50 Years of the German Mark: Essays in Honour of Stephen F. Frowen

261 Pages·79.613 MB·English

by  Jens Hölscher (eds.)

Anglo-German Foundation for the Study ofI ndustrial Society
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Professor Stephen Francis Frowen KSG
Photograph by Anthony Buckley and Constantine Ltd
SO Years of the
German Mark
Essays in Honour of
Stephen F. Frowen
Edited by
Je ns HOlscher
University of Brighton
in association with
Anglo-German Foundation
for the Study of Industrial
Society
Editorial matter and selection © jens Holscher 2001
Chapter 7 © jens Holscher, Eric Owen Smith and Geoffrey Pugh 2001
Chapters 1-6,8 and 9 © Palgrave Publishers Ltd 2001
All rights reserved. No reproduction, copy or transmission of
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Copyright, Designs and Patents Act 1988.
First published 2001 by
PALGRAVE
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Companies and representatives throughout the world
PALGRAVE is the new global academic imprint of
St. Martin's Press LLC Scholarly and Reference Division and
Palgrave Publishers Ltd (formerly Macmillan Press Ltd).
ISBN 978-1-349-41283-9 ISBN 978-0-230-37855-1 (eBook)
DOI 10.1057/9780230378551
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A catalogue record for this book is available
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Library of Congress Cataloging-in-Publication Data
50 years of the German mark: essays in honour of Stephen F.
Frowen I edited by jens Holscher.
p.cm.
Includes bibliographical references and index.
1. Mark, German-History. 2. Money-Germany-History.
3. Monetary policy-Germany-History. I. Title: Fifty years
of the German mark. II. Frowen, Stephen F. ill. Holscher, jens.
HG999.5 .A 154 2000
332.4'943-dc21
00-052420
10 9 8 7 6 5 4 3 2
10 09 08 07 06 OS 04 03
Contents
List of Tables viii
List ofF igures ix
Acknowledgements x
Word of Greeting by Otmar Issing xi
Notes on Contributors xii
Introduction by Tens HOlscher xvii
Laudatio on the Occasion of the 75th Birthday
of Professor Stephen F. Frowen xx
Hans Tietmeyer
Stephen Frowen - An Inspired Mediator in Turbulent Times xxiv
Norbert Kloten
1 Keynote Speech: The DM and the Future of the Euro 1
C. A. E. Goodhart
Introduction 1
Professor Stephen Frowen 1
The Deutsche Mark 3
The future of the Euro 4
Conclusion 6
2 Fifty Years of the Deutsche Mark - a Currency and its
Consequences 7
Hans Tietmeyer
3 The 1948 Currency Reform: Structure and Purpose 15
Keith Tribe
Introduction 15
The currency refonn: terms and conditions 17
Rearmament and wars of conquest: Geri:iuschlose Finanzierung
and its consequences 25
The restoration of market relations and economic policy 34
Currency reform in postwar Europe 39
Conclusion 43
v
vi Contents
Comment 52
Horst Tomann
4 Paradigm Changes of German Monetary Policy 56
Reiner Konig
Introduction 56
1948-1973: Increasing tensions between domestic and external
value of the German currency 57
1974-1998: The monetary targeting policy of the Deutsche
Bundesbank 59
Constants of German monetary policy 62
Conclusions and outlook for European Monetary Union 66
Comment 70
Andy Mullineux
5 Is the European Central Bank too Independendent? 75
Geoffrey E. Wood
Introduction 75
Concepts of independence 76
Indepedence and performance 77
Causality, history and exceptions 79
Accountability and transparency 86
Comparisons 90
Conclusions 92
Comment 98
Anke Jacobsen
6 The Euro: Implications for Germany and Europe 100
Norbert Kloten
A backward look on Germany 100
Implications of the Euro 103
Germany and the European Union put on test 112
Comment 120
David Cobham
7 The DM-Undervaluation and West Germany's Economic
Performance 125
Jens HOlscher, Eric Owen Smith and Geoffrey Pugh
Introduction 125
The current account debate 127
Conclusion 150
Contents vii
Comment 154
Jorg Bibow
8 The Fate of Key Currencies: a Strategic Approach 159
Stephen F. Frowen and Elias Karakitsos
Introduction 159
The German mark and the euro 161
The policy-choice model 167
The choice of eqUilibrium 171
Conclusions and lessons for Europe 178
9 The Bipolar International Monetary System and the British
Pound 183
Hajo Riese
The dollar as a model for the euro 183
The challenge of the 'lender of last resort': the market solution 186
The British pound in a bipolar monetary system 188
The general problem with the pound 191
10 Epilogue: The Meaning of Sound Money 195
Sir Samuel Brittan
Deflation 196
Sound Money 197
Stephen F. Frowen: Bibliographical Data 203
Books edited 203
Translations from German into English 204
Translations from English to German 204
Contributions to books 204
Articles 207
Short articles and notes 210
Reviews 211
Official publication 211
Published letters 211
Obituary notices 212
Other references 212
Name Index 214
SubjectIndex 217
List of Tables
3.l. Arms expenditure 1933-38 26
3.2. Price and monetary indices, Germany 1932-44 28
3.3. Reich budget (bn RM) 29
3.4. Comparison of US, German and UK public debt 31
3.5. Estimated changes in German monetary stock since
May 1945 33
3.6. Stock of notes and coin plus bank deposits in individual
zones, September 1946 (bn RM) 34
5.l. Classification of central bank dependency 1973-86 78
7.l. Average Percentage Deviation of Market Rate from PPP rate 137
7.2. Changing value of the DM and its impact on German price
competitiveness 137
8.l. European reaction-function 175
viii
List of Figures
7.l. Current and trade balances 127
7.2. Visibles and invisibles 128
7.3. Interest rates and trade balances 131
7.4. Mean macroeconomic index for Germany and the UK 134
7.5. Percentage undervaluation (-) and overvaluation (+) of
the DM against sterling (1951-95), the French franc
(1962-95) and the US dollar (1964-95) 135
7.6. Growth of trade 140
8.l. Three possible equilibriums in a game setting 170
8.2. Inflation and growth in the business cycle 171
8.3. Sensitivity of equilibrium with respect of the US priorities
of inflation and growth 174
8.4. Welfare and interest rates 174
ix