# Richard Werner

Richard Andreas Werner (born 5 January 1967) is a German banking and development economist who is a university professor at University of Winchester.
He has proposed the "Quantity Theory of Credit", or "Quantity Theory of Disaggregated Credit", which disaggregates credit creation that are used for the real economy (GDP transactions), on the one hand, and financial transactions, on the other hand. In 1995, he proposed a new monetary policy to swiftly deal with banking crises, which he called 'Quantitative Easing', and it was published in the Nikkei. He also first used the expression "QE2" in public to refer to the need to implement 'true quantitative easing' as an expansion in credit creation. His 2001 book Princes of the Yen was a number one general bestseller in Japan. In 2014, he published the first empirical evidence that each bank creates Money when it issues a new loan.

## Early life

In 1989, Werner earned a BSc in economics at the London School of Economics (LSE). During his postgraduate studies at Oxford University he spent over a year in Japan, studying at the University of Tokyo and working at the Nomura Research Institute. His DPhil in economics was conferred by Oxford. In 1991, he became European Commission-sponsored Marie Curie Fellow at the Institute for Economics and Statistics at Oxford. His 1991 discussion paper at the institute warned about the imminent 'collapse' of the Japanese banking system and the threat of the "greatest recession since the Great Depression". In Tokyo, he also became the first Shimomura Fellow at the Research Institute for Capital Formation at the Development Bank of Japan. He was a visiting researcher at the Institute for Monetary and Economic Studies at the Bank of Japan; and he was a visiting scholar at the Institute for Monetary and Fiscal Studies at the Ministry of Finance.

## Career

Werner was chief economist of Jardine Fleming from 1994 to 1998 and published several articles on the Japanese credit cycle and monetary policy, many of which are in Japanese. He joined the faculty of Sophia University in Tokyo (1997-2004) as a tenured assistant professor. Werner was senior managing director and senior portfolio manager at Bear Stearns Asset Management. He worked at the University of Southampton (2004-2018), mainly as Chair and Professor in International Banking. Werner becomes Professor of Banking and Finance at De Montfort University in 2018. He is the founding director of the university's Centre for Banking, Finance and Sustainable Development and organiser of the European Conference on Banking and the Economy (ECOBATE), first held on 29 September 2011 in Winchester Guildhall, with Lord Adair Turner, FSA Chairman, as keynote speaker. From 2011 to 2019, he was a member of the ECB Shadow Council.
Werner has developed a theory of money creation called the Quantity Theory of Credit, which is in line with Schumpeter's credit theory of money. He has argued, since 1992, that the banking sector needs to be reflected appropriately in macroeconomic models since it is the main creator and allocator of the money supply, through the process of credit creation by individual banks.
Werner's book Princes of the Yen, about the modern economic development of Japan, including the bubble of the 1990s and subsequent bust, was a number one general bestseller in Japan in 2001. The book covers the monetary policy of the Bank of Japan specifically and central bank informal guidance of bank credit in general.
Werner proposed a policy he called "quantitative easing" in Japan in 1994 and 1995. At the time working as chief economist of Jardine Fleming Securities (Asia) Ltd. in Tokyo, he used this expression during presentations to institutional investors in Tokyo. It is also, among others, in the title of an article he published on September 2, 1995, in the Nihon Keizai Shinbun (Nikkei). According to Werner, he used this phrase in order to propose a new form of monetary stimulation policy by the central bank that relied neither on interest rate reductions (which Werner claimed in his Nikkei article would be ineffective) nor on the conventional monetarist policy prescription of expanding the money supply (e.g. through "printing money", expanding high-powered money, expanding bank reserves or boosting deposit aggregates such as M2 –all of which Werner also claimed would be ineffective). Instead, Werner argued, it was necessary and sufficient for an economic recovery to boost "credit creation", through a number of measures. He also suggested direct purchases of non-performing assets from the banks by the central bank; direct lending to companies and the government by the central bank; purchases of commercial paper, other debt, and equity instruments from companies by the central bank; and stopping the issuance of government bonds to fund the public sector borrowing requirement, instead having the government borrow directly from banks through a standard loan contract.
Werner is founding director and chairman of Local First Community Interest Company, which promotes the establishment of not-for-profit local community banks, modelled on the successful German local co-operative, Raiffeisen and Sparkasse savings banks that have enabled German small firms to become top exporters and job creators in Germany.
In 2019, Werner took out a discrimination case against his employer, Southampton University, claiming he was discriminated against and ‘victimised’ in a ‘harassment and bullying’ campaign for being German and Christian, during his 14 years career at the university. The £2.5m payout was one of the largest awards ever made by a British tribunal and was so high because the university failed to defend itself. In July 2019, after a successful appeal by the University, the judgement was set aside and the case was set to proceed in the usual fashion. Werner was then, in August 2020, granted permission to appeal the decision in the Employment Appeal Tribunal. In the meantime Werner brought a discrimination claim against the University of Cambridge after they withdrew a conditional offer of employment in 2018.

