Strukturelle Fehlentwicklungen in der Wirtschaft der Bundesrepublik Deutschland
Problems Of Post-Keynesian Monetary Analysis - A Contribution to the Debate Opened by Professor Thomas Mayer
Mayer on Monetarism: Comments from a British Point of View
The Microfoundations of Monetary Theory
Die optimale Transaktionskasse vom Typ M1 und M2
Das Kreditsystem der Planwirtschaften im Wandel
Bankpolitik (Helmut Lipfert)
Wirtschafts- und Sozialwissenschaftliches Institut des Deutschen Gewerkschaftsbundes GmbH: WSI-Studien zur Wirtschafts- und Sozialforschung Nr. 27 (Hermann Quester)
Strukturen und Funktionen des Marktes für Investmentzertifikate in der Bundesrepublik Deutschland (Gerd Wassenberg)
"Structural Misdevelopment in the Economy of the Federal Republic of Germany"
This contribution considers the present economic situation in Germany against the background of long-term development. The recession in 1966/67 is described as a caesura in postwar development.
Misdevelopments in income distribution, in production structure and in public finance impede recovery from the latest recession and prevent any rapid reduction of unemployment. With regard to income distribution the rise in the wage share is emphasized, and it is shown that as a result both re-employment of non-utilized capacities and creation of new jobs are hindered. The misdevelopment in production structure is considered to lie in the fact that in the Federal Republic of Germany branches of production and production methods were preserved on account of a false DM exchange rate, although they are no longer competitive internationally in view of the domestic wage level that has been reached. The high level of government borrowing in the past year - and perhaps also in the current year - was defensible and desirable from the standpoint of trade cycle and capital market policy, as private demand for credit was very low owing to the small volume of investment in industry and housing construction. Growing difficulties will be encountered, however, if private demand for credit increases again with the acceleration of economic activity and government credit needs - only a minor part of - which is due to the cyclical trend - are not reduced accordingly. Hence there is a danger that a future expansion may be slowed or stopped prematurely by rising interest rates.
"Problems Of Post-Keynesian Monetary Analysis - A Contribution to the Debate Opened by Professor Thomas Mayer"
This article relates to the survey on monetary analysis by Professor Mayer, which appeared in this journal (8/1975), and contains the following corrective and differentiating comments.
(1) In Hicks' version of IS/LM analysis there is a substitution relationship only between money and bonds. There is no substitution between real assets and either money or bonds. In Meltzer's analysis, there is substitution in all directions between money and all assets; however, financial and real assets are treated as perfect substitutes. In the Brunner/Meltzer monetary analysis, on the other hand, General and non-perfect substitution relationships are postulated between all assets in all directions. Among other things, this involves inclusion of the credit market in addition to a money market.
(2) The still open debate on the Phillips curve can be summarized in the form of 3 theses.
(a) In the short as well as the long run there is a trade-off between the inflation rate and employment.
(b) That trade-off exists only over the long run.
(c) There is neither a short-term nor a long-term trade-off (rigorous version of the "natural unemployment" thesis).
These differences reflect important differences of opinion on the role of expectations and on supply behaviour on the goods market. The more recent monetarist studies conclude that the 1st thesis must be rejected.
(3) In the Brunner/Meltzer analysis, fiscal policy plays different roles in the short run and the long run. In the short run rising government expenditures increase private production, while in the long run this "purely" fiscal effect is augmented by a - dominating - financial effect, which leads to "crowding out".
(4) According to the Keynesian view, the private sector is relatively unstable and the government is therefore regarded as the "ultimate stabilizer". The monetarist view is exactly the contrary and avers in particular that the private sector is a shock-absorbing, self-adjusting mechanism. The larger the public sector (relatively speaking), the greater is the instability it causes.
(5) Monetarist analysis prefers "small models" and does not support the view of many econometricians that all (or as many as possible) allocative details must be included in a model in order to be able to analyse aggregative phenomena. Increasing importance is being attached to adequate consideration of anticipatory reactions.
"Mayer on Monetarism: Comments from a British Point of View"
I have little to quarrel with in the substance of Mayer's paper (8/1975). However, various aspects of monetarism receive different emphasis in different countries. My comments view monetarism from a British point of view.
First, it is argued that, whatever the monetarists' judgements about the relative importance of unemployment and inflation as social problems may be, and however these judgements differ from their Keynesian opponents, there is no such difference of ethics in Britain. There is, however, a difference in analysis. The British monetarist argues that inflation is to be combatted with aggregate demand management, particularly monetary, policies, while unemployment should be tackled mainly by microeconomic policies geared to increasing the efficiency of the labor market. By way of contrast British Keynesianism has it that demand management policies should be geared to pursuing an unemployment target, while micro policies, in the form of wage and price controls, should be the principal anti-inflation weapon.
