SHORT-CUT ESTIMATES OF REAL INCOME

The United Nations International Comparisons Project (ICP) has conducted in-depth purchasing-power parity (PPP) studies of the so-called "benchmark" countries (of which there were 34 in the 1975 sample). In the absence of PPP studies of the rest of the countries in the world, the ICP team has constructed "short-cut" estimates of real income (that is, income converted from domestic currency to dollars at PPP) for the nonbenchmark countries. The idea of a "short-cut" procedure for estimating real income is to run a regression of real income on nominal income (that is, income converted from domestic currency to dollars at a market exchange rate) and other variables among the benchmark countries and then to use this regression to estimate real income for the nonbenchmark countries. The most recent ICP short-cut estimates have been based on regressions of real income on nominal income and the foreign trade ratio. The present study expands the list of candidate variables that might be included in a short-cut regression. The list includes educational attainments, the share of minerals in GDP, the trade balance, the growth of the money supply, tourist receipts, and the share of nontradables in GDP. The theory underlying the inclusion of each of these variables is discussed. Regressions are run with various combinations of these variables and some short-cut estimates of real income for 76 market economies are presented.     

USE OF NATIONAL ACCOUNTS FOR A SHORT-TERM ECONOMETRIC MODEL: 1954–1966

A quarterly macro-econometric model of Japan's postwar economy has been constructed for the period 1954–1965 FY on the basis of standardized quarterly national income accounts. The model is designed for facilitating short-term economic forecasting and formulating adequate fiscal and monetary policy. Longer-term factors such as labor mobility, technical progress, etc., were also considered in the model.
The model consists of fifty-three equations related to most of the macroeconomic variables in both money and real terms, and the equations were estimated in principle by the limited information maximum likelihood method. Principal exogenous variables related to policy instruments are government expenditures including transfers, parameters of tax functions, interest rate, and prices and fares controlled by the government, etc. In formulating the model, non-linear specifications were used whenever found necessary.
Results of our testing on its predictive capability indicated fairly satisfactory performances for our observation period and also for 1966 FY. Multipliers related to fiscal and monetary policy were also obtained, indicating the dynamic characteristics of the Japanese economy, in particular, represented by dynamic business fixed investment, as compared with corresponding multipliers of the U.S. models.
Although the model is exploratory and to serve as a core for a more disaggregated "Master Model," the usefulness of the model for our purposes and the workability of our quarterly national accounts data for model-building have been recognized. The quarterly data, however, still remain to be improved especially in regard to consistency between income and expenditure and integration with flow-of-funds accounts.     

Ein ökonometrisches Quartalsmodell für den monetären Sektor der österreichischen Wirtschaft

Summary This paper describes the development of a quarterly econometric model for the monetary sector oft the Austrian economy. The model consists of 8 behavioural equations and 3 definitions. The equations were estimated by OLS using absolute differences on an annual basis of quarterly time series data. The sample period covers 44 quarters (1^st quarter of 1960 to 4^th quarter of 1970).Behavioural equations were estimated for three components of bank reserves: net free reserves, borrowing from the central bank and short-term net foreign position. The instruments of central bank policy (discount rate, minimum reserve requirements and open market operations), changes in net foreign assets of the central bank and bank deposits constitute important determinants of these reserve components. Central bank borrowing and net foreign assets appear to be planned aggregates, whereas net free reserves have a more residual character. A further equation explains banks' net investment in long-term fixed-interest securities (bonds). Another group of equations was estimated for non-banks' demand for money (defined in the wide sense). Separate equations exist for currency, demand deposits and (private) saving deposits (no satisfactory explanation could be found for time deposits). These monetary aggregates are determined as usual by income variables (the distribution of disposible income between wage and non-wage income) and by the interest rate (effective interest rate of newly issued bonds). Several additional variables improved the degree of explanation. Finally, total bank loans were found to be determined by fixed and inventory investment and by loans from abroad.These structural equations form a linear recursive system which can be solved via reduced form. In order to study the properties of the model several tests were performed. The dynamic solution (values generated by the model were used for lagged endogenous variables) shows that errors do not cumulate in the course of time. As an, example of multiplier analysis the effects of a change in the net foreign reserve assets of the central bank on several endogenous variables are considered. Policy simulations are run for the cases of changes in the discount rate, in minimum reserve requirements and disposible income (e. g. as a result of a change in income tax rate).From the satisfactory results of these tests we conclude that our model represents the structure of the Austrian monetary sector quite well.

