Journal of Money, Credit & Banking

Reports major findings in the study of financial institutions, financial markets, monetary and fiscal policy, credit markets, money and banking.

Articles from Vol. 34, No. 1, February

A Simple Adaptive Measure of Core Inflation
IN A SERIES OF PAPERS, Cecchetti (1997), Bryan and Cecchetti (1993, 1994, and 1995), and Bryan, Cecchetti, and Wiggins (1997) have studied a variety of problems related to the measurement of inflation. Their work is motivated by the observation that...
Can Nontradables Generate Substantial Home Bias?
A NUMBER OF RECENT STUDIES have documented a significant, yet slowly falling "home bias" in international financial portfolios among industrialized countries. (1) The most recent evidence, from Tesar and Werner (1998), shows that by the end of 1996...
Caution and Conservatism in the Making of Monetary Policy
An important reason to expose central bankers to elected officials is that, just as the latter may have an inflationary bias, the former may easily develop a deflationary bias. Shielded as they are from public opinion, cocooned within an...
Cost and Profit Efficiency of Financial Conglomerates and Universal Banks in Europe
FINANCIAL CONGLOMERATES are financial institutions that offer the entire range of financial services. Next to performing the traditional banking operations, they may sell insurance, underwrite securities, and carry out security transactions on behalf...
Covered Interest Rate Arbitrage in the Interwar Period and the Keynes-Einzig Conjecture
It may be said, therefore, that discrepancies between Interest Parities and forward rates do not cause deliberate transfers through interest arbitrage on a large scale unless and until the profit on the operation is at least 1/2 percent per...
Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate
IN THE FEDERAL FUNDS MARKET U.S. banks exchange unsecured loans of non-interest-bearing reserves, whose supply the Fed controls daily by intervention. Despite this market's role as the channel for implementation of U.S. monetary policy, the details...
Financial Crisis and the Great Depression: A Regime Switching Approach
RECENT EVENTS IN SOUTHEAST ASIA have focused much attention on financial crises. Despite this attention, there is no consensus view as to what causes financial crises, what are the appropriate policies for ending a crisis, and what are the real effects...
Heterogeneity in Price Rigidity: Evidence from a Case Study Using Microlevel Data
VARIATION IN PRICE RIGIDITY is an issue of considerable Interest in macroeconomics because understanding its reasons may shed light on causes of price rigidity. (1) For example, according to Gordon (1981, p. 517), understanding it "is crucial for the...
How Well Does the Beige Book Reflect Economic Activity? Evaluating Qualitative Information Quantitatively
IN THE CONDUCT OF MONETARY POLICY, the Federal Reserve must make policy decisions in the presence of a great deal of uncertainty. Not only is there uncertainty about the direction of future economic activity, but there can even be substantial uncertainty...
The Option to Wait to Invest and Equilibrium Credit Rationing
STIGLITZ AND WEISS (1981) show that asymmetric information may lead to a situation where, among observationally identical loan applicants, some get a loan whereas others are denied credit. The key to this result is the assumption that the payoff for...
Trade Credit and the Bank Lending Channel
THE INFLUENCE OF CREDIT MARKET imperfections on the transmission of monetary policy to the real economy is still controversial [see surveys by Bemanke (1993) and Kashyap and Stein (1994)]. Many economists believe that only the "money channel" is important,...
Wage Indexation and Output Stability Revisited
SINCE THE MID-1970S, there has been considerable research on the macroeconomic consequences of wage indexation. Starting with the seminal papers by Gray (1976) and Fischer (1977), the academic literature has studied the effects of wage indexing on...
When to Dollarize
IN THE LITERATURE on dollarization, the issue of timing is touched on only obliquely. It might seem appropriate that timing is treated as a subsidiary issue. The key question is whether dollarization is sensible; once that has been answered, analysis...