## Selected works
### Books

* Ryan-Collins, Josh; Werner, Richard; Jackson, Andrew (2012). Where Does Money Come From?: A Guide to the UK Monetary & Banking System (2nd ed.). London: New Economics Foundation. p. 178. ISBN 978-1908506238. OCLC 816167522.
* Neue Wirtschaftspolitik, München: Vahlen Verlag (2007) - New Economic Policy, Munich: Vahlen Publishing House (2007)
* New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance (2005)
* Princes of the Yen: Japan's central bankers and the transformation of the economy (2001)
* 『虚構の終焉』 = Towards a new macroeconomic paradigm. Tokyo: PHP. (2003)
* 『謎解き!平成大不況 : 誰も語らなかった「危機」の本質』 = The enigma of the great recession (2003)
* Three essays on Japanese macroeconomic policy in the 1980s and 1990s (2006)
* 『福井日銀・危険な素顔』 =　The Bank of Japan under Toshihiko Fukui, with M. Ishii. Tokyo: Appuru Shuppan. (2003)
* 『不景気が終わらない本当の理由』 =　Central Banking and Structural Changes in Japan and Europe. Tokyo: Soshisha. (2003)
* Dismantaling the Japanese Model, with M. Kikkawa. Tokyo: Kodansha. (2003)
* Princes of the Yen, Japan's Central Bankers and the Transformation of the Economy. New York: M.E. Sharpe.
* 『円の支配者』. Tokyo: Soshisha (2001)

### Chapters

* 1998 – "Bank of Japan window guidance and the creation of the bubble," in: Rodao, F. and A. Lopez Santos (eds.), El Japon Contemporaneo, Salamanca: University of Salamanca Press
* 2002 – "Macroeconomic Management in Thailand: The Policy-induced Crisis," in: Rhee, G.S. (eds.), Rising to the Challenge in Aisa: A Study of Financial Markets, Vol. II, Thailand, Manila: Asian Development Bank
* 2006 – "The relationship between interest rates and economic activity: How the conventional literature has dealt with the Japanese experience," in: Batten, J.A., Fetherston, T.A. and Szilagyi, P.G. (eds.), Japanese Fixed Income Markets: Money, Bond and Interest Rate Derivatives, Amsterdam: Elsevier (pp. 135–170)
* 2007 – "Europe’s choice and lessons from Japan: supply vs. demand policy, fiscal vs. monetary policy," in: Terzi, A. and J. Bibow (eds.), Euroland and the World Economy: Global Player or Global Drag, Basingstoke: Palgrave Macmillan
* 2007 – "The cause of Japan’s recession and the lessons for the world," in: Bailey, Coffey and Tomlinson (eds), Crisis or Recovery: Industry and State in Japan. Cheltenham: Edward Elgar
* 2008 – "Was sind die Voraussetzungen fuer ein gesundes Wirtschaftswachstum ohne Bankenprobleme?," in: Carl Spaengler KAG (ed.), 20 Fragen zur Geldanlage. Salzburg: Carl Spaengler Kapitalanlagegesellschaft mbH.

