I. Introduction
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Staff Working Paper No. 845 Eight Centuries of Global Real Interest Rates, R-G, and the ‘Suprasecular’ Decline, 1311–2018 Paul Schmelzing
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A Model of Bimetallism
Federal Reserve Bank of Minneapolis Research Department A Model of Bimetallism François R. Velde and Warren E. Weber Working Paper 588 August 1998 ABSTRACT Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it a de- sirable system? In our model, the (exogenous and stochastic) amount of each metal can be split between monetary uses to satisfy a cash-in-advance constraint, and nonmonetary uses in which the stock of un- coined metal yields utility. The ratio of the monies in the cash-in-advance constraint is endogenous. Bi- metallism is feasible: we find a continuum of steady states (in the certainty case) indexed by the constant exchange rate of the monies; we also prove existence for a range of fixed exchange rates in the stochastic version. Bimetallism does not appear desirable on a welfare basis: among steady states, we prove that welfare under monometallism is higher than under any bimetallic equilibrium. We compute welfare and the variance of the price level under a variety of regimes (bimetallism, monometallism with and without trade money) and find that bimetallism can significantly stabilize the price level, depending on the covari- ance between the shocks to the supplies of metals. Keywords: bimetallism, monometallism, double standard, commodity money *Velde, Federal Reserve Bank of Chicago; Weber, Federal Reserve Bank of Minneapolis and University of Minne- sota. We thank without implicating Marc Flandreau, Ed Green, Angela Redish, and Tom Sargent. The views ex- pressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago, the Fed- eral Reserve Bank of Minneapolis, or the Federal Reserve System. -
WHY DID the BANK of in Financial Markets and Monetary Economics
NBER WORKING PAPER SERIES WHY DIDTHEBANK OF CANADA EMERGE IN 1935? Michael Bordo Angela Redish Working Paper No. 2079 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 1986 The research reported here is part of the NBER's research program in Financial Markets and Monetary Economics. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research. NBER Working Paper #2079 November 1986 Why Did the Bank of Canada Emerge in 1935? ABSTRACT Three possible explanations for the emergence of the Canadian central bank in 1935 are examined: that it reflected the need of competitive banking systems for a lender of the last resort; that it was necessary to anchor the unregulated Canadian monetary system after the abandonment of the gold standard in 1929; and that it was a response to political rather than purely economic pressures. Evidence from a variety of sources (contemporary statements to a Royal Comission, the correspondence of chartered bankers, newspaper reports, academic writings and the estimation of time series econometric models) rejects the first two hypotheses and supports the third. Michael D. Bordo Angela Redish Department of Economics Department of Economics College of Business Administration University of British Columbia University of South CArolina Vancouver, B.C. V6T lY2 Columbia, SC 29208 Canada Why Did the Bank of Canada Emeroe in 1935? Michael D. Bordo and Angela Redish Three possible explanations for the emergence of the Canadian central bank in 1935 are examined: that it reflected the need of competitive banking systems for a lender of last resort; that it was necessary to anchor the unregulated Canadian monetary system after the abandonment of the gold standard in 1929; and that it was a response to political rather than purely economic pressures. -
The Bank Restriction Act and the Regime Shift to Paper Money, 1797-1821
European Historical Economics Society EHES WORKING PAPERS IN ECONOMIC HISTORY | NO. 100 Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821 Patrick K. O’Brien Department of Economic History, London School of Economics Nuno Palma Department of History and Civilization, European University Institute Department of Economics, Econometrics, and Finance, University of Groningen JULY 2016 EHES Working Paper | No. 100 | July 2016 Danger to the Old Lady of Threadneedle Street? The Bank Restriction Act and the regime shift to paper money, 1797-1821* Patrick K. O’Brien Department of Economic History, London School of Economics Nuno Palma Department of History and Civilization, European University Institute Department of Economics, Econometrics, and Finance, University of Groningen