objections are good reason to correct that model by way of amendment of the model's specification of the demand function and by expanding the model by adding an additional market equation. Departing from the standard model, the revised model implies that (1) changes in the real value of securities and/or money assets held in foreign countries by residents act via changes in the real value of the money assets of economic units and exert immediate effects on the demand for money, commodities, securities and forms of investment in money assets, and that the various forms of investment in money assets must be regarded as substitutes, (2) the securities and money assets held abroad - in contrast to a situation with fixed exchange rates and perfectly free international capital movements - cannot be considered perfect substitutes because they involve varying risks, and (3) for the dispositions of economic units with respect to their assets, at least in the long run, it is not the nominal rate of interest on money investments that is relevant, but the real interest rate on such investments.
The revised model results in international capital movements being viewed in a different light. Those capital movements reflect adjustments of stocks of assets to a new equilibrium with finite equilibrium stocks. The process of adjustment of asset stocks is effected not only via interest rate changes, but also via changes in the real value of the stocks of money assets.
The "revised model" can also form the framework for analysis of other macroeconomic questions, too. For instance, employment conditions and wages can be taken into account by including the labour market, and the effects of changes in exogenous variables on employment and price level, wages, interest rates and exchange rates can be analysed. By adding hypotheses concerning the formation of expectations by economic entities relating to the trend of prices, wages, exchange rates, etc., the system can also be analysed with respect to its dynamic qualities, and the time profiles of the effects of stabilization policy measures can be investigated.
In my view, the revised model is more efficient than the corresponding Keynesian models and permits more thorough discussion of new experience with flexible exchange rates.
Jonson, Peter D.
"Money, Prices and Output: An Integrative Essay"
This essay aims to put some recent developments in monetary economics into perspective by drawing out what we have learnt - or relearnt - from them about the structure of the economic system. Following a very brief historical overview the methodology of much recent analysis is illustrated by presenting a very simple one good, one asset model designed to illuminate one or two important relationships. The way in which the simple model provides suggestions about relationships in larger, more complicated, and presumably more realistic models is shown. The basic insights about the role of money in the economic system given by this class of model have been tested, and appear to be quite robust. Rigorous testing of economic theory of the sort discussed is a time consuming and expensive business, however, and the essay discusses an alternative way in which the basic insights of modern monetary theory can be applied. The two good one asset model used in quite a bit of recent theoretical writing is introduced, and used to analyze an important policy problem, the shifting trade-off between inflation and unemployment.
Timberlake, Richard H. Jr.
"Destabilizing Factors in Contemporary Monetary Policy"
This paper reviews the contemporary history of monetary policy in the United States. Official statements by the Chairmen and the Board of Governors of the Federal Reserve System are used as primary source material. These statements reflect certain theoretical precepts and principles, and attempt to justify the policy actions taken by the Federal Reserve during the ten-year period, 1964 - 1974. Federal Reserve policies and the principles supporting them are subjected to critical analysis in this paper, with the purpose of determining how the relatively stable monetary economy of the early 1960s became the unstable economy of the early 1970s.
It was found that political factors weighed heavily in determining central bank actions, and that appropriate economic arguments were then adduced to rationalize the policies taken. The controversy over "money market indicators"(-interest rates) versus "the Aggregates" (monetary stocks) as guides to policy is a significant reflection of this pattern of central bank behavior. The compatibility of an easy money policy with the wage-price freeze of August 15, 1971 is another example of political domination of monetary policy.
Other subsidiary principles of Federal Reserve policy are also examined for their destabilizing influences. The most serious indictment of these policies lies in the fact that the Federal Reserve made inflation control by monetary means look difficult, if not impossible, and thus encouraged ubiquitous interventions by the federal government that continue to hamper economic productivity and jeopardize economic freedoms in other sectors of the economy.
Roskamp, Karl W. and Tank, Frederick E.
"Improvement in Economic Position through Risk-Taking: An Attempt to Map Intertemporal Risk-Consumption"
In this paper the possibility of overcoming an initial lack of sufficient economic assets through increased willingness to take risk (lower risk-aversion), is investigated.
Compared are the situations of two investors, one of them possessing large, the other small economic assets. Both are risk-averters. In the computer model it is assumed that both investors can make their asset choices from the same opportunity set of m securities, which contains low as well as high risk securities. In each investment period optimal portfolios are selected. The condition is, however, that the investors have to egress after n investment periods from the security markets with assets equal to their initial ones. Because there is no net accumulation, the income streams emanating from the two portfolios result in differences in consumption levels. Inter-temporal consumption is a function of risk-aversion only. There are thus inter-temporal risk-consumption frontiers. These were computed in a simulation process and they were mapped in diagram 1.
The conclusion of this study is that the possibility to compensate in a competitive world for a difference in initial wealth through increased risk-taking - a degree of freedom the less-wealthy has to improve his lot - is limited. The larger the wealth differential, the smaller the chance to catch up. This will be all the more so if the per unit investment cost (transaction cost, cost of obtaining information, etc.) which was assumed to be the same in this study, is higher for the small than the large investor. Finally, catching up becomes will-nigh impossible if with increased wealth goes, pari passu, a decreased risk-aversion, the rich man taking more risk because he can afford it.
"The Random Walk Hypothesis for Bank and Industrial Shares"
The object of the article is a twofold one: First, for 50 frequently traded shares the random walk hypothesis is repudiated with the help of the run test and by estimation of autocorrelation coefficients. Secondly, by applying cluster analysis it is shown that the shares of German banks differ clearly from those of other companies with respect to the randomness of price fluctuations. By examining the characteristics in which banks differ from industrial firms, the author comes to the conclusion that banks can, and actually do, exploit their position on the German money and capital market to influence the price trend of their own shares.
This established influence potential can be utilized by the banks also to influence other securities - though with slight or temporally limited motivation. Hence it may be concluded that one cause for the lack of efficiency of German stock exchanges lies in the position of the banks.