bluuebunny/crossref_metadata_2025 huggingface dataset:
A Crisis in Critical Commodities
Authors: Lang Alexander S.
Published: August 2019

Twenty years ago the United States was confronted with a report that warned that it was becoming dagerously dependent on imports from insecure foreign sources for supplies of a number of critical commodities. The President's Materials Policy Commission, better known as the Paley Commission, predicted that before long the nation would be faced with serious shortages of domestically produced fuelds and other minerals.
The Financing of the Multi-National Firm: Comment and Extension
Authors: Severn Alan K.
Published: August 2019

In a recent issue of KYKLOS, Robert E. Krainer applies the Modigliani-MIller theorem to the debt-equity mix of the multinational firm. He correctly notes that the applicability of this theorem is limited by a) the tax deductability of interest payments, and b) the difficulties facing portfolio investors who attempt to obtain personal loans in foreign countries. Krainder then presents empirical results to show that U.S. firms -- whether direct investors or not -- minimized interest costs by floating a larger proportion of their total bond issues abroad, the lower were foreign interst rates relative to U.S. rates. Thus, his empirical results are concerned only with the relative sources of a given total amount of borrowing, and not with the firm's reliance on debt versus equity.
The So-Called Devaluation Bias in a System of Adjustable Pegs: The Theory of the Devaluation Bias
Authors: Henry George B. , Roper Don E.
Published: August 2019

It has been argued taht the Bretton Woods system of adustable pegs contains a "devaluation bias" against the dollar. That is, there is a systemtic tendency for the U.S. dollar to become progressively overvalues with the passage of time.
Economic Reforms in South Vietnam
Authors: Lang Alex X.
Published: August 2019

During 1970 and 1971 the government of South Vietnam introduced a number of far-reaching economic reforms involving interest rates, exchange and tariff rates, prices and land redistribution. These were aimed not only at stabilizing the economy and increasing governmental revenues, but also at preparing the country for a greater self-reliance in economic matters and creating conditions for economic development. The reforms were to a large degree inspired by the cussess of similar measures in South Korea and Taiwan, and their results to date seem to confirm general validity of the approach which was tried in all three cases.
Price Competitiveness in Export Trade Among Industrial Countries
Authors: Junz Helen B. , Rhomberg Rudolf R.
Published: August 2019

More than three years have passed since the revaluation of the German mark initiated a period of greater flexibility in exchange rates, and about one year since a new rate structure was agreed at the Smithsonian conference. Academic researchs and governement officials everywhere are scrutinizing current trade data for sign indicating the effectiveness of the realignment, particularly and solid start toward recersals in the deficit of the United States or the surpluses of Japan, Germany, and Canada. The magnitude of the prospective total effect had been assessed largely on the assumption, unconfirmed by empirical work, that the response of trade flows to changes in teh exchange rate would resemble that to changes in foreign trade prices in general; and the timing of the effect was almost pure guesswork.
The Multinational Firm and the Determinants of Investment
Authors: Stevens Guy V. G.
Published: August 2019

In 1970 fixed investment spending of U.S. foreign affiliates reached 20 percent of the domestic total for manufacturing and 16 percent for all industry. For specific industries the 1970 figures are even more dramatic: chemicals, 38 percent; transportation equipment, 45 percent.
Investor Evaluation of Foreign and Domestic Risk
Authors: Severn Alan K.
Published: August 2019

In recent years, foreign direct investment by U.S. manufacturing firms has grown rapidly, oriented largely toward markets outside the U.S. Levels of economic activity in these markets are less than perfectly correlated with levels in the U.S. From 1963 on, the U.S. Interest Equalization Tax effectively prevented U.S. portfolio investors from achieving international portfolio diversification directly. Given this contraint, international diversification by firms was of benefit to their owners, by reducing portfolio risk for a given rate of returns.
The Energy Crisis and the Less-Developed Countries
Authors: Lang Alexander S.
Published: August 2019

Petroleum consumption and import requirments of the less-developed regions of the world are only a fraction of those of the major industrialized nations. This situation is but a reflection of the close association in our age between the stage of economic development and the level of petroleum consumption. The recent dramatic reversal of the international energy-petroleum situation has caught most less-developed countries still at the beginning of the development process involving transformation of their economic structures. The change, therefore, promises to have an even greater impact on their future economic development course and the energy-petroleum erequirements than on the already industrialized countries with well-estabilished patterns of production and energy consumptoin. We will review the energy-petroleum position and perspectives of the less-developed countries in Asia, Latin America (including Caribbean Area), Africa and the Middle East, with the exception of a few major oil producing and exporting countries, members of the Organization of Petroleum Exporting Countries (OPEC).
Balance of Payments Aims and Structures in the 1970's
Authors: Junz Helen B.
Published: August 2019

