Money, Banking, and Economic Activity

Money, Banking, and Economic Activity focuses on the use of macro- and microeconomic theory in the analysis of the interrelations of money, banking, and economic activity.

The book first underscores the importance and definition of money and financial intermediaries. Discussions focus on financial intermediaries and risk reduction, ability of intermediaries to decrease their own risks, effect of inflation on credit monies, and empirical definition of money. The text then examines the supply of money and the economic role of nonmoney-creating financial intermediaries, including thrift institutions and monetary policy, federal funds and repurchase agreements, monetary analysis and the place of thrift institutions, and developments altering the functions of financial intermediaries.

The publication takes a look at the evolution of the international monetary system, money in an open economy, electronic fund transfers, and the Gibson paradox and the term structure of interest rates. Topics include level of interest rates, importance of theories of the term structure, market structure of financial institutions, theory of the supply of money, and foreign exchanges and the balance of payments.

The manuscript is a valuable source of data for researchers interested in the interrelations of money, banking, and economic activity.

Inhalt

1 The Importance of Money
2 What is Money?
The Traditional Definition
The Empirical Definition of Money
A Comparison of the Traditional and Empirical Definitions
The Liquidity Definition
Monetary Systems
Credit Money and Monetary Management
Credit Monies and Inflation
The Effect of Inflation on Credit Monies
Social Benefits of Paper Money
Summary
3 Financial Intermediaries
The Lending Process
Financial Intermediaries and Risk Reduction
The Ability of Intermediaries to Decrease Their Own Risks
Specialization and Cost Reduction
A Mixed Blessing?
Disintermediation and Regulation Q
Historical Rationalizations for Regulation Q
Recent Rationalizations for Regulation Q
The Effectiveness of Regulation Q
The Cost of Regulation Q
The Structure and Growth of Financial Intermediaries
Financial Intermediaries and the Volume of Credit
Financial Intermediaries and Lending Specialization
The Flow of Loanable Funds Through Private Intermediaries
Summary
4 The Supply of Money
The Balance Sheet
Money Creation
Some Final Thoughts on the Supply of Money
What Determines the Supply of Money?
Who Controls the Money Supply?
Can the Central Bank Control the Money Supply?
Summary
Appendix A - The Origin of Commercial Banking
Appendix B - Bank Credit Rather than Money
Appendix C - Bank Reserve Requirements and Their Enforcement: A Comparison Across States
Appendix D - Variations on a Theme
5 The Economic Role of Nonmoney Creating Financial Intermediaries
Recent Developments Altering the Functions of Financial Intermediaries
The Historical Concern With Thrift Institutions
Monetary Analysis and the Place of the Thrifts
The Distinguishing Characteristics of Commercial Banks
Thrift Institutions and Monetary Policy
Thrift Institutions and the Money Multiplier
Federal Funds and Repurchase Agreements
Summary
6 The Theory and Practice of Commercial Banking
The Bank Balance Sheet
The Asset and Liability Structure of a Typical Bank
The Relationship of Market Interest Rates and Bond Prices
The Theories of Commercial Banking
Summary
7 Central Banking
The History of American Central Banking
The Tools of Central Banking
The Federal Reserve as a Fiscal Agent
Proposals for Reform
Summary
8 The Derivation of the Monetary Base
Sources of the Base
Movements in the Source Accounts Over Time
The Components of the Monetary Base and Control of the Money Supply
Summary
9 The Federal Treasury, the National Dabt, and the Money Supply
The Federal Government's Fiscal Activities
When is Fiscal Policy Fiscal Policy?
The Maturity Structure of the Public Debt
The Treasury, the g Ratio, and the Money Supply
Summary
10 Money and Economic Activity
The Commodity Market
The Money Market
Joint Equilibrium in the Commodity and Money Markets
The Labor (and Output) Market
The Complete Keynesian Model
An Increase in the Supply of Money
Factors Governing the Success of Monetary Policy
The Countercyclical Use of Monetary Policy
Summary
Appendix A - The Derivation of the Keynesian Speculative Demand for Money
Appendix B - A Critique of the Monetary Theory of Keynes
Appendix C - Refinements to the Monetary Theory of Keynes
Appendix D - Other Problems in a Macroeconomic Context
Appendix E - The IS-LM Framework as an Alternative Macroeconomic Model
11 The Implementation of Monetary Policy
Targets and Indicators of Monetary Policy
Desirable Characteristics of a Target and Indicator
Economic Theory and the Choice of Targets and Indicators
The Choice of Targets and Indicators
The Monetary Transmission Mechanism
An Evaluation of Each Target-Indicator Set
Current Federal Reserve Practices
Summary
Appendix A - Interest Rates as an Indicator of Federal Reserve Policy and the Procyclical Growth of the Money Supply
Appendix B - The Implementation of Monetary Policy in an IS-LM Context
Appendix C - Deliberations of the Federal Open Market Committee in 1979
12 Inflation and Unemployment
Inflation
Unemployment
The Inflation-Unemployment Trade-Off
Summary
Appendix A - A Mathematical Development of the Phillips' Curve Theory
13 The Gibson Paradox and the Term Structure of Interest Rates
The Ricardo-Tooke Conundrum
Gibson's Paradox
The Level of Interest Rates
The Term Structure of Interest Rates
The Importance of Theories of the Term Structure
Conclusion
14 The Great Debate Over the Importance of Money
The Neutrality of Money
The Proportionality of the Money Stock and the General Level of Prices
A Monetary Theory of the Price Level
The Causality of Money
The Exogeneity of Money
Summary
15 Electronic Funds Transfers
Description of Some EFT Systems
A Definition of Money
The Market Structure of Financial Institutions
The Portfolio Selections of Depository Institutions
The Theory of the Supply of Money
The Theory of the Demand for Money
Regulation Q
The Effectiveness of the Instruments of Monetary Policy
The Selection of the Appropriate Set of Targets and Indicators
The Transmission Mechanism
Summary
16 Money in an Open Economy
The Role of Money in an Open Economy
The Case for Free Trade
The Balance of International Payments
The Balance of Payments of the United States
The Foreign Exchange Market
Foreign Exchanges and the Balance of Payments
Fixed vs. Flexible Exchange Rates
Monetary and Fiscal Policy in an Open Economy
Conclusion
Appendix A - The IS-LM Model in an Open Economy
17 The Evolution of the International Monetary System
The Gold Standard
The Gold Exchange Standard
Bretton Woods - 1944
The Cause of the United States Balance-of-Payments Problem
Conclusion
Appendix A - The EuroDollar Market
Index