Current Issues in Financial and Monetary Economics PDF
Preview Current Issues in Financial and Monetary Economics
CURRENT ISSUES IN FINANCIAL AND MONETA RY ECONOMICS CURRENT ISSUES IN ECONOMICS General Editor: David Greenaway, University of Nottingham Current Issues in Microeconomics Edited by John D. Hey Current Issues in Macroeconomics Edited by David Greenaway Current Issues in Labour Economics Edited by David Sapsford and Zafiris Tzannatos Current Issues in International Monetary Economics Edited by David T. Llewellyn and Chris Milner Current Issues in Development Economics Edited by V. N. Balasubramanyam and Sanjaya Lall Current Issues in Financial and Monetary Economics Edited by Kevin Dowd and Mervyn K. Lewis F orthcoming Current Issues in Public Sector Economics Edited by Peter Jackson Current Issues in Industrial Economics Edited by John Cable Current Issues in Welfare Economics Edited by Nicholas Barr and David Whynes Current Issues in Agricultural Economics Edited by A. J. Rayner and David R. Colman CURRENT ISSUES IN FINANCIAL AND MONETARY ECONOMICS Editedby Kevin Dowd and Mervyn K. Lewis Department 0/ Economies University of Nottingham Macmillan Education ISBN 978-0-333-51640-9 ISBN 978-1-349-21908-7 (eBook) DOI 10.1007/978-1-349-21908-7 Selection, editorial matter, and Chapter 1 © Kevin Dowd and Mervyn K. Lewis 1992 Individual chapters © Keith Blackbum, Robin C. Bladen-Hovell, John Chant, K. Alec Chrystal, Kevin T. Davis and Mervyn K. Lewis, Charles A. E. Goodhart, Gerald P. O'Driscoll, Jr., Daniel L. Thornton and Courteney C. Stone 1992 Softcover reprint of the hardcover 1s t edition 1992 All rights reserved. For information, write: Scholarly and Reference Division, St. Martin's Press, Inc., 175 Fifth Avenue, New York, N.Y. 10010 First published in the United States of America in 1992 ISBN 978-0-312-06829-5 Library of Congress Cataloging-in-Publication Data Current issues in financial and monetary economics I edited by Kevin Dowd and Mervyn K. Lewis. p. cm.-(Current issues in economics) Includes bibliographical references and index. ISBN 978-0-312-06829-5 1. Monetary policy. 2. Intermediation (Finance) 3. Banks and banking-Deregulation. I. Dowd, Kevin. 11. Lewis, Mervyn. III. Series. HG230.3.C86 1992 332.1-dc20 91-27228 CIP Contents LIST OF TABLES vii LIST OF F1GURES Vlll SERIES EDITOKS PREFACE ix NOTES ON THE CONTRIBUTORS xi LIST OF ABBREVIATIONS XII 1 INTRODUCTION: CURRENT ISSUES IN FINANCIAL AND MONETARY ECONOMICS Kevin Dowd and Mervyn K. Lewis 1 2 ALTERNATIVE MONETARY STANDARDS Charles A. E. Goodhart 15 3 THE NEW THEORY OF FINANCIAL INTERMEDIAT ION lohn Chant 42 4 THE OPERATION OF FINANCIAL MARKETS K. Alec Chrystal 66 5 FINANCIAL INNOVATION: CAUSES AND CONSEQUENCES Daniel L. Thornton and Courteney C. Stone 81 6 BANKING REFORM Gerald P. 0' Driscoll, lr 110 7 DEREGULAT ION AND MONET ARY POLICY Kevin T. Davis and Mervyn K. Lewis 128 8 CREDIBILITY AND TIME-CONSISTENCY IN MONETA RY POLICY Keith Blackburn 155 VI Contents 9 INTERNATIONAL MONETARY POLICY COORDINAT ION Robin C. Bladen-Hovell 175 NOTES 195 BIBLIOGRAPHY 209 AUTHOR INDEX 224 SUBJECT INDEX 227 List of Tables 5.1 Financial innovations in 1985 84 5.2 Financial product innovations 86 5.3 Selected measures deregulating deposit-taking activities, 1970-86 88 5.4 Financial innovations, 1970-82 92 5.5 Standard deviations of monthly corporate bond yields, 1960-90 94 5.6 Standard deviations of monthly stock index return, 1961-89 94 5.7 Coefficient of variation of month-end to month-end exchange rates, 1950-87 94 5.8 Sources of funds raised in debt-markets by US non-financial corporations, 1960-89 95 7.1 Aspects of financial regulation in major industrial countries 132 VII List of Figures 4.1 Fr Actuaries 500: price and dividend indices 73 5.1 Ex post real rates, 1959.1 to 1989.4 91 5.2 The income velocity of MI, 1954.1 to 1989.4 97 5.3 The growth of MI velocity, 1954.1 to 1989.4 101 5.4 MI velocity and the 3-month T-bill rate, 1951.1 to 1989.4 105 5.5 The k-ratio and the money-multiplier, 1959.1 to 1989.4 107 5.6 The k-ratio and the 3-month T-bill rate, 1959.1 to 1989.4 107 7.1 Deregulation and the deposit market 144 7.2 Interest -rate deregulation in the IS/ LM framework 148 9.1 Target and instrument conflict 181 9.2 Target and instrument conflict 182 9.3 The gains from cooperation and leadership 183 9.4 The gains from cooperation and leadership 184 viii Series Editor's Preface The Current Issues se ries has slightly unusual ongms. Current Issues in International Trade, which was published in 1987, and which turned out to be the pilot for the se ries was in fact 'conceived' in the Horton Hospital, Banbury and 'delivered' (in the sense of completed) in the Hilton International in Nicosia! The reader may be struck by the thought that a more worthwhile and enjoyable production process would start and finish the other way around. I agree! Be that as it may, that is how the series started. As I said in the Preface to Current Issues in International Trade the reason for its creation was the difficulty of finding suitable references on 'frontier' subjects for undergraduate students. Many of the issues which excite professional economists and which dominate the journalliterature take quite a time to percolate down into texts, hence the need for a volume of Current Issues. The reception wh ich Current Issues in International Trade received persuaded me that it may be worth doing something similar for the other subject areas we teach. Thus each volume in this series is intended to take readers to the 'frontier' of the particular subject area. Each volume contains nine or ten essays, one of which provides a general overview while the remainder are devoted to current issues. As series editor the main challenge I faced was finding suitable editors for each of the volumes - the best people are generally the busiest! I believe, however, that I have been fortunate in having such an impressive and experienced team of editors with the necessary skills and reputation to persuade first-dass authors to participate. I would like to thank all of them for their cooperation and assistance in the development of the series. Like me, all of them will, I am sure, hope that this series provides a useful service to undergraduate and graduate students as weil as faculty. Current Issues in Financial and Monetary Economics is the sixth in the series. This has been an area of profound change over the last decade or so. Fundamental institutional change and a number IX
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