August 15, 1971 marks a crucial turning in international financial history. With the suspension of the convertibility of the U.S. dollar into gold or other reserve assets and the de facto adoption of a regime of managed floats for many currencies, the way the international financial system had been functioning since the Bretton Woods conference in the mid-'Forties came to an end. Up to that date, the operation of the BRetton Woods system hinged upon the central role of the U.S. dollar. Other nations pegged the exhange value of their currencies to the dollar and tied this value to hold on the basis of the readiness of the U.S. treasury to convery officially-held dollar balances into gold at fixed rates. Because of this, the dollar had come to be the hub of the system. Within given rules, other currencies were freely able to vary their exchange value vis-a-vis the dollar. The dollar rate, however, was viewed as the fixed point in the mulilateral exchange rate structure and, thus, considered not to be variable at the initiative of the U.S. authorities.
The Price Effects of Exchange Rate Changes: Models, Empirical Evidence, and Notes on Aggregation Bias
Authors: Isard Peter
Published: August 2019

The recent concurrence of rapid domestic prices increases with large par value adjustments and volatile floating rates has rekindled an interest in the international transmission of inflation. In particular, there has been a call to remodel the process of domestic inflation in a manner which highlights "the internationally traded goods, whose prices (adjusted for trade barriers) must be everywhere the same."
Profitable Speculation, Price Stability, and Welfare
Authors: Salant Stephen W.
Published: August 2019

In 1953, Milton Friedman asserted that profitable speculation increases prices stability: "People who argue that speculation can be destabilizing seldom realize that this is largely equivalent to saying that speculators lose money, since speculation can be destabilizing in general only if speculators sell when the currency is low in price and buy when it is high."
Output, Inflation, and the Balance of Payments in a Small, Fixed-Exchange Rate Economy: Tests with Data for Korea, 1960-1973
Authors: Kwack Sung Y.
Published: August 2019

Increasing interdependence among economies in recent years has stimulated the development of models that take account of such interdependence inorder to more adequately analyze an individal country's economic activity and inflation. At the same time, effects of fiscal, monetary, and exchange rate policies in a small open economy on its output, inflation and balance of payments have been discussed at an abstract level. Little systematic empirical work has yet been undertaken to examine the intersting implications emerging from these recent theoretical developments. In this paper, an attept is made to provide an econometric framework explicitly allwoing for external transations for goods, servics, and financial assets and for the dependence of monetary changes on fiscal deficits and the balance of payments. The models is applied to a highly open but small economy, the Republic of Korea, to demonstrate the usefulness of this framework.
Estimation of a Dynamic Demand Function for Gasoline with Different Schemes of Parameter Variation
Authors: Mehta J. S. , Narasimham G. V. L. , Swamy P. A. V. B.
Published: August 2019

This paper attempts to study the demand for motor gasoline by private individuals in the U.S. The study has a three-fold objective: (i) to formulate a demand function for gasoline whose consumption is technologically realted to the stock of automobiles owned by individuals, (ii) to specify a dynamic equation which captures the effect of the adjustment of these stocks over time on the consumption of gasoline and (iii) to empirically verify the stability of the postulated model across geographical regions in the U.S.
The Strength of U.S. Machinery Exports in 1975: An Analysis of Price Competitiveness and Special Demand Factors
Authors: Hooper Peter , Isard Peter
Published: August 2019

U.S. merchandise exports increased in a value by nearly 10 percent in 1975, despite the decline in economic activity abroad. Machinery exports accounted for over half of this increase, expanding to a level of $28.8 billion, or slightly more than one quarter of total merchandise exports. Macninery exports grew roughly 20 percent in 1975, following a 40 percent increase in 1974.
Central Bank Operations in Foreign and Domestic Assets Under Fixed and Flexible Exchange Rates
Authors: Girton Lance , Henderson Dale W.
Published: August 2019

Under the Bretton Woods system, national authorities agreed to intervene in the exchange markets to keep exchange rates within narrow limits around pre-established and rarely altered par values. Foreign balances obtained in exchange market intervention were normally used to purcahse interest earning assets, mainly U.S. Treasury securities, although sizable amounts of reserves were held as hold and SDR's. These exchange market and reserve management operations were carried out along side conventional open market operations. While exchange market oerations were narrowly directed at preventing the exchange rate from moving outside its band, domestic open market operations were, depending on time and circumstances directed at operating targets, such as monetary aggregates or interst rates, in order to achieve desired values for primary targets such as price levels, incomes, or balance of payments. Under the recent, post Bretton Woods system of mixed fixed and floating exchagne rates, many central banks have continued to intervene in exchange markets, even when not obliged to do so by any international agreement.
Transaction Costs and Interest Arbitrage: Tranquil Versus Turbulent Periods
Authors: Frenkel Jacob A. , Levich Richard M.
Published: August 2019

