Monetary Theory and Monetary Policy: New Tracks for the 1990s

395 Pages·1993·33.865 MB·English

by  Stephen F. Frowen (eds.)

MONETARY THEORY AND MONETARY POLICY
Also edited by Stephen Frowen
BUSINESS, TIME AND THOUGHT: Selected Papers of
G. L. S. Shackle
CONTROLLING INDUSTRIAL ECONOMIES
MONETARY POLICY AND ECONOMIC ACTIVITY IN
WEST GERMANY (with A. S. Courakis and M. H. Miller)
MONETARY POLICY AND FINANCIAL INNOVATIONS IN
FIVE INDUSTRIAL COUNTRIES (with Dietmar Kath)
UNKNOWLEDGE AND CHOICE IN ECONOMICS
Monetary Theory and
Monetary Policy
New Tracks for the 1990s
Edited by
Stephen F. Frowen
formerly B11nde.~bank Professor of Monetary Economics
Free University, Berlin
©Stephen F. Frowen 1993
Softcover reprint of the hardcover 1st edition 1993
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First publisheo.l in Great Britain 199J hy
THE MACMILLAN PRESS LTD
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A catalog,ue record fur this book is available
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ISBN 978-1-349-23098-3 ISBN 978-1-349-23096-9 (eBook)
DOI 10.1007/978-1-349-23096-9
Transferred to digital printing 1998
02/780
First puhlished in the United States of America 19tH by
Scholarly and Reference Divisinn,
ST. MARTIN'S PRESS, INC.,
!75 Fifth Avenue.
New York. N.Y. 100!0
ISBN 978-0-312-09111-8
Library of Congress Cataloging-in-Puhlil'ation Dau1
Monetary tlu:ory and nwnctary policy: new tracks fi•r the 19'XIs:
edited hy Stephen F. Fruwcn.
p. WI.
lndudcs index.
ISBN 978-0-312-09111-8
!. Monetary policy. 2. Money. I. Frnwcn, Stcpht•n F.
HG230.3.M66.~ 199.~ n
·'-'2.4'6--dc20 ~4119
('JJ'
Contents
Prejilce xi
l..ist of Participants xiii
Notes on the Contrihutors XV
Introduction xxii
1 Tracks towards a Common Monetary Policl
in EurofJe 1
Norhert Klote11
1.1 Introduction
1.2 The New Committee 2
1.3 The Main Questions 3
1.4 The Strategy of an lMF and a European
Parallt~l Currency 4
1.5 A Conccptually·Bascd Approach 9
1.6 The Status of Monetary Policy in the
Transitional Stages 11
1.7 A Rigid Schedule for the Integration
Programme or a Tentative Approarh'! 12
l.R Conclusions 14
Discussant: Man.fi·etl Bore/tnt IR
2 Monetarism. Microfoundations and the Theor)· of
Monetary Policy 21
Davie/ l.aidla
.2, .1., Introduction 21
Monetary Polil'Y in the Economics of the
Ncodassical Synthesis and Mont·tarism 22
2.3 Microfoundations and the Nl'W
Monetary El:onomks 26
:!.4 Money as a Public Good 32
2.5 Conduding Comments 37
vi Contents
3 Monetarism in a World without 'Money' 43
Thomas Mayer
3.1 The Contributions of Monetarism 44
3.2 Is Money Still a Useful Measure? 44
3.3 The Behaviour of Velocity in the USA 48
3.4 Velocity in a Sample of Countries 50
3.5 Money Demand Functions 55
3.6 Implications for Monetarism 56
3.7 An Evaluation 58
3.8 Induced Financial Evolution 61
3.9 A Science-Fiction World 62
3.10 An Overdraft World 63
3.11 More Perfect Asset Markets 65
3.12 Conclusion 66
Discussant: Joseph Bisignano 71
4 The Evolution of the Banking System and the
Theory of Monetary Policy 79
Victoria Chick
4.1 Introduction 79
4.2 Stages of Banking Development 80
4.3 Institutional Change and the Theory and
Practice of Monetary Policy 84
4.4 Conclusion 91
Discussant: G. M. Ambrosi 93
s Financial Theory and Central Bank Policies 100
