Credit Markets and the Propagation of Korea's 1997 Financial Crisis

We consider the roles of monetary shocks and tightening credit market conditions in the transmission of South Korea's 1997 financial crisis to the real sector, and compare the relative impacts of these factors on production in light and heavy industries. Using structural regression equations, vector autoregressive models, and the accompanying dynamic forecasts, we find that the ratio of commercial bills dishonored to the total value of bills to be cleared can explain the decline in industrial production more fully than either the decline in the real stock of money or the spread between yields on corporate and government bonds. These results are most emphatic in light industry, for which small and medium-sized firms account for more than 70% of the total value added. Since fluctuations in the dishonored bills ratio may reflect components related to increases in the cost of credit intermediation and its effect on small and medium-sized firms more precisely than the corporate-government bond spread, we interpret the evidence as suggestive of a credit channel and “flight to quality” at work.     

当前我国超额货币的测算与冲销对策

本文在测算我国超额货币的基础上,分析了当前我国超额货币的成因以及对经济的不利影响。结果表明当前我国超额货币现象严重,不仅诱发通货膨胀,而且削弱货币政策的效果。在此基础上,提出兜售央票,斩断人民币升值预期,合理使用外汇储备等政策建议。     

Specialization and Welfare in the Presence of Imperfectly Integrated Capital Markets and Learning-by-doing

We study a two-sector, two-period model with learning externalities in the modern sector and imperfectly integrated capital markets. We find that higher capital market integration lowers the requirements on the learning pattern necessary for free trade to lead to an equilibrium with maximal specialization in modern sector activities. We further find that the equilibrium with maximal specialization in modern sector activities Pareto dominates, if it exists, any other free trade equilibrium, and that autarky can Pareto dominate free trade if capital markets are poorly integrated, even when there is maximal specialization in modern sector activities under free trade.

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Currency Substitution and the Stability of the Demand for Money in East Asia

Abstract

This paper models and tests the stability of the demand for money in five East Asian countries—Indonesia, Malaysia, Philippines, Singapore, and Thailand—in the context of an open economy. The Johansen multivariate cointegration vector error correction analysis against quarterly data covering the period 1985:1–2001:4 was used. It was found that a stationary long run cointegrating relationship exists between broad money, real income, domestic interest rates, foreign interest rates corrected for exchange rate depreciation, and the expected rate of depreciation of the exchange rate. The results show that US Treasury bills rates and the foreign exchange rate vis-à-vis the US dollar play a significant role in the East Asian countries money demand relationship. This suggests that currency substitution vis-à-vis the US dollar may be an important consideration in the design and implementation of monetary policy in the East Asian countries. Furthermore, the results show that the Asian currency crises impacted the money demand functions negatively in these countries. CUSUM and CUSUMSQ stability tests show no evidence of parameter instability of the money demand functions in three of the five countries throughout the period under investigation.     

On the causes of the rise in the liquidity ratio in The Netherlands during the early eighties

During the early eighties the liquidity ratio in The Netherlands shows a sharp rise. The aim of this article is to inquire into the causes of this rise. This has been done by means of the demand theory of money. The analysis leads to the following conclusions.

我国发达地区现代服务业发展比较：水平、结构与优势

以江苏、浙江、山东、广东为代表的我国发达地区现代服务业整体规模位居全国前列,但比较优势不明显.具体到行业,四省之间现代服务业部门构成差异不大,地区间分工程度不高,但行业发展各有特点,略显错位发展态势.四省现代服务业投入不足必将掣肘现代服务业的加快发展,未来应加大投入力度特别是研发投入力度,同时因地制宜,重点关注那些现在比重小但增速快的行业,培育现代服务业新增长点.     

Private Sector Participation in the Provision of Quality Drinking Water in Urban Areas of Ghana: What Do Households Want and Can Afford?

This study conducts a survey among households in three cities in Ghana on how water delivery should be managed. The contingent valuation method was used to estimate the willingness to pay for improved water delivery under private sector participation. Results indicate that most households will remain connected to their current water supplies if private sector is engaged to improve water delivery at higher monthly water bills. Given that the mean household monthly water bill of GH¢10.82, the results indicate that there is demand for water quality improvement, and private sector engagement is likely to provide these services. However, this policy measure marginalises the poor in terms of access to water. Therefore, private sector participation in water delivery may require a complementary programme to promote access to water.     