This paper deals with transaction costs and the efficiency of short term capital movements. Our prime purpose is to examine whether, and to what extent, the efficiency of short term capital movements have been affected by different economic environments generated by the varying exchange rate regimes.
The Effect of Exchange Rate Uncertainty on the Prices and Volume of International Trade
Authors: Hooper Peter , Kohlhagen Steven W.
Published: August 2019

Since the floating of exchange rates in the Spring of 1973 there has been a considerable increase in the variation of bilateral exchange rates. For example, the dollar-mark rate has fluctuated by as much as 20 percent within period of several month or less. Such fluctuations raise important questions about how much the risks associated with international transactions have increased and what impact the increase in risk has had on those transactions.
The Denationalization of Money: A Review
Authors: Howard David H.
Published: August 2019

Book Review
J. Laurence Laughlin and the Quantity Theory of Money
Authors: Girton Lance , Roper Don E.
Published: August 2019

In this paper the issues raised in the turn of the century American debate over the quantity theory of money are examined. J. Laurence Laughlin of Chicago, the leading anti-quantity theorist, provoked the controversty with his theoretical and empirical criticism of the quantity theory, while Irvine Fisher emerged as the chief defender of the monetary orothdoxy. Laughlin attacked the quantity theory position that a change in the quantity of money would cause a proportional change in prices. He argued that issues of convertible paper money in any single open economy would raise prices, but would instead lead to losses of hold through the balance of payments. The seperation of neutrality of money proposition into its two components, the neutrality proposition per sa and the exogeneity of money, isu sed to identify the essential features of the two sides of the debate.
Cyclical Fluctuations in the Share of Corporate Profits in National Income
Authors: Brown Scott B.
Published: August 2019

During the period since 1960, the share of total national income attributal to corporate profits has fallen in most Western industrial countries. The fall has been especially pronouned during the 1970's, and has stimulated considerable public discussion of trends in business profitability and their implications for the future course capital formation. In this country the discussion has centered on likelihood of a "capital shortage," a scenario in which low rates of return to capital lead to continuted slack in business investment, and hence to low rates growth of real output.
Staving Off the Backstop: Dynamic Limit-Pricing with a Kinked Demand Curve
Authors: Salant Stephen W.
Published: August 2019

The successful manipulation of the world oil price by the OPEC cartel has stimulated a search among consuming nations for substitute energy sources and technologies. At the current real price of oil, few of these "backstops" can successfully compete. But should the oil prices raised sufficiently, other alternatives to oil mige be profitably supplied. At prices where a new substitute could be profitably produced, demand for OPEC oil would be substantially more sensitive to price changes than in the current situation where little substitution is possible.
Approaches for Assessing the Risk Involved in Lending To Developing Countries
Authors: Maroni Yves
Published: August 2019

The enormous increase in the external debt of the developing countries in recent years, and the prospect that this debt will continue to grow in coming years, have focussed attention on the risk involved in lending to those countries. An assessment of this risk important to the private commercial banks in the industrial countries, which have become a major source of loans to the developing countries, and which must decide how large an exposure they may safely accept in particular countries or regions. It is also important to the regulatory authorities in the industrial countries, which concerned with the soundness of the banking system under their jurisdiction and with the safety ofthe deposits entrusted to the banks. More generally, an assessment of this risk is important to the economic community at large, including both the industrial and the developing economies, as part of the background needed for an effective formulation of economic and financial policies, at a time when continued good health of the world economy might threatened, should difficulties in servicing developing countries' external debts cause a spread of insolvency among banks in the industrial countries.
U.S. Demand for Imported and Domestically-Produced Foods: An Investigation of Intertemporal and Cross Substitution
Authors: Isard Peter , Lowrey Barbara R. , Swamy P. A. V. B.
Published: August 2019

Attempts to explain the time-series behavior of consumer purchases traditionally rely on econometric specifications that are alleged to reflect a utility-maximizing theory of consumer behavior. Most explicit presentations of the underlying theory view the consumer to be maximizing utility over a single-period horizon. Yet many econometric specifications include a list of lagged price variables that have no place the in the single-period model of consumer choice.
The Effects of Foreign Aid on Optimal Savings and Debt
Authors: Freeman Richard T.
Published: August 2019

Since the hypothesis that foreign aid may retard domestic savings in developing country was first raised by Trygve Haavelmo, this issue has been at the center of an ongoing debate among development economists. For example, the finding by Weisskopf and others of evidence that an increased aid flow tended to reduce the level of domestic savings in LDC's has given support to the view that foreign aid may bring about a temporary or permanent increase in the degree of dependence on outside resources among recipient countries.
Capital Controls, Political Risk, and Interest Disparities
Authors: Dooley Michael P. , Isard Peter
Published: August 2019