Abstract The Bank Restriction Act of 1797 suspended the convertibility of the Bank of England's notes into gold. The current historical consensus is that the suspension was a result of the state's need to finance the war, France’s remonetization, a loss of confidence in the English country banks, and a run on the Bank of England’s reserves following a landing of French troops in Wales. We argue that while these factors help us understand the timing of the Restriction period, they cannot explain its success. We deploy new long-term data which leads us to a complementary explanation: the policy succeeded thanks to the reputation of the Bank of England, achieved through a century of prudential collaboration between the Bank and the Treasury. JEL classification: N13, N23, N43 Keywords: Bank of England, financial revolution, fiat money, money supply, monetary policy commitment, reputation, and time-consistency, regime shift, financial sector growth * We are grateful to Mark Dincecco, Rui Esteves, Alex Green, Marjolein 't Hart, Phillip Hoffman, Alejandra Irigoin, Richard Kleer, Kevin O’Rourke, Jaime Reis, Rebecca Simson, Albrecht Ritschl, Joan R. -
Deflation, Productivity Shocks and Gold: Evidence from the 1880-1914 Period
Deflation, Productivity Shocks and Gold: Evidence from the 1880-1914 period Michael D. Bordo NBER and Rutgers University John Landon-Lane Rutgers University Angela Redish University of British Columbia Abstract In this paper, we examine the issue of deflation from a historical perspective. We focus on the price level and growth experiences at the four dominant countries on the gold standard, in the period 1880-1913: the United States, the United Kingdom, France and Germany. We distinguish between good deflation (driven by positive aggregate supply shocks) and bad deflation (driven by negative aggregate demand shocks). We use an empirical Blanchard-Quah model which decomposes the behavior of prices, output, and the money stock in the impact of three structural shocks (a world price level shock, a domestic supply shock, a domestic demand shock). Our key finding is that the European economies were essentially classic in the sense that money was neutral and output was mainly supply driven. In the United States, however, we observe both good and bad deflation. JEL: Money, Economic History, 1880-1913. Keywords: Deflation, Gold Standard, Demand, Supply Shocks. The authors wish to thank participants at the CNEH conference and at the Money/macro seminar at Carleton University and Tulane University, for comments, and Jake Wong for research assistance. Michael D. Bordo, Department of Economics, New Jersey Hall, 75 Hamilton Street, Rutgers University. New Brunswick NJ 08901. (732) – 932 – 7069/7416. [email protected] Introduction The return to an environment of low inflation in most countries in the past decade has sparked renewed interest in the subject of deflation since its possibility is only a recession away. -
Draft. Do Not Cite. April 4, 2005 Deflation, Productivity Shocks And
Draft. Do not cite. April 4, 2005 Deflation, Productivity Shocks and Gold: Evidence from the 1880-1914 period Michael D. Bordo NBER and Rutgers University John Landon-Lane Rutgers University Angela Redish University of British Columbia Paper prepared for seminar at Carleton University, and the conference of the Canadian Network in Economic History, Kingston, ON, April 2005. All comments appreciated. Introduction The return to an environment of low inflation in most countries in the past decade has sparked renewed interest in the subject of deflation since its possibility is only a recession away. The recent deflationary experiences of Japan, China, Hong Kong, Switzerland and other countries led to concern in 2003 by policymakers at the Federal Reserve, the ECB and elsewhere that it could happen to them. They feared the possibility of prolonged stagnation as experienced by Japan or even worse a deflationary spiral that would lead to the conditions of the 1930s Great Depression (Bordo and Filardo, 2004). In this paper we examine the issue from an historical perspective. We focus on the experience of deflation in the late nineteenth century when most of the countries of the world adhered to the classical gold standard. The period 1880-1914 was characterized by two decades of secular deflation followed by two decades of secular inflation. The price level experience of the pre 1914 period has considerable resonance for today’s environment. Several elements are salient. First deflation pre 1914 was quite low as has been the case recently. In the U.S. the GNP deflator declined by an average of 1% to 1.5 % per year from 1880-1896. -