---

---

Die Verfasser danken Herrn Professor Dr.E. Streissler für zahlreiche Anregungen.     

A panel data approach to the demand for money and the effects of financial reforms in the Asian countries

Alternative panel data estimation methods are used to estimate the cointegrating equations for the demand for money (M1) for a panel of 14 Asian countries from 1970 to 2005. The effects of financial reforms are analyzed with estimates for two sets of sub-samples and two break dates. Our results show that money demand function has been stable and financial reforms are yet to have any significant effects. Since there is no evidence for instability in the demand for money, the central banks of these countries should use money supply, instead of the rate of interest, as the monetary policy instrument.     

Long-run estimates of money demand: new evidence from East Asian countries and the presence of structural breaks

Conventionally, the money demand function is estimated using a linear regression of the logarithm of money demand on a number of variables. In this article, we aim to estimate the long-run properties of money demand specification for a number of East Asian economies and within a panel framework with the presence of structural breaks. Various country-specific coefficients are allowed to capture inter-country heterogeneities. Consistent with theoretical postulates, it is found that (a) the demand for money in the long-run positively responds to real income and inversely to the interest rate spread, inflation, the real effective exchange rate and the US real interest rate; (b) the long-run income elasticity is greater than unity; and (c) both the currency substitution and capital mobility hypotheses hold. The empirical findings in this article can provide useful policy guidelines to the East Asian countries’ central banks in their quest for price stability. If one of the primary objectives of these countries is to minimize price instability, they should avoid creating unnecessary disequilibrium in the money market, while the employment of cointegration with the presence of structural breaks clearly recommends to central banks to use the supply of money to attain price and macroeconomic stability.     

Virtual Currencies,the Money Market,and Monetary Policy

Virtual currencies are in vogue mainly due to two factors. First, as a protest against authority-driven monetary policy decisions and second, as alternatives to deficits in some monetary systems arising out of political instability or other causes. Assuming that virtual currencies indeed (partially) replace national currencies as payment vehicles, we attempt, in this article, to integrate the virtual currency supply and demand into the Keynesian money market framework. This article presents a few results for the central banks and outlines problems that may result for monetary policy formulation. Since this is the first such attempt to model a national money market as a combination of nationally-issued currency and globally-issued virtual currency, certain simplistic assumptions have been made. Nevertheless, the model offers directions on the impact of virtual currencies on the monetary system and the national money market. Additionally, the paper integrates the official standpoints of the European Central Bank and the Bank of England on this topic.     

A macroeconometric framework for monetary policy evaluation: A case study of Pakistan

This paper attempts to establish the quantitative importance of the various channels of monetary transmission by constructing, estimating and simulating a small macroeconometric model of Pakistan's monetary sector, while using data from the monetary statistics and the monetary survey of the State Bank of Pakistan over 1976–2007. The paper elucidates that the key feature of the study of monetary policy in Pakistan has been preoccupied with neglect either of the demand or the supply function of money and shows how this may lead to imprecise policy actions and mistaken conclusions. Accordingly, we delineate the transmission mechanism of monetary policy by taking into consideration all structural money demand and money supply linkages along with the historically implied identifying assumption in the framework of a marginalized macroeconometric model. The within-sample and out-of-sample evaluations of the model are found satisfactory. The paper presents results of three policy simulations from the estimated model that highlight the impact of alternative monetary policy instruments on the monetary variables under a rule-based and a discretionary policy environment. We find that (i) the SBP subscribes to an unannounced monetary policy rule, (ii) the determination of the policy rate under the announced rule environment stabilizes the monetary sector in that convergence to full equilibrium is smooth and rapid, (iii) a 100 bps reduction in the discount rate, ceteris paribus, decreases money supply by 4.97%, and (iv) the long term implication of reducing (increasing) the reserve requirement ratio on time (demand) deposits, ceteris paribus, is only higher inflation. Finally, we establish that a 100 bps increase in interest rate increases money supply by 3.14% in full equilibrium.     