In his reinterpretation of the interest-rate parity theorem, Robert Aliber (1973) distinguishes between exchange risk and political risk as determinants of disparities between interest rates on different money-market assets. Interst disparities reflect exchange risk when assets are denominated in dfferent currencies and/or political risk when assets are issued in dfferent countries (i.e., under different legal jurisdictions).
The Role of Central Banks in the Development of Securities Markets
Authors: Maroni Yves
Published: August 2019

The growth of a securities market is an essential element in the economic development of countries in which investment is to be financed voluntarily from private savings. As is well known, such a market provides the machinery for transfer the funds (either directly or with the help of financial intermediaries) from those who hold more than they need to satisfy their current requirements to those who desire additional funds, beyond what they may able to generate internally, to finance their activities.
The Apparent Effects of Recent IMF Stabilization Programs
Authors: Connors Thomas A.
Published: August 2019

IMF conditional programs have increasingly come under attack as not being in the best interest of countries that negotiate such programs. The purpose of this paper is to investigate the effects of IMF programs on some major macroeconomic variables in countries that came under IMF guidance in the post-1972 period. This will shed some light on the question of how IMF programs affect countries. The mechanics of conditional IMF programs are discussed in Section I. Previous studies done in this area are briefly discussed in the first part of Section II. The statistical results of this paper are then presented in the second part of Section II.
The Portfolio-Balance Model of Exchange Rates
Authors: Dooley Michael P. , Isard Peter
Published: August 2019

Since the collapse of the Bretton Woods regime, models of asset-stock equilibrium have dominated professional thinking about exchange-rate determination. A number of empirical investigations have established that changes in relative stocks of money explain a considerable portions of the behavior of echange rates. It has also been established, however, that persistant deviations from purchasing-power parity weaken the links between exchange rates and relative stocks of money in the shorts run, and that relative rates of money growth by themselves do a poor job of explaining the behavior of exchange rates since late 1975, when real economic growth in the United States recovered to a rate of exceeded and continued to outpace growth rates in other industrialized countries.
U.S. Banks, Exchange Markets, and the Dollar, September - November 1978
Authors: Lowrey Barbara R. , Smith Ralph W.
Published: August 2019

At the request of the Senate Banking Committee, the Federal Reserve System conducted in the spring of 1979 a survey of major U.S. banks' daily foreign exchange trading activity and position-taking during September 15-November 15, 1978 period of exchange market turbulence. The survey was requested in hopes of shedding additional light on allegations that the speculative activities of large trading banks were responsible for the severe selling pressure on teh dollar in October 1978 which led to the adoption of the November 1 package, including a tightening of monetary policy. This study analyzes the results of that survey. Actual aggregated data submitted to the Senate Banking Committee are appended.
Expectations and the Adjustment of Trade Flows Under Floating Exchange Rates: Leads, Lags and the J-Curve
Authors: Wilson John F. , Takacs Wendy E.
Published: August 2019

According to the standard textbook view of the adjustment of trade flows under floating exchange rates, currecny depreciation or appreciation due to existing imbalances would fairly promptly set in motion adjustment in real goods and services flows. If this is so, the return toward equilibrium would be quicker than in a fixed-rate environment where national authorities may defend inappropriate exchange rates for too long.
Restricting the Scale of Government in a Small Open Economy
Authors: Johnson Ronald
Published: August 2019

It is the purpose of this paper to compare, in the context of a small open economy, the impact of reductions in various categories of tax-financed government expenditures on a real private sector output and on teh balance of payments. The comparisons are performed within the framework of a tradable-non-tradable model where the interaction between labor supply decisions, taxation and the composition of tax-financed governemnt expenditures is captured. This interaction is introduced through the labor supply function, which is assumed to dpened on the level of the real after-tax wage, relative prices and the level of real money balances.
Reserve Requirements on Eurocurrency Deposits: Implications for Eurodeposit Multipliers, Control of a Monetary Aggregate, and Avoidance of Redenomination Incentives
Authors: Henderson Dale W. , Waldo Douglas G.
Published: August 2019