### Journals

* 1994 – Werner, Richard A. (1994). "Japanese Foreign Investment and the "Land Bubble"". Review of International Economics. 2 (2): 166–178. doi:10.1111/j.1467-9396.1994.tb00038.x.
* 1997 – Werner, R. A. (July 1997). "Towards a new monetary paradigm: a quantity theorem of disaggregated credit, with evidence from Japan". Kredit und Kapital. 30: 276–309.
* 2002 – Werner, Richard A. (2002). "Monetary Policy Implementation in Japan: What They Say versus What They do". Asian Economic Journal. 16 (2): 111–151. doi:10.1111/1467-8381.00145.
* 2003 – Werner, Richard A. (2002). "Post-Crisis Banking Sector Restructuring and Its Impact on Economic Growth". Japanese Economy. 30 (6): 3–37. doi:10.2753/JES1097-203X30063. S2CID 154398385.
* 2003 – Werner, Richard A. (2002). "Aspects of Career Development and Information Management Policies at the Bank of Japan". Japanese Economy. 30 (6): 38–60. doi:10.2753/JES1097-203X300638. S2CID 154924035.
* 2003 – Werner, Richard A. (2002). "A Reconsideration of the Rationale for Bank-Centered Economic Systems and the Effectiveness of Directed Credit Policies in the Light of Japanese Evidence". Japanese Economy. 30 (3): 3–45. doi:10.2753/JES1097-203X30033. S2CID 153927778.
* 2004 – Werner, Richard A. (2004). "No Recovery without Reform? An Evaluation of the Evidence in Support of the Structural Reform Argument in Japan". Asian Business & Management. 3: 7–38. doi:10.1057/palgrave.abm.9200077. S2CID 154783685.
* 2009 – Werner, Richard A. (6 June 2009). "Financial crises in Japan during the 20th century". Bankhistorisches Archiv. 47: 98–123.
* 2011 – Voutsinas, Konstantinos; Werner, Richard A. (2011). "Credit supply and corporate capital structure: Evidence from Japan". International Review of Financial Analysis. 20 (5): 320–334. doi:10.1016/j.irfa.2011.05.002.
* 2011 – Chen, Yuanquan; Werner, Richard A. (2011). "The role of monetary aggregates in Chinese monetary policy implementation". Journal of the Asia Pacific Economy. 16 (3): 464–488. doi:10.1080/13547860.2011.589633. S2CID 153679115.
* 2011 – Werner, Richard (2011). "Economics as if Banks Mattered: A Contribution Based on the Inductive Methodology". The Manchester School. 79: 25–35. doi:10.1111/j.1467-9957.2011.02265_5.x.
* 2012 - Lyonnet, Victor; Werner, Richard (2012). "Lessons from the Bank of England on 'quantitative easing' and other 'unconventional' monetary policies". International Review of Financial Analysis. 25: 94–105. doi:10.1016/j.irfa.2012.08.001.
* 2012 - Werner, Richard A. (2012). "Towards a new research programme on 'banking and the economy' — Implications of the Quantity Theory of Credit for the prevention and resolution of banking and debt crises" (PDF). International Review of Financial Analysis. 25: 1–17. doi:10.1016/j.irfa.2012.06.002.
* 2013 - Werner, Richard A. (2013). "Towards a More Stable and Sustainable Financial Architecture – A Discussion and Application of the Quantity Theory of Credit". Credit and Capital Markets – Kredit und Kapital. 46 (3): 357–387. doi:10.3790/ccm.46.3.357. hdl:10419/293714.
* 2013 - Werner, Richard A. (2013). "Commentary". Environment and Planning A: Economy and Space. 45 (12): 2789–2796. Bibcode:2013EnPlA..45.2789W. doi:10.1068/a130106c.
* 2014 - Werner, Richard A. (2014). "Can banks individually create money out of nothing? — the theories and the empirical evidence". International Review of Financial Analysis. 36: 1–19. doi:10.1016/j.irfa.2014.07.015. hdl:2086/17269.
* 2014 - Werner, Richard A. (2014). "Enhanced Debt Management: Solving the eurozone crisis by linking debt management with fiscal and monetary policy". Journal of International Money and Finance. 49: 443–469. doi:10.1016/j.jimonfin.2014.06.007. hdl:2086/17263.
* 2015 - Werner, Richard A. (2014). "How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking". International Review of Financial Analysis. 36: 71–77. doi:10.1016/j.irfa.2014.10.013. hdl:2086/17271.
* 2016 - Werner, Richard A. (2016). "A lost century in economics: Three theories of banking and the conclusive evidence" (PDF). International Review of Financial Analysis. 46: 361–379. doi:10.1016/j.irfa.2015.08.014.
* 2016 - Ryan-Collins, Josh; Werner, Richard A.; Castle, Jennifer (2016). "A half-century diversion of monetary policy? An empirical horse-race to identify the UK variable most likely to deliver the desired nominal GDP growth rate". Journal of International Financial Markets, Institutions and Money. 43: 158–176. doi:10.1016/j.intfin.2016.03.009. hdl:2086/17265.
* 2018 - Lee, Kang-Soek; Werner, Richard A. (2018). "Reconsidering Monetary Policy: An Empirical Examination of the Relationship Between Interest Rates and Nominal GDP Growth in the U.S., U.K., Germany and Japan". Ecological Economics. 146: 26–34. doi:10.1016/j.ecolecon.2017.08.013. hdl:2086/17264.
* 2018 - Bermejo Carbonell, Jorge; Werner, Richard A. (2018). "Does Foreign Direct Investment Generate Economic Growth? A New Empirical Approach Applied to Spain". Economic Geography. 94 (4): 425–456. doi:10.1080/00130095.2017.1393312. hdl:2086/17268.