中国“货币超发”： 判断标准、成因及其治理

2013年10月末,我国广义货币余额达到107万亿元,与GDP之比接近200%,M2/GDP也被广泛用来佐证我国货币已经超发的论点,但简单地将M2与GDP相对应,论证货币超发缺乏严谨的理论依据与逻辑结构,对经济变量的解释力也不足。从IS-LM模型分析发现我国高M2/GDP的症结不在货币量的多少,而是货币对经济产出的影响效率偏低,关注的重点需要从“货币超发”转向为货币政策创造制度环境,解决的途径也不在“堵”而在“疏”。     

货币增速剪刀差与CPI相关性的实证研究

货币供应量作为我国的货币政策中介目标存在很多争议,但是现阶段依然具有不可替代的作用,在重视货币总量的同时,应分析货币结构的变化,实现对货币供应量中介目标的改良是一个现实选择。本文通过对2001年1月—2010年12月的宏观月度数据的研究,发现货币增速剪刀差与CPI之间存在着显著的正相关关系。在样本期内,货币增速剪刀差与通货膨胀之间互为格兰杰因果关系,货币增速剪刀差的变化体现为4期之后的CPI变化,当期货币增速剪刀差每增加一个单位则4个月之后的CPI上升0.049个单位。央行应将货币结构尤其是货币增速剪刀差作为货币供应量数量指标的补充,同时考虑对货币结构进行调控,以增强货币政策效用。     

The Optimum Currency Area Puzzle

The theory of optimum currency areas, suggesting the redrawing of currency areas across countries or splitting of national money into several currencies, is at odds with the one-money-one-country pattern that has dominated monetary history for 26 centuries. This paper puts forward an equilibrium approach which, by stressing the influence of the border effect on intranational adjustment, solves the puzzle and analyzes the closely related issue of the viability of monetary unions and regional specialization.     

Money demand in the Dominican Republic

This paper investigates a demand for money relationship for the Dominican Republic. The financial system of the Dominican Republic is underdeveloped, and there are no suitable domestic data on the opportunity cost of holding money. Economic links with the USA suggest a possible role for a foreign interest rate effect and a currency substitution effect in the demand for domestic money. A long-run demand for money relationship is developed from the perspective of alternative estimation methodologies, and it is shown that a 'literature standard' specification augmented by foreign monetary variables is robust. The ensuing short-run dynamic model is adequate, stable and suggests an important role for expected inflation, and a real bilateral exchange rate with the USA. A number of policy implications for the Dominican Republic are drawn from the results.     

Money-income causality: Results for six countries

In this paper we attempt to ascertain multivariate money-income causality. Previous studies using a bivariate framework likely suffer from bias as a result of omitted variables. A framework is developed where both U.S. money and domestic money in an open, nonreserve currency country may influence that country's income. Reverse causation from income to domestic money is also possible. We use data from six countries to test the model. Our results suggest that both U.S. and domestic money stocks are important determinants of income. Thus, bias exists in previous studies. However, our results vary by country and are sensitive to the measure of money included which suggests that important variables may still be omitted.     

内生货币体系下房价波动对货币供求的冲击

在内生货币体系下,房价上涨导致我国内生货币扩张的途径主要有两条:一是基于房地产抵押信贷需求膨胀引致的商业银行内生货币供给的扩张;二是被房价持续上涨及人民币升值预期所吸引的外汇流入导致央行大量基础货币的被动投放。这样会对货币供应量目标有效性带来影响。因此应将房地产市场监测数据列入当前货币供应量调控的参照指标。     

中国货币政策中介目标与经济增长

货币政策中介目标是货币政策体系中的重要组成部分,合适的货币中介目标对保持国民经济持续稳定增长具有重要意义。采用基于ARDL模型的协整分析方法,对货币中介目标与中国国民经济增长的关系进行了深入研究,发现通货膨胀率对国民收入的影响幅度最大、货币供应量对国民收入的影响次之,而利率对国民收入的影响相对较小。认为在目前条件下,我国应从过于强调货币供应量指标,转向综合利用多种金融变量来指导货币政策的操作,但在将来市场体系完善后,可考虑采用通货膨胀作为货币政策中介目标。     