In this paper a two-country model of international financial markets is employed to analyze some implications of placing reserve requirements on Eurocurrency deposits. The features of this model are described in Section II. Many earlier analyses of the Eurocurrency markets focused on Eurodeposit multiplier, the response of equilibrium holdings of Eurodeposits to an autonomous shift from domestic deposits into EUrodeposits. The analysis in Section II is a continuation of this tradition; there the model is used to trace out the implications of a shict from domestic demand deposits to Eurodollar deposits for equilibrium holdings of Eurodollar deposits and total Eurocurrency deposits. The approach of recent contributions to analysis of monetary policy maknig has been to evaluate alternative operating procedures and suggested changes in financial regulations under various assumptions aboud the relative magnitudes of different kinds of shocks to the economy. This is the approach adopted in Section IV where teh effects of changes in Eurocurrency reserve requirements on the deviations of a monetary aggregate from a chosen target value are investigated. There it is assumed taht the authorities set the supply of high-powered monety in an attempt to achieve a desired value for a monetary aggregate, which is their intermeidate target. Deviations between the actual and desired values arice because the authorities have incomplete current information about the shocks which buffet the financial system. In Sections II, III, and IV one possible system of Eurocurrency reserve requirements is analyzed. In Section V it is demonstrated that under some alternative systems the imposition of Eurocurrency reserve requirements may give rise to an inventive for Eurocurrency deposits denominated in one ore the other ucrrency to be redenominated so that all Eurocurrency deposits are denominated in a single currency. This section also includes a discussion of how structure Eurocurrency reserve requirements so as to avoid giving rise to redenomination incentives. Section VI contains some conclusions.
International Portfolio Disturbances and Domestic Monetary Policy
Authors: Shafer Jeffrey R. , Truman Edwin M.
Published: August 2019

This paper analyzes the implications for the formulation and execution of national monetary policy of a shift of significant size over a short period (a few days or weeks) in the Eurocurrency market from deposits denominated in dollars to deposits denominated in marks. We analyze the immediate and short-run implications of such a shift under alternative assumptions about the orientation of monetary policy in Germany and the United States and about the official exchange market intervention policies.
Oil Price Indexing-Versus Large Price Shocks: Macroeconomic Impacts
Authors: Jacobson Laurence R. , Thurman Stephen S.
Published: August 2019

Following the dramatic oil price increases by the Organization of Petroleum Exporting Countries (OPEC) in late 1973 and 1974, average prices remained fairly stable through 1978 in nominal dollar terms. However the purchasing power of OPEC oil as measured by the U.S. implicit GNP deflator or the price deflator for consumption fell substantially between the first quarter of 1974 and the end of 1978, and teh value of the dollar fell significantly versus a weighted average index during the same period. Ths contrasts strongly to the experience since the end of 1979 in which OPEC price increases have greatly outpaced the rate of inflation and exchange rate flucations, causing a more than doubling of the real oil price during the subsequent eighteen months.
Estimation of Portfolio-Balance Functions that are Mean-Variance Optimizing: The Mark and the Dollar
Authors: Frankel Jeffrey A.
Published: August 2019

This paper offers a way of efficiently estimating the parameters in demand functions for mark and dollar assets. The technique imposes the contraint that the parameters, rather than being determined arbitratily, are based on investors' optimizing behavior regarding expected returns and variances. It dominates some previous empirical applications of finance theory in the respect that the expected returns are allowed to vary from period to period, which is a necessary feature of any macro model. The constraint that the parameters are based on mean-variance optimization is also tested, and not rejected.
Gold Monetization and Gold Discipline
Authors: Flood Robert P. , Garber Peter M.
Published: August 2019

Gold and its price have emerged as frequent topics of both academic and government debate. Public attention focused on the gold market when gold's price surged briefly to $850/ounce by January, 1980; by July, 1981, the price collapsed to less than $400/ounce.
The Information Content of the Interest Rate and Optimal Monetary Policy
Authors: Canzoneri Matthew B. , Henderson Dale W. , Rogoff Kenneth S.
Published: August 2019

Data on financial varibales are available with essentially no lag. Today's nominal interest rate provides imcomplete current information about aggregate disturbances in the money and goods markets. Employing a standard IS-LM model, Poole shows how the monetary authorities can best use this incomplete information to reduce, though not eliminate, the variabce of output. Under his recommended "combination policy," the monetary authorities try to minimize the variance of the nominal interest rate when money market disturbances predominate and to amplify the variance of the nominal interest rate when goods market disturbances predominate.
Estimating the Hedging Effectiveness of Treasury Bill Futures: An Alternative Approach
Authors: Parkinson Patrick
Published: August 2019

Recent studies by Ederington and Frankle examined the effectiveness of Treasury bill futures contracts as insturments for hedging price risks associated with spot market transactions in Treasury bills. These studies, as well as studies of the hedging effectiveness of livestock and grain futures and foreign currency futures, employed a common set of procedures to estimate a measure of hedging effectiveness developed by Johnson and Stein.
An Accounting Framework and Some Issues for Modelling How Exchange Rates Respond to the News
Authors: Isard Peter
Published: August 2019