### Papers

* 1991 – "The Great Yen Illusion: Japanese Capital Flows and the Role of Land," Oxford Applied Economics Discussion Paper Series, Oxford: Institute of Economics and Statistics, University of Oxford, No. 129, December
* 1993 – "Towards a quantity theorem of disaggregated credit and international capital flows," Paper presented at the Royal Economic Society Annual Conference, York, April 1993
* 2010 – Comment on Range of Methodologies for Risk and Performance Alignment of Remuneration [in the banking sector], official submission to public call for comments on ‘Range of Methodologies for Risk and Performance Alignment of Remuneration, Consultative Document’ by the Basel Committee on Banking Supervision, 14 October 2010, submitted 31 December 2010.
* 2010 – Towards Stable and Competitive Banking in the UK - Evidence for the ICB, submitted to the Independent Commission on Banking, UK (Chair: Professor Sir John Vickers), submitted 19 November 2010
* 2010 – Towards a Twenty-First Century Banking and Monetary System, Joint Submission to the Independent Commission on Banking, UK (Chair: Professor Sir John Vickers), with Ben Dyson, Tony Greenham, Josh Ryan-Collins, by the Centre for Banking, Finance and Sustainable Development, the new economics foundation, and Positive Money, submitted 19 November 2010 PDF
* 2010 – Comment on Strengthening the Resilience of the Banking Sector, official submission to public call for comments on ‘Strengthening the Resilience of the Banking Sector, Consultative Document’ by the Basel Committee on Banking Supervision, September 2009. Submitted 16 April 2010; published by the Bank for International Settlements, Basel.

## Honors

* 2003 – World Economic Forum in Davos, "Global Leader for Tomorrow"