When Did the Dollar Overtake Sterling As the Leading International Currency? Evidence from the Bond Markets
WORKING PAPER SERIES NO 1433 / MAY 2012 WHEN DID THE DOLLAR OVERTAKE STERLING AS THE LEADING INTERNATIONAL CURRENCY? EVIDENCE FROM THE BOND MARKETS by Livia Chitu, Barry Eichengreen and Arnaud Mehl In 2012 all ECB publications feature a motif taken from the €50 banknote. NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily refl ect those of the ECB. Acknowledgements The authors are grateful to Thierry Bracke, Marc Flandreau, Kristin Forbes, Norbert Gaillard, Christopher Meissner, Angela Redish and Roland Straub for helpful discussions. The views expressed in this paper are those of the authors and do not necessarily refl ect those of the ECB or the Eurosystem. Livia Chițu at European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany; e-mail: [email protected] Barry Eichengreen at University of California, 603 Evans Hall, Berkeley, 94720 California, USA; e-mail: [email protected] Arnaud Mehl at European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany; e-mail: [email protected] © European Central Bank, 2012 Address Kaiserstrasse 29, 60311 Frankfurt am Main, Germany Postal address Postfach 16 03 19, 60066 Frankfurt am Main, Germany Telephone +49 69 1344 0 Internet http://www.ecb.europa.eu Fax +49 69 1344 6000 All rights reserved. ISSN 1725-2806 (online) Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the authors. -
Early Speculative Bubbles and Increases in the Supply of Money
UNLV Retrospective Theses & Dissertations 1-1-1991 Early speculative bubbles and increases in the supply of money Douglas Edward French University of Nevada, Las Vegas Follow this and additional works at: https://digitalscholarship.unlv.edu/rtds Repository Citation French, Douglas Edward, "Early speculative bubbles and increases in the supply of money" (1991). UNLV Retrospective Theses & Dissertations. 167. http://dx.doi.org/10.25669/h29l-bf64 This Thesis is protected by copyright and/or related rights. It has been brought to you by Digital Scholarship@UNLV with permission from the rights-holder(s). You are free to use this Thesis in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/ or on the work itself. This Thesis has been accepted for inclusion in UNLV Retrospective Theses & Dissertations by an authorized administrator of Digital Scholarship@UNLV. For more information, please contact [email protected]. INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. -
Nber Working Paper Series Banking Crises
NBER WORKING PAPER SERIES BANKING CRISES: AN EQUAL OPPORTUNITY MENACE Carmen M. Reinhart Kenneth S. Rogoff Working Paper 14587 http://www.nber.org/papers/w14587 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 December 2008 The authors are grateful to Vincent Reinhart, Keyu Jin, Tarek Hassan, Vania Stavrakeva for useful comments and suggestions on an earlier draft, and to Cesar Sosa, Chenzi Xu and Jan Zilinsky for excellent research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2008 by Carmen M. Reinhart and Kenneth S. Rogoff. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Banking Crises: An Equal Opportunity Menace Carmen M. Reinhart and Kenneth S. Rogoff NBER Working Paper No. 14587 December 2008 JEL No. E6,F3,N0 ABSTRACT The historical frequency of banking crises is quite similar in high- and middle-to-low-income countries, with quantitative and qualitative parallels in both the run-ups and the aftermath. We establish these regularities using a unique dataset spanning from Denmark's financial panic during the Napoleonic War to the ongoing global financial crisis sparked by subprime mortgage defaults in the United States. Banking crises dramatically weaken fiscal positions in both groups, with government revenues invariably contracting, and fiscal expenditures often expanding sharply. -
Deflation Edited by Richard C