Marvin Goodfriend
5.1 Introduction 100
5.2 Interest Rate Smoothing 101
5.3 Financial Theory and Bank Structure 104
5.4 Emergency Credit Assistance 108
5.5 The Lender of the Last Resort 111
5.6 Summary 114
Discussant: Manfred J. M. Neumann 119
6 The Demand for Money in Japan, the United
Kingdom, West Germany and the USA: An
Empirical Study of the Evidence since 1973 123
Herbert Buscher and Stephen F. Frowen
Contents vii
6.1 Introduction 123
6.2 The Partial Adjustment Approach to the
Demand for Money 125
6.3 The Forecasting Performances of Different
Money Demand Estimates 142
6.4 Co-integration and Error-Correction
Modelling 146
6.5 Summary and Conclusions 156
Discussant: Jurgen Siebke 165
7 Money Supply, Interest Rate and Exchange Rate
Targets: Conflicting Issues in an Open Economy 171
Rudiger Pohl
7.1 Introduction 171
7.2 The Model 172
7.3 Ineffective Endogenous Monetary Policy 174
7.4 Endogenous Real Exchange Rate 177
7.5 Monetary Strategies 178
7.6 Conclusion and Outlook 184
Discussant: M. J. Artis 186
8 Credit as Intermediate Target of Monetary Policy? 188
Wolfgang File
8.1 Issues and Questions 188
8.2 Bank Credit as an (Additional?) Financial
Target or Indicator? 191
8.3 Some Empirical Relationships 198
8.4 Concluding Remarks 212
Discussant: Dietmar Kath 217
9 Monetary Theory and Policy in a Global Context
with a Large International Debt 225
Paul Davidson
9.1 Neoclassical Monetary Theory for Closed
and Open Economies 225
9.2 The Keynesian - Post Keynesian
Alternative View 229
9.3 Why the Preference for Export-Led Growth? 232
9.4 What About the International Debt Crisis? 237
IJ.5 The Orthodox Neoclassical Solution 240
viii Contents
9.6 Are Deficit Nations Living Beyond
Their Means? 242
9.7 A Modest Proposal for Avoiding Future
Debt Crises 244
9.8 Avoiding Default of the Existing Debt 245
9.9 Conclusion 254
Discussant: DeAnne Julius 259
10 Uncovered Interest Parity Condition between the
United States and Europe under Dilferent
Exchange Rate Regimes 264
Gebhard Kirchgiis.sner and Jurgen Wolters
lO. 1 Introduction 264
10.2 Theoretical Considerations 265
10.3 Econometric Methodology 268
10.4 The Data 271
10.5 Empirical Results 274
10.6 Concluding Remarks 290
Discussant: George Hatljimatheou 298
11 Monetary Policy Co-ordination in an Asymmetrical
World: Future Prospects for the USA and Europe 303
Elias Karakitsos
11.1 Introduction 303
11.2 Co-operative and Non-Co-operative Optimal
Policies under Rational Expectations 306
11.3 The Model 310
11.4 The Framework of Co-operation and
Non-Co-operation 312
11.5 The Welfare Gains/Losses under
Non-Co-operation and Co-operation 316
11.6 Conclusion 320
Discussant: flans-Eckart Scharrer 323
12 Concepts and Implications of International
Monetary Co-ordination 327
Manfred Willms
12.1 Introduction 327
Contents ix
12.2 Experiences with the Floating
Exchange-Rate System 328
12.3 Proposals for International Monetary
Co-ordination 331
12.4 Evaluation of Monetary Policy Co-ordination 337
12.5 Perspectives for the 1990s 344
13 Address by the President of the LZB in Berlin 350
Dieter Hiss
14 Comments on Monetary Theory and Monetary
Policy: New Tracks for the 1990s 352
Peter Zdrahal
14.1 The Globalisation of Financial Markets 353
14.2 Turnover in Financial Markets 353
Name Index 357
Subject Index 360