This paper develops a framework of approximate account idntities that is used to discuss the limitations of existing empirical models of exchange rate determination. The poor explanatory power of the empirical models of the Seventies has now been well documented by Meese Rogoff and Backus. in this paper the limitations are first addressed by using the account framework to demonastrate that some commonly-adopted behavioral assumptions cannot jointly explain a major portion of exchange rate movements. The middle sections of the paper address some issues in modeling how "news" leads to revisions in the expectational terms that enter the exchange-rate accounting framework. The final section illustrate the issues by drawing inferences and conjectures about the types of news that contributed to the major swings in mark/dollar exchange rates (spot and forward) during 1980-81. The paper stops short of using the account framework as a building block for conducting regression tests of specific behavioral asumptions about the expectational terms.
An Appraisal of the Chaps Payments Mechanism
Authors: Frankel Allen B.
Published: August 2019

The purpose of this paper is to highlight some of the possible consequences for payment practices and money markets in the United Kingdom of the introduction, later in 1983, of CHAPS. CHAPS, an acronym for Clearing House Automated Payment System, is a real-time interbank sterling payments mechanism developed by the U.K. Clearing Banks. It is anticipated that CHAPS will replace the paper-based end-of-day Town Clearing as the core clearing mechanism for sterling-denominated transactions.
Speculation and Hedging Using Options on Futures Contracts
Authors: Jacobson Laurence R.
Published: August 2019

Last year, a number of options contracts were initiated in several exchanges, and several other have been started in 1983. Trading began in the fourth quarter of 1982 for options to purchase Treasury bond futures, options for gold futures, and options for spot purchases of five major currencies. Options on stock index futures were intitiated early this year. The rapid expansion of options contracts is probably related to the increased volatility (variance) of interest rates, exchange rates, stock prices, etc., as well as to the enlarged opportunity set for hedging and speculation. Some of the new option contracts may become moribund due to thinness of the market, although any prognosis at this time may be premature. As will be explained further below, the existing options on futures (gold, Treasury bonds) are only a subset of possible options on futures contracts, since the expiraction date of available options always bear a fixed relationhsip to the delivery date of the futures contract. However, all other possible futures options prices would be determined by arbitrage possibilities.
Country Risk, International Lending, and Exchange Rate Determination
Authors: Dooley Michael P. , Isard Peter
Published: August 2019

The purpose of this paper is to emphasize the importance of credit risk in a model that integrates the determination of international lending and exchange rates. The literature on exchange rate determination contains a number of models that integrate an equilibrium condition on stocks of assets or debts with an equilibrium condition on goods flows or the international trade balance; together, these conditions anchor the (long-run) level of the real exchange rate, defined either as a relative price of domestic and foreign goods or relative price of nontradable and tradable goods. Models of this type include DOrnbusch, Calvo and Rodriguez, Dornbusch and Fischer, and Mussa. A restrictive feature of these models, however, is the small-country assumption that concentrates attention on the portfolio-adjustment behavior of domestic residents, who are assumed able to borrow or lend freely at a fixed foreign interest rate. A second limitation of these models is the lack of attention to credit risk, and in many cases to exchange risk as well. Needless to say, such abstractions don't square well with a world in which debt rescheduling has become commonplace and few countries can be found whose liabilities are either small or riskless from the perspective of their international creditors.
An Analysis of External Debt Positions of Eight Developing Countries Through 1990
Authors: Dooley Michael P. , Tryon Ralph W. , Underwood John M. , Helkie William L.
Published: August 2019

In this paper we trace the accumulation of large external debts by eight developing countries since 1973 and provide a persepective on their external positions thorugh 1990.
Deficit-Savings Ratios as Indicators of Interest-Rate Pressure: A Collection of Notes
Authors: Caprio Gerard , Henderson Dale W. , Hooper Peter , Lubitz Raymond , Symansky Steven A.
Published: August 2019

The purpose of this collection of notes is to examine the usefulness of such rations as exogenous indicators of the interest rate or credit market pressures generated by shifts in fiscal policies. We also consider the extent to which such ratios provide a meaningful basis for international comparisons. That is, does a ratio of a given size express the same degree of credit market pressure across countries?
Alternative Financial Strategies: The Results of Some Policy Simulations with the Multi-Country Model
Authors: Symansky Steven A. , Haas Richard D.
Published: August 2019

In this paper, we report on a set of policy simulations with Multi-Country Model (MCM) developed by the staff of the Federal Reserve Board.
Domestic Saving, Current Accounts, and International Capital Mobility
Authors: Caprio Gerard , Howard David H.
Published: August 2019

This paper examines the Feldsteing-Horioka proposition that over the medium run variants in a country's domestic saving rate are reflected almost exclusively in offsetting movements in domestic investment rather than in the country's current account. Data on 23 OECD countries for the four OECD business cycles during the period 1963-1981 are used to investigate this proposition. The evidence presented in this paper is inconsistent with the Feldstein-Horioka proposition; that is there appears to be a substantial degree of medium-term net international capital mobility. Nevertheless, it is found that over long period of time average current accounts tend to be fairly small in absolute value. Some possible explanations of this phenomenon are presented and policy implications are discussed.
Can Exchange Rate Predictability be Achieved Without Monetary Convergence? Evidence from the EMS
Authors: Rogoff Kenneth S.
Published: August 2019