Cambridge University Press 978-0-521-83799-6 — Deflation Edited by Richard C. K. Burdekin , Pierre L. Siklos Frontmatter More Information DEFLATION Until recently, fears of deflation seemed nothing more than a relic of the Great Depression. However, beginning in the 1990s, persistently falling consumer prices emerged in Japan, China, and elsewhere. Deflation is also a distinct possibility in some of the major euro area economies, especially Germany, and became a concern of the U.S. Federal Reserve in 2003. Deflation may be worse than inflation, not only because the real burden of debt rises but also because firms would confront rising real wages in a world where nominal wage rigidity prevails. This volume explores some key themes regarding deflation including: (i) how economic agents and policy makers have responded to de- flation; (ii) the links between monetary policy, goods price movements, and asset price movements; (iii) the impact of deflation under different monetary policy and exchange rate regimes; and (iv) stock market reactions to deflation. Richard C. K. Burdekin is Jonathan B. Lovelace Professor of Economics at Claremont McKenna College, Claremont, California. His areas of interest include monetary and financial economics, Chinese economic reforms, and inflation and deflation. Professor Burdekin has published four books: Budget Deficits and Economic Performance (with Farrokh K. Langdana), Confidence, Credibility and Macroeconomic Policy (with Farrokh K. Langdana), Distributional Conflict and Inflation (with Paul Burkett), and Establish- ing Monetary Stability in Emerging Market Economies (edited with Thomas D. Willett, Richard J. Sweeney, and Clas Wihlborg). He has also authored more than forty refereed journal articles that have been published in the American Economic Review; the Jour- nal of Economic History; the Journal of International Money and Finance; the Journal of Money, Credit, and Banking; and the Review of Economics and Statistics, among other leading publications. -
The Big Reset: War on Gold and the Financial Endgame
WILL s A system reset seems imminent. The world’s finan- cial system will need to find a new anchor before the year 2020. Since the beginning of the credit s crisis, the US realized the dollar will lose its role em as the world’s reserve currency, and has been planning for a monetary reset. According to Willem Middelkoop, this reset MIDD Willem will be designed to keep the US in the driver’s seat, allowing the new monetary system to include significant roles for other currencies such as the euro and China’s renminbi. s Middelkoop PREPARE FOR THE COMING RESET E In all likelihood gold will be re-introduced as one of the pillars LKOOP of this next phase in the global financial system. The predic- s tion is that gold could be revalued at $ 7,000 per troy ounce. By looking past the American ‘smokescreen’ surrounding gold TWarh on Golde and the dollar long ago, China and Russia have been accumu- lating massive amounts of gold reserves, positioning them- THE selves for a more prominent role in the future to come. The and the reset will come as a shock to many. The Big Reset will help everyone who wants to be fully prepared. Financial illem Middelkoop (1962) is founder of the Commodity BIG Endgame Discovery Fund and a bestsell- s ing author, who has been writing about the world’s financial system since the early 2000s. Between 2001 W RESET and 2008 he was a market commentator for RTL Television in the Netherlands and also BIG appeared on CNBC. -
A History of Merchant, Central and Investment Banking Learning
Chapter 2: A History of Merchant, Central and Investment Banking Learning Objectives: To apply the history and evolution of money and banking to comprehension of existing systems To diagnose and calculate seniorage and debasement To recount how conditions drawn from history led to today's instruments and institutions To examine how economic problems lead to banking and capital market innovations To describe how money and banking integrated into the many economies over thousands of years To summarize the many artistic, literary, technological and scientific achievements that were funded or otherwise facilitated by banking To recognize the problems associated with usury in religious, social and economic contexts To express how academic, exploration, technological, trading, religious and other cultural developments contributed to the practice of banking A. Early History of Money In Chapter 1, we briefly discussed the economic roles of a number of types of financial institutions along with their origins. In this chapter, we discuss in greater detail the history of money and banking, beginning with the early history of money and extending through the advent of modern banking in the early 20th century. In later chapters, we will discuss the repeated occurrence and consequences of banking crises and development of banking regulation from a historical perspective. Commodity and Representative Money The earliest forms of money tended to have alternative intrinsic value as commodities. For example, grain-money has been used since the dawn of agriculture. Neolithic peoples in what is now China are believed to have used cowrie (sea snail) shells as money perhaps as long ago as 4,500 years.