Suchergebnisse

During the last two centuries there have been four main approaches to analysing the determination of the money supply, to wit: (1) Deposits cause Loans, (2) The Monetary Base Multiplier, (3) The Credit Counterparts Approach and (4) Loans cause Deposits. All four approaches are criticized, especially (2) which used to be the standard academic model, and (4) which is now taking over as the consensus approach. Instead, I argue that banking is a service industry, which sets the terms and conditions whereby the private sector can create additional money for itself. The problem is that such money creation tends to be highly procyclical, so the question then becomes finding the best trade‐off between official control of that process and allowing sufficient flexibility for the private sector. I conclude by reviewing how Lord King's reform proposals, in his book on The End of Alchemy, might fit into this broader analysis.

Lionel Robbins was concerned about the methodology of economic science. When he discussed the relationship between theory and 'reality', two of the examples of inappropriate relationships were taken from monetary economics. Such shortcomings continue. Among the worst are:(1) IS/LM: whereby the monetary authorities set the monetary base, and the interest rate is market determined;(2) the monetary base multiplier of bank deposits, and the role of reserve ratios;(3) the current three‐equation neoclassical consensus, assuming perfect creditworthiness, and hence no need for banks;(4) the analysis of the evolution of money.

In 1989 The Reserve Bank Of New Zealand Act Gave The Rbnz the operational independence to vary monetary instruments, in particular to control the level of short-term money market rates, in such a way as to hold inf lation within a stated range over a stated period of time. That numerical range and period were to be agreed in a contractual arrangement between the Minister of Finance and the Governor, and the Governor was to be held personally responsible for achieving those agreed objectives.

Given the long and variable time lags between interest rate changes and responses in output and inflation, an inflation forecast must lie at the heart of monetary policy. In the UK the Bank's inflation forecast and Report were developed when the interest rate decision still lay with the Chancellor. Its, largely unchanged, continuation has led to certain tensions once that decision was delegated to a Monetary Policy Committee of independently responsible experts. In this paper the question is raised whether such a Committee should be jointly and individually responsible for the inflation forecast, and what might be considered as alternative procedures.

AbstractThis paper examines the problems of the transition to EMU, on the assumption that stage 3 of the EMU process begins in 1999. A number of issues are addressed, ranging from the attachment to national countries to problems of fiscal adjustment in the final path to EMU, and I suggest that the Maastricht fiscal criteria may turn out to be more flexible than many commentators suggest. Other problems relate to the possibility of a final parity realignment between the participants of EMU, and the relationship between those countries joining EMU, and the excluded countries. Finally, the paper concludes that there is no need to rush quickly from stage 3A to stage 3A to stage 3B of the EMU process until public and political support for the introduction of the Euro is built up.