Een onderzoek naar de invloed van monetaire factoren op het reële groeiproces in enkele traditionele theorieen van economische groei (I)

Summary With some exceptions — e.g., Tobin and Johnson — theorists have been looking for an explanation of economic growth in the real sector. This is the first of three successive papers on the problem of to what extent monetary phenomena influence the real variables in a process of economic growth.If one aims at adding a monetary sector to a real model of economic growth, the first thing to do is getting an exposition of the monetary theory which is most suitable for this purpose. The monetary theory used in this paper is based on Patinkin and Gurley and Shaw. The conditions under which money does not affect the real economic process are amply discussed. Only in very special cases money turns out to be neutral.In the two subsequent papers this monetary theory is used for an investigation into the impact of money on growth according to a neo-classical and a neo-keynesian model of economic growth.De schrijvers zijn dank verschuldigd aan talrijke leden van de wetenschappelijke staf van de Economische Faculteit te Groningen en aan de deelnemers van een economistenconferentie te Tilburg op 12 januari 1968 voor hun stimulerende opmerkingen bij de oorspronkelijke versie van dit werkstuk.     

Real dollarization in Phnom Penh,Evidence from two surveys

This paper aims to identify real dollarization in markets in Phnom Penh and to investigate how U.S. dollar (USD) and Cambodian riel or Khmer riel (KHR) perform the three functions of money—a unit of account, a store of value and a medium of exchange in markets in Phnom Penh through two simple surveys. Real dollarization refers to the use of the U.S. dollar for purchasing goods and services and for paying salary. We find that the choice of currency for transactions varies with market types, sources of products whether they are imported or domestically produced, and prices of products. The survey about currency for salary payment shows that the majority of employed persons in the private sector and in non-government organization receive salary in U.S. dollar while those who work in public sector receive salary in Khmer riel. The majority of employed persons save their money in U.S. dollar. In general, U.S. dollar dominates Khmer riel in performing the three functions of money in Phnom Penh.     

A Descriptive Model of Banking and Aggregate Demand

We integrate a banking sector into an accessible macroeconomic framework, which then provides new insights on developments around the Global Financial Crisis. The analysis shows that growth of banking sector money supply may help explain the secular decline in long-term interest rates before the crisis. A new bank funding channel of monetary transmission clarifies why increases in central bank policy rates could not reverse this trend. Our analysis highlights the distinction between the zero lower bound and the liquidity trap, and shows that bank recapitalizations can be more effective than fiscal expansions in restoring aggregate demand after a banking crisis.     

The case against currency boards

Conclusion We have argued that a CB is a creation of the state, aiming at granting particular political favors, and purposefully designed to secure the reappearance of an independent domestic money producer. A CB establishes a foreign fiat money standard enforced by legal tender laws for its bank notes, which are mere money substitutes in the context of fractional-reserve commercial banking. This insight helps us to understand why CBs have always degenerated into national central banks of the modern type: they were intentionally created to do so. This surely will also be the fate of present-day CBs. Although technically the transition from a CB to a commodity money (gold or other commodity standard) is facilitated by the warehouse aspect of the currency board, this institution does not present any incentive for the policy-makers to subject the production of money to the regulation of the free market. The paper was presented at the Southern Economic Association meeting, New Orleans, 2002.     

Welfare and economic growth in Kenya, 1914–76

In this paper we present estimates of per capita income, income distribution, and poverty in Kenya for the period between 1914 and 1976. The estimates indicate that per capita incomes mostly increased up to 1974; inequality increased most of the time until 1950, then fell and increased again until 1971 and then finally fell; poverty declined until 1964 but has since then increased slightly. A decomposition analysis shows that modern sector enrichment contributed more to growth than modern sector enlargement, and that traditional sector enrichment was of greater importance to the poor than modern sector enlargement.     

The impact of shadow banking on the implementation of Chinese monetary policy

This paper empirically analyses the relationship between the shadow banking system and implementation of monetary policy in China using the VECM methodology. We show that an increase in the size of shadow banking sector increases the independence of bank lending from the policies of the People Bank of China. We also find that Shadow Banking works in an asymmetric fashion in that it amplifies increases in the money supply but weakens the effects of restrictive interest rate-based monetary policy decisions.     