One purpose of the presented paper is to investigate whether the EMS has coincided with reduced variablity in unanticiapted nominal and real exchange rate movements. Exchange rate expectations are measured using Euromarket forward rates, as well as random walk and vector autoregressive forecasting models. This study also extends earlier analyses by considering volatility at horizons greater than one month. (The efficient estimation of multi-month conditional forecast error variances turns out to require estimation of moving average process.) In order to examine the frequent assertion that the EMD provides a blueprint for reducing exchange rate variablilityamong the world's largest currencies, the analysis focuses on France, Germany and Italy.
Monetary Policy Games and the Role of Private Information
Authors: Canzoneri Matthew B.
Published: August 2019

Consider the following scenario: Monetary aggregates surce ahead of expected or targeted rates; the Fed claims that it is accomodating a perceived increase in money demand in order to stabilize the price level; the private sector (or the Administration, or Congress_ counters taht the Fed is running inflationary policy to expand employment; a period of credibility building ensues, which may focus upon the personalities of policy makers, targeting procedures, or even proposals for lefislative reform. A key elelment in this scenario is that the private sector cannot verify the Fed's claim; the Fed's forecast of money demand is private information.
Postwar Financial Policies in Taiwan, China
Authors: Emery Robert F.
Published: August 2019

The objective of this paper is to examine the monetary policies of Taiwan, China, since the reactivation of tis central bank in 1961 to see what lessons can be learned from its credit control operaions, rather than the subject of financial reform per se. Although there have been certain innovations as the authorities have improved their control of monety and credit, there has been no dramatic financial reform in Taiwan, China, since the 1961 reactivation. The financial structure in Taiwan, China, has remained relatively stable, partly because of the authorities' willingness to allow relatively high interest rates whenever this was required as a result of inflationary pressures. To the extent that there was been a major financial reform in the postwar period, this occured in 1950 when high nominal interest rates (25 percent, compount rate) were paid on certificates of deposit to successfully eliminate the 85 percent rate of inflation at the time.
Conditional Econometric Modelling: An Application to New House Prices in the United Kingdom
Authors: Ericsson Neil R. , Hendry David F.
Published: August 2019

The statistical formulation of the econometric model is viewed as a sequence of marginalizing and conditioning operations which reduce the parameterization to manageable dimensions. Such operations entail that the "error" is a derived rather than an autonomous process, suggesting designing the model to satisfy data-based and theory criteria. The relevant concepts are explained and applied to data modelling of UK new house prices in the framework of an economic theory-model of house builders. The econometric model is compared with univariate time-series models and tested against a range of alternatives.
Long Memory Models of Interest Rates, The Term Structure, and Variance Bounds Tests
Authors: Shea Gary S.
Published: August 2019

Variance bounds tests of the rational expectations hypothesis of the interest rate term structure are sensitive to the stochastic characterization of short-term interest rates used. When a long memory or fractional difference nonstationary time series model is used in preference to a mean stationary model, the rational expectations hypothesis is not rejected. Long memory models of interest rates are estimated and tested against alternatives. Their forecasting properties are also examined. Hypothesis tests are based upon bootstrapping (Monte Carlo) methodologies.
Comparing Costs of Note Issuance Facilities and Eurocredits
Authors: Mills Rodney H.
Published: August 2019

Since early 1984, note issuance facilities (NIFs) have in considerable degree replaced syndicated Eurocurrency bank credits in international credit markets, especially for borrowers in industrial countries, because borrowers have found it cheaper to bypass bank syndications and obtain funds more directly by issuing Euronotes. Factors behind this include an increasing awareness of borrowing possibilities, more freedom for Japanese investors to buy foreign securities, a drop in the relative popularity of bank obligations with investors, and banks' desire to slow asset growth to improve capital ratios.Measurement of the cost savings to borrowers on NIFs as compared with Eurocredits is difficult because of limited comparison possibilities. Most NIFs arranged so far have not been drawn on through issuance of notes, and few of the actual issuers have arranged LIBOR-priced Eurocredits recently. In the 12 cases, as of mid-1985, where meaningful comparisons could be made, it appears that the cost savings to the borrowers ranged from about 10 to around 50 basis points. All of the savings were in the interest spread, where the NIFs appear to have been about 15 to 55 basis points cheaper. Fee costs were slightly higher on NIFs than on Eurocredits; although front-end fees are lower, the total fee costs for NIFs are higher because of the annual facility fee paid to banks that underwrite the NIF.
A Method for Solving Systems of First Order Linear Homogeneous Differential Equations when the Elements of the Forcing Vector are Modelled as Step Functions
Authors: Johnson Robert A.
Published: August 2019

