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. 27, No. 4, November

Bank Entry during the Antebellum Period
It has long been believed that the establishment of the free banking laws was a move by state legislatures to provide greater access to the bank market and to increase bank competition. Kenneth Ng (1988) challenged the traditional views that these laws...
Computable General Equilibrium Models and Monetary Policy Advice
To a Fed ECONOMIST, the "Greenbook" and "Bluebook"-- that is, the briefing materials provided by the Board of Governors' staff of economists for each meeting of the Federal Open Market Committee (FOMC)--are among the raw materials of monetary policy...
Consumer Default and the Life Cycle Model
Rates of consumer default have increased dramatically in the United States in the past decade. Between 1980 and 199 1, the total number of personal estates in bankruptcy increased from 315,000 to over a million. In 1980, 1.4 households out of every thousand...
Costs of Adjustment, Portfolio Separation, and the Dynamic Behavior of Bank Loans and Deposits
One branch of the banking literature in recent years has been devoted to developing dynamic theories of bank behavior. Goodfriend's (1983) model of the bank discount-window borrowing decision highlighted the deficiency of continuous-time static models...
Do Credit Markets Discipline Sovereign Borrowers? Evidence from U.S. States
There has been considerable theoretical interest in describing how rational lenders may respond to imperfect information by rationing credit to borrowers.(1) Much of this literature identifies the resulting credit constraints with a market failure (see,...
Estimating Policy-Invariant Deep Parameters in the Financial Sector When Risk and Growth Matter
1. INTRODUCTION THIS PAPER provides and illustrates an approach to the estimation of technology parameters in the financial sector. The relevant technologies are those of the financial intermediaries that produce inside money as output services and...
Financial Intermediation and Monetary Policy in a General Equilibrium Banking Model
THE PROCESS by which monetary policy affects the level of financial intermediation, or the "credit channel," has been the focus of a great deal of research recently; see, for example, the survey paper by Hubbard (1994). An important issue, which is a...
Financing Constraints and Investment: New Evidence from Hospital Industry Data
Well-known models of investment financing under asymmetric information demonstrate that agency costs may limit a firm's access to external finance.(1) That is, adverse selection or moral hazard problems may lead to less-flexible financing arrangements...
Fiscal Trends in Real Economic Aggregates
SIMPLE THEORETICAL REAL BUSINESS CYCLE (RBC) MODELS focus exclusively on productivity disturbances as the source of economic fluctuations and growth. These models imply that the ratios of consumption and investment to output, hours worked per capita...
Forward-Looking Behavior and the Stability of a Conventional Monetary Policy Rule
AT THE TURN OF THE CENTURY, Knut Wicksell introduced an analysis, "The Influence of the Rate of Interest on Prices," that has been influential among policymakers. In fact, a modem version of Wicksell's prescription dominates monetary policy discussions...
Government Expenditure Financing in an Endogenous Growth Model: A Comparison
Recently there has been a renewed interest in issues of economic growth. The primary contribution of the new literature, pioneered by Romer (1986), Lucas (1988), and Rebelo (1991), has been to endogenize the growth rate of the economy and, in so doing,...
Gresham's Law in Nineteenth-Century America
For almost as long as money has been the object of systematic study, Gresham's law--bad money drives out good--has been recognized as one of money's governing principles. Now, however, doubts have arisen concerning the validity of this venerable principle....
Inside Money, outside Money, and Short-Term Interest Rates
THIS PAPER presents a quantitative general equilibrium model with multiple monetary aggregates. Developing such a framework is important for answering various questions concerning the cyclical behavior of those aggregates. For example, what drives the...
Intertemporal Tax-Smoothing and the Government Budget Surplus: Canada and the United States
AMIDST THE CHAOS that surrounds the budget-making process in most countries, it is often hard to believe that there is any rationale at all to the time pattern of budget deficits and taxes. Yet, under the plausible assumption that the distortionary effects...
Is New Zealand's Reserve Bank Act of 1989 an Optimal Central Bank Contract?
The literature on the inflation bias that can arise under discretionary monetary policy has emphasized the value of establishing a reputation for following credible policies designed to sustain low inflation. The ability to achieve such a reputation...
Liquidity Effects and Transactions Technologies
Recently there has been growing interest in using general equilibrium models to understand the effects of monetary policy on interest rates and real economic activity. This research effort has involved the search for models that will account for the...
Liquidity Effects, Monetary Policy, and the Business Cycle
This paper presents a flexible-price, quantitative general equilibrium model with the property that a positive money supply shock drives the nominal interest rate down, and aggregate employment, output, and the real wage up. These implications are broadly...
Monetary and Financial Interactions in the Business Cycle
Many students of the business cycle view the cycle as composed of two logically distinct forces: a random shock or impulse to the environment, and, a propagation mechanism by which these shocks are transformed into persistent movements in economic time...
New Keynesian Economics and the Phillips Curve
Sticky prices are an important part of monetary models of business cycles. In recent years, a consensus has formed around the microfoundations of sticky price models, and this consensus is an important part of New Keynesian economics (Ball, Mankiw, and...
Portfolio Theory, Transaction Costs, and the Demand for Time Deposits
1. THE ISSUE MANY BANKS REVIEW WEEKLY the interest rates they pay on their small time deposits. If the U.S. Treasury yield curve changes significantly, banks change their deposit rates to reflect the new market interest rates. Large rate changes occurred...
Stability in the Absence of Deposit Insurance: The Canadian Banking System, 1890-1966
THE STABILITY OF THE CANADIAN BANKING SYSTEM in the period before the introduction of formal deposit insurance in 1967, and in particular, the Canadian banks' immunity from the crisis that afflicted the U.S. banking system in the Great Depression, are...
The Operations of the Bank of England, 1890-1908: A Dynamic Probit Approach
RECENT CONTRIBUTIONS Of Bloomfield (1992), Cooper (1992), and McKinnon (1993) in the Journal of Economic Literature confirm that interest in the various facets of the gold standard is as lively as ever. Previous empirical studies have used an implicit...
The Quantitative Analytics of the Basic Neomonetarist Model
A great deal of macroeconomic research in the last decade or two has been motivated by a lively debate over whether or not prices are sticky and whether and how much money matters. What are the lessons those who have not been active partisans can take...