Liberalisation,Financial Risk,and Formal Financial Participation in Pakistan: Hyperinflationary Microeconomic Responses to Moderate Volatility in a Developing Economy

With formal financial inclusion much lower than its neighbours, Pakistan has been the focus of intensive efforts to ‘bank’ the ‘unbanked’. Yet, after a drop in deposits in the wake of Pakistan’s 2008 crisis, deposits are still struggling to return to their mid-1990s’ levels. Focusing on distortions in the banking sector, the Central Bank attributes this to ‘crowding out’ amidst a steep rise in the propensity to consume. This study draws on extensive fieldwork, identifying heightened financial risk driven by multifaceted monetary instability since the liberalisation of the rupee and of Pakistani markets. It proposes that heightened monetary risk has translated into a broad-based shift out of the rupee akin to hyperinflationary responses, but revealed in relatively moderate monetary conditions. It argues that, exposed to global markets, national currency itself has become a risky asset, pushing store-of-value and transactional holdings into unconventional liquid assets. This suggests that monetary stability, expressed in the currency itself and in broader pricing patterns in the economy, is key to the uptake of financial intermediation. The issue at the root of disintermediation in Pakistan, it is argued, is less one of ‘crowding out’ than of disruption to the role of national currency as money itself.     

Monetary dynamics: a market approach

The behaviour of the short-run responses implied by the identification of a long-run money demand relationship is examined. These responses have recently been interpreted as representing the policy stance of the monetary authority. However, as movements in the monetary aggregate reflect both demand and supply adjustments, estimating the short-run dynamics solely within the money demand relationship may produce biased results. In order to address this issue, the paper explicitly acknowledges the importance of the supply of money function by including the function alongside the demand for money function. While the interaction of the two equations continues to produce the long-run quantity theory result, the additional detail provides more accurate estimates of the individual short-run adjustments within the two equations.     

THE MONETARY METHOD AND THE SIZE OF THE SHADOW ECONOMY: A CRITICAL ASSESSMENT

A widely applied approach to measure the size of the shadow economy, known as the "monetary method" or the "currency approach," is based on econometric estimates of the demand for money. These estimates are used to get the currency held by economic agents in excess of the amount they need to finance registered transactions. This excess of currency multiplied by the income-velocity of circulation (assumed to be equal in the registered and shadow economies) gives a measure of the hidden GDP. This paper shows that the monetary method only produces coherent estimates if the income-elasticity of the demand for currency is one and suggests a way to correct the estimated size of the shadow economy when such elasticity is not one. The correction is applied to existent measures for different countries.     

A TECHNIQUE FOR ESTIMATING INCOME TRENDS FROM CURRENCY DATA AND AN APPLICATION TO NINETEENTH-CENTURY BRAZIL

This paper develops a method for estimating long-run trends in income growth from the data available on a country's currency stock. The method is applied to nineteenth-centry Brazil. The results indicate that contrary to earlier beliefs, the country as a whole probably experienced only moderate growth in per-capita income during the nineteenth century. The approach may also be useful for other countries where data shortages preclude estimates of national income by conventional methods.     

我国统一调控下货币政策内部传导区域效应非对称性分析

我国外汇资产迅速扩张,外汇占款取代再贷款成为我国中央银行基础货币投放的主渠道。经济开放程度高的发达区域不仅基础货币投放量远远超过其他区域,其区域货币乘数也高于其他区域,导致货币政策内部传导的区域效应非对称性。实证分析认为,我国基础货币变化对开放程度最高的东部发达区域货币供应量的影响最大,其次是经济不发达的中部区域,对开放程度低的西部不发达区域的影响最小。建议采取适度差别的区域货币政策,缓解区域货币供给的非均衡性,提高我国货币政策内部传导的整体效率。     

Money,income and prices in Latin America: An empirical note

Recent papers by Behrman and Vogel, using a simple monetary model, have provided evidence that the price adjustment mechanism in Latin America is characterized by a lagged response to money supply changes which may seriously impede stabilization efforts. In both studies the response to income changes is also drawn out in time. This note re-examines and expands on this evidence, finding that the model only performs well for the high inflation countries and that in these countries price adjustment for both the money supply and real income appears to be virtually complete within the current year.