This paper presents a method for solving a system of first order linear differential equations with constant coefficients when the elements of the forcing vector are step functions. The analysis presented in the text has been programmed for use in the computer simulation of linear continuous time rational expectations models using any combination of anticipated and unanticipated, permanent or temporary shocks. The program entitled "JAB" is available from the author upon request.
The Stock Market and Exchange Rate Dynamics
Authors: Gavin Michael K.
Published: August 2019

This paper articulates a model of the small, open economy in which the stock market, rather than the bond market, determines domestic aggregate demand. It resembles in many respects the widely adopted dynamic Mundell-Fleming approach, but can, in some circumstances, exhibit output and asset price dynamics that differ in economically illuminating ways from that more standard framework. In particular, if the stock market effects are important enough, then a monetary expansion can result in real exchange rate appreciation, rather than depreciation. Anticipated fiscal expansion can, if the favorable effects on future productivity lead to strong enough stock market effects, lead to an output expansion, rather than a contraction as in, for example, Burgstaller (1983), Blanchard (1984) and Branson, Fraga and Johnson (1985). Furthermore, if the delay between announcement and implementation of the fiscal expansion is long enough, an anticipated fiscal expansion can lead to exchange rate depreciation, rather than appreciation.
Comovements in Aggregate and Relative Prices: Some Evidence on Neutrality
Authors: Pauls B. Dianne
Published: August 2019

This paper develops an alternative test of the neutrality of anticipated monetary policy. A multi-good equilibrium model along the lines of Barro and Hercowitz is used to derive a neutrality proposition for anticipated movements in the aggregate price level and to demonstrate econometrically its equivalence to the exogeneity of relative prices with respect to the aggregate price level. Multivariate causality tests provide a basis for testing these restrictions. The empirical results provide mixed evidence for the equilibrium models, while the variation in the findings across industries suggests a role for supply-side disturbances in explaining comovements in aggregate and relative prices.
Tests of the Foreign Exchange Risk Premium Using the Expected Second Moments Implied by Option Pricing
Authors: Lyons Richard K.
Published: August 2019

This paper applies a new method to investigate the foreign exchange risk premium. The method is new in the sense that it utilizes the time-varying second moment expectations implied by foreign currency option pricing. The vast empirical literature on the risk premium generally neglects the role of time-varying second moments, in spite of their importance in assessing risk-return tradeoffs. In fact, this importance is borne out in the data: time-varying expectations generate valuable new evidence regarding both unbiasedness in the forward rate and portfolio balance models. Moreover, the results suggest that previous tests which assume constant second moments involve serious misspecification errors. The results also highlight the unreliability of the portfolio balance effects of sterilized intervention, in spite of the quantitative importance of expected return differentials.
The Structure and Properties of the FRB Multicountry Model Part I: Model Description and Simulation Results
Authors: Edison Hali J. , Marquez Jaime R. , Tryon Ralph W.
Published: August 2019

The FRB Multicountry Model (MCM) is a linked system of five quarterly national macroeconometric models of the United States, Canada, Germany, Japan, and the United Kingdom. The MCM emphasizes international linkages, and has equations for trade in goods and services, investment income flows, and exchange rates. This paper documents the current version of the MCM. The paper describes the theoretical structure of the model, and presents the empirical estimation results. The paper also describes a series of simulations of fiscal and monetary policy scenarios and external shocks. A complete listing of the model is given in an appendix.
Germany and the European Disease
Authors: Davis John , Minford Patrick
Published: August 2019

This paper is concerned with the growth of unemployment in Europe in the late 70s and early 80s. Unemployment has risen to double digit rates in many countries, rates which are not considered likely to fall much in the rest of the 80s. A theory--'the disease'--is expounded, with empirical evidence from the Federal Republic of Germany. The disease is characterized by high unemployment and low output growth, these being systematic rather than the consequence of some temporary phenomenon such as the downphase of the business cycle. Consequently we present a 'natural rate' explanation as an underlying determinant of unemployment with consideration given to the role of the business cycle in recent German unemployment. The latter role is examined with the use of a full macroeconomic model of the Federal Republic. The model is new-classical with two of its most distinguishing features being the assumption of rational expectations throughout and the endogenous determination of natural rates. We find that the natural rate of unemployment in Germany more than trebled its 1973 level by the end of the 70s, reaching 1.21 million by 1982 before falling to 1.16 million in 1983. We suggest that Germany may have caught the now familiar 'British disease'--that is, the prevention of real wage adjustment, via unemployment benefits and social aid.