Reconstruction of the Spanish money supply, 1492–1810

How did the Spanish money supply evolve in the aftermath of the discovery of large amounts of precious metals in Spanish America? We synthesize the available data on the mining of precious metals and their international flow to estimate the money supply for Spain from 1492 to 1810. Our estimate suggests that the Spanish money supply increased more than ten-fold. Viewed through the equation of exchange this money supply increase can account for most of the price level rise in early modern Spain.     

Productivity growth,fixed exchange rates,and export-led growth

This paper studies how the fixed exchange rate regime (FERR) may promote growth when a country experiences faster rates of productivity growth in its tradable sector than its nontradable sector. In a simple two-sector model with money, we show that the FERR can reduce the Balassa-Samuelson effect if wage adjustment is subject to nominal rigidities. The undervaluation thus created suppresses real wage growth but increases the size of the tradable sector and leads to higher growth rates of the entire economy. Using cross-country panel data, our econometric exercises provide robust evidence that supports the results. Meanwhile, other fundamentals, including the external balance position, export share in the tradable sector, and the stage of development, play roles in determining the effects of FERR. Last, we apply the empirical results to run simulations on China from 1994 to 2007 to highlight the role of FERR in the country's export-led growth.     

Asset Accumulation in Rural Households during the Post‐Showa Depression Reconstruction: A Panel Data Analysis*

This paper investigates asset accumulation in Japanese farm households during reconstruction following the Showa Depression. After the Showa Depression, farm households emphasized accumulation of cash and quasi‐money rather than productive assets. The accumulation of cash and quasi‐money is consistent with the buffer stock hypothesis. Evidence regarding accumulation of livestock, which is sometimes used as the buffer stock in modern developing countries, is not conclusive. The presence of well‐developed financial institutions in prewar Japan may have allowed farm households to smooth consumption via cash and quasi‐money.     

Coffee, money and inflation in Colombia

The purpose of this paper is to analyse the relationship between coffee, money, inflation and international competitiveness in Colombia. The basic hypothesis being investigated is that higher (lower) prices of coffee will tend to result, through the accumulation of international reserves, in higher (lower) inflation. In turn, this higher inflation will generate, for a given rate of devaluation of the nominal exchange rate, a reduction of the real exchange rate, with the consequent loss of competitiveness in the non-coffee tradable goods sector. A ‘Dutch-disease’ type of model is developed to discuss analytically the relationship between coffee prices, money creation and competitiveness in the short and long run. Empirical results for 1952–1980 are presented. These results support the hypothesis that there has been a positive relationship between the price of coffee, money creation and inflation in Colombia.     

Explorations in monetary history: A survey of the literature

Monetary economists have long been interested in economic history as a laboratory for the testing of theory. This paper surveys recent work in monetary history within the context of the modern quantity theory of money and the new classical macroeconomics. Topics surveyed include the development of historical monetary statistics and the determinants of money supply and money demand; historical uses of Granger-Sims causality tests of the relationships between money, prices, and output; historical studies of the secular behavior of velocity; the Great Depression; financial crises; historical evidence for the long-run and short-run neutrality of money; and domestic and international aspects of monetary standards. Each topic surveyed concludes with an evaluation and an agenda for future research.     

National and provincial PPPs: Issues of supervision and accountability

This article focuses on the key requirements for an enabling framework for the implementation of public‐private partnerships (PPPs) in South Africa. It contends that such an enabling framework should facilitate coherent government policies and legislation, secure procurement reform, enhance capacity, foster stringent ‐ albeit not constraining ‐financial regulation and put in place supportive institutional arrangements. Arguing that PPPs revolve around risk sharing between the public and private sector, value for money and affordability, key features of the South African policy environment as it affects PPPs are discussed. Amid considerable progress, policies across sectors could still be better aligned, legislative inconsistencies straightened out, procurement procedures and approaches updated to focus more sharply on value for money (rather than lowest price) and financial uncertainties countered. It is also noted that PPPs currently occur in an institutional vacuum in the public sector. It is therefore proposed that a dedicated institutional capacity be created to support PPPs more effectively.