Second, because Britain is an open economy British economists must take a view about the international nature of inflationary problems. There is a distinctively monetarist viewpoint here. It sees inflation in a world of fixed exchange rates as being determined at the level of the world economy and the problem of inflation in any one national economy as being best analyzed in terms of a theory of the transmission of inflation between regions of the closed world economy. The factors that seem important in transmitting inflation between national economies are inflationary expectations formed about the behavior of the world price level and, of course, money flows transmitted through the balance of payments. Moreover the monetarist sees the key to achieving exchange rate stability as lying in the international coordination of domestic monetary policies, rather than in the institutional framework of the foreign exchange market.
"The Microfoundations of Monetary Theory"
Following an initial brief mention of some fundamental problems of micro-economic monetary theory in the introduction, it is shown how rudimentary equilibrium models of the Arrow-Debreu type are from the viewpoint of transaction theory.
Traditional equilibrium theory does not explain why there are objects in the real national income which perform the function of a medium of exchange. Consequently it also fails to explain why just a few goods are used as dominant media of exchange. Furthermore, it is completely unclear how the economic interaction of individuals is coped with in the transformation from the initial to the equilibrium allocation. The theory proceeds implicitly from the assumption that this process is of a decentralized nature as far as information is concerned, but only at the cost of assuming a non-specified perfect exchange organization, with the result that all information and co-ordination problems deriving from the interdependence of individual exchange activities are eliminated by definition. Traditional equilibrium theory further fails to explain why individuals can acquire a positive amount of a "useful" good with a unit of a good having no inherent value (paper money). The function of money as a general medium of exchange is not sufficiently well grounded in the model structure. Moreover, since the same equilibrium allocation is attainable both with and without the help of intermediate transactions, the idea suggests itself of regarding all positive intermediate transactions as functionless. Lastly, the theory gives no answer to the question why the exchange organization observed in reality came into being, because in this approach exchange is not conceived as an economic activity that requires resources, that is to say, there is no choice between different exchange organizations (transaction technologies).
Starting out from these deliberations, this essay discusses approaches which set out to modify the initial model, which is unsatisfactory from the standpoint of transaction theory. By allowing for transaction costs, exchange can be conceived as an economic activity in which the choice between various modes of exchange becomes an economically relevant decision-making problem. Transaction costs can be taken into account by the following alternative procedures: On the one hand, every individual can be assigned the dual function of consumption and exchange; on the other hand, however, the two economic activities of consumption and exchange can be isolated from each other for analysis, drawing a distinction between a household sector comprising households only and a sector consisting solely of exchange intermediaries. However, this approach seems to afford few possibilities of advancing very far beyond the initial model in the matter of the use of media of exchange. The groundwork for this is provided by another approach in which (neglecting transaction costs) the function of money as a medium of exchange can be well founded and explained in the model by the conception of exchange as bilateral interaction.
"Optimal Type M1 und M2 Transaction Cash"
For a long time now, the quantity concepts M1 and M2 have been generally accepted in both the money quantity statistics of central banks and in money supply theory. The theory of the demand for money, however, has hardly been developed at all in this respect. The essay sets out to examine a special area of the theory of demand for money, namely that of transaction cash, and to derive the demand functions for money for transaction purposes for both M, and M2.
The traditional literature on optimal determination of individual transaction cash (Baumol-Tobin) derives the optimal distribution of M2 between M1 (cash and demand deposits) and M2 - M1 (time deposits) satisfactorily, but starts out from a given stock of M2. One of the aims of the essay is to determine M2, which is interpreted as an alternative to the holding of goods by both households and firms. One important result arrived at by the study is that the demand for type M2 transaction cash is interest-inelastic and that the income elasticities differ for M1 and M2.
A second object of the study is to investigate the relationship between optimal transaction cash of types M1 and M2 and the inflation rate. Whereas in the case of inflation the demand for type A2 is inversely related to the expected inflation rate, the decrease in type M1 transaction cash results from two substitution effects: the rising cost of M1 compared to time deposits on account of the rise in the nominal interest rate and the rising cost of M1 compared to the holding of goods with a value equivalent to the expected inflation rate. This last case explains why "payment practices" (e. g. in inflationary economies) are not an "institutional" datum, but the result of economic choices.