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. 2, May

Budget Deficits, Corporate Income Taxes, and the Current Account
The conventional view about the effects of budget deficits in finite horizon models is that, because agents are finitely lived, future taxes and transfers are discounted at a higher rate than the interest on government debt. Therefore, both anticipated...
Credit Cards and Money-Demand: A Cross-Sectional Study
Since the 1960s, credit card use in the United States has increased dramatically, as reflected in debt levels and ownership rates.(1) Nevertheless, there have been few empirical studies of credit card effects on money demand. Using the 1970 Survey of...
Differentiated Contracts, Heterogeneous Borrowers, and the Mortgage Choice Decisions
A significant development in the United States residential mortgage market was the regulation change allowing the origination of adjustable rate mortgages (ARMs) where interest rate risk is shared between lenders and borrowers. The resulting expansion...
Income Tax Indexation in an Open Economy
The vast literature on wage indexation seems to have one rather robust result: compared to complete nominal wage rigidity, wage indexation stabilizes output with respect to demand shocks but makes it more sensitive to supply shocks. On the other hand,...
Inflation and Currency Depreciation in Germany. 1920-1923: A Dynamic Model of Prices and the Exchange Rate
Earlier empirical literature on the German hyperinflation has looked at various aspects of the inflationary process rather in isolation, the focus being mostly on the determinants of either the money demand, the exchange rate, or prices. The thesis brought...
Macroeconomic Sources of Time-Varying Risk Premia in the Term Structure of Interest Rates
According to intertemporal capital asset pricing models (ICAPM) in finance (Merton 1983), risk premia are the prices of risk built in assets priced according to their hedging capabilities against the uncertainties related to the relevant state variables...
Monetary Policy, Aggregate Uncertainty, and the Stock Market
DOES MONEY MATTER? When first posed, this question sparked a major debate between the Chicago and Keynesian schools of macroeconomic thought. More recently, the importance of money for stock prices and returns has aroused considerable interest among...
Monetary Policy, Elasticity Dynamics, and Real Exchange Rate Reversal
Real exchange rate of volatility in the 1970s focused attention on models of exchange rate overshooting. For example, Dornbusch (1976a) examines the effects of monetary policy in the presence of price level persistence and finds that money supply shocks...
Money-Demand and Seigniorage-Maximizing Inflation
There is widespread consensus among economists that high inflation is often caused by the government's need to raise seigniorage in order to finance high budget deficits (Sargent 1982; Dornbusch and Fischer 1986; Van Wijnbergen 1989; Buiter 1990; and...
Rescheduling of Sovereign Debt: Forgiveness, Precommitment, and New Money
Many less developed countries in the past decade failed to meet contractual obligations on their external debt. Lenders generally responded by rescheduling these debts rather than declaring them to be in default, but further commercial lending to these...
Syndicated Loan Announcements and the the Market Value of the Banking Firm
Many studies have analyzed the shareholder wealth effects of investment decisions made by nonfinancial corporations. McConnell and Muscarella (1985), Office of Chief Economist (1985), and the extensive literature on mergers and acquisitions provide examples....
The Effect of Changes in Reserve Requirements on Investment and GNP
There is a large literature that posits a link between the extent of financial intermediation performed by banks and aggregate real activity. While the specifics differ from model to model, the basic idea is that certain types of borrowers, mostly small...
The Foreign Exchange Risk Premium: Is It Real?
An extensive empirical literature suggests that the forward exchange rate is not equal to the expected future spot rate, conditional on all available information. This deviation is often attributed to the existence of a risk premium. A large number of...
The Profit-Structure Relationship in Banking -V Tests of Market-Power and Efficient-Structure Hypotheses
Many studies in the banking literature and in the more general industrial organization literature find a positive statistical relationship between profitability and measures of market structure - either concentration or market share. On first blush,...
The Relationship between Capital and Earnings on Banking
ACCORDING TO CONVENTIONAL WISDOM in banking, a higher capital-asset ratio (CAR) is associated with a lower after-tax return on equity (ROE). The arguments in favor of this hypothesized negative relationship between capital and earnings have intuitive...
The Stabilizing Properties of a Nominal GNP Rule
This paper makes a theoretical case in favor of a commitment to a nominal GNP target on the part of the monetary authorities, as compared to two other popularly proposed targets, the money supply and the exchange rate. Bean (1983) and West (1986) show...
The Thrift Crisis, Mortgage-Credit Intermediation, and Housing Activity
In the wake of adverse developments in the thrift industry, analysts and policymakers alike have questioned the continued need for specialized federally insured institutions to promote housing finance. Although thrifts have long been the cornerstone...
Why Does Liquidity Matter in Investment Equations?
1. INTRODUCTION Variables representing liquidity and finance constraints have appeared frequently as determinants of business investment spending, and have generally proven to be quite significant. In the first econometric study of investment, Tinbergen...