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. 31, No. 3, August

An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis
ALTHOUGH A FEW SCATTERED WORDS of defense can be found in the literature,(1) the once-dominant IS-LM framework for macroeconomic analysis has been sharply criticized by many leading researchers over the last twenty years or more. Among the critics...
Asymmetric Monetary Effects on Interest Rates across Monetary Policy Stances
RECENTLY THERE HAS BEEN a great deal of work on the construction of empirical measures for exogenous monetary shocks and on the empirical modeling of monetary policy effects. Extending the empirical literature on the effects of monetary policy on interest...
Can the Financial Markets Privately Regulate Risk?
The Development of Derivatives Clearinghouses and Recent Over-the-Counter Innovations WHETHER MARKET FORCES WOULD PROVIDE SUFFICIENT INCENTIVES to produce adequate self-regulation of financial institutions and markets is a hotly debated issue. This...
Demandable Debts as a Means of Payment: Banknotes versus Checks
BY VALUE, MOST MARKETPLACE TRANSACTIONS in the United States are not paid for with government-issued currency or coin, but with privately issued payments media.(1) Familiar examples of such media include checks drawn on bank deposits, as well as credit...
Discretionary Inflation in a General Equilibrium Model
ONE OF THE MOST WIDELY ACCEPTED THEORIES of inflation is that of Barro and Gordon (1983). In that paper, the authors look at the trade-off between the costs and benefits to surprise inflation in a game between the monetary authority and the private...
Financial Fragility with Rational and Irrational Exuberance
[W]hat does it mean to say that markets are rational? Is it assumed that most markets behave rationally most of the time, or that each and every participant in the market has the same intelligence, the same information, the same purposes, and the same...
Friedman's Plucking Model of Business Fluctuations: Tests and Estimates of Permanent and Transitory Components
IN A REVIEW OF BUSINESS CYCLE STUDIES at the National Bureau of Economic Research, Milton Friedman (1964) noted a striking asymmetry in the correlations between succeeding phases of the business cycle: the amplitude of a contraction is strongly correlated...
Inflation and Relative Price Variability: Reinstating Parks' Results
THE RELATIONSHIP between inflation and relative price variability has given rise to an extensive empirical literature.(1) Although a positive relationship between these variables is often quoted as a well-established empirical fact, there is still...
Inside and outside Money as Alternative Media of Exchange
IN AN EARLIER PAPER, Cavalcanti and Wallace (1999), we generalized a random-matching model of money by weakening the assumption that individual trading histories are private information. We assumed that a subset of people, called bankers, have known...
Introduction
IN MACROECONOMICS, money begins with the quantity theory. Summarizing ideas that date at least to David Hume, the quantity theory simply and elegantly captures the central point of agreement among economists about the impact of money on the aggregate...
Panel: Thoughts on the Future of Payments and Central Banking: Arrangements for Access to Payment Credit
THE COMMENTS THAT I MAKE TODAY reflect both recent research of mine, as well as observations about the regulation of payment arrangements by governments. My comments will focus on the interbank relationships that are fostered under various approaches...
Panel: Thoughts on the Future of Payments and Central Banking: Maintaining a Uniform (Electronic) Currency
THE ROLE A CENTRAL BANK SHOULD PLAY in operating or regulating a payments system is not a new issue. Back in 1913, for example, Congress decided that the Federal Reserve would play a major role, providing the country with a national check-clearing...
Panel: Thoughts on the Future of Payments and Central Banking: The Role of Central Banks in Money and Payments Systems
I WOULD LIKE TO THANK BRUCE SMITH for the honor of participating on this panel with such distinguished experts on central banking and payments. Moreover, Bruce should be commended for putting together an outstanding conference on what is probably the...
Panel: Thoughts on the Future of Payments and Central Banking: We Need to Think Straight about Electronic Payments
ELECTRONIC MONEY AND EMERGING PAYMENTS are sometimes regarded these days as being entirely new types of money. Some economists model them as new types of barter, in a sense that I'll try to be more specific about in a moment. Actually they are neither...
Preface
This year marks the tenth anniversary of the Federal Reserve Bank of Cleveland's partnership with the Journal of Money, Credit, and Banking in organizing these conferences in Cleveland. In fact, the partnership extends beyond the JMCB, for in a very...
Price-Level Targeting versus Inflation Targeting: A Free Lunch?
"PRICE STABILITY" is often a recommended goal for monetary policy. It has, however, been interpreted in different ways. Price stability can be interpreted as price-level stability, that is, a stationary price level with low variance. In practice, it...
Private Money
WHILE MOST TWENTIETH-CENTURY MONETARY SYSTEMS have evolved into arrangements dominated by government-supplied currency, privately issued media of exchange were common in many countries during the nineteenth century and before. The success, or lack...
Private Money Creation and the Suffolk Banking System
RECENT LEGISLATIVE DEVELOPMENTS have removed the legal impediments to private banknote issue in the United States. At the same time, improvements in transaction technologies have made it possible for banks--or other entities--to issue various forms...
Redemption Costs and Interest Rates under the U.S. National Banking System
THE BANKING SYSTEM that existed in the United States between 1863 and 1914--the so-called National Banking System--is unique in U.S. history. Under this system, private commercial banks (national banks) were permitted to issue payable-on-demand liabilities...
The Long-Run U.S./U.K. Real Exchange Rate
RECENT STUDIES of purchasing power parity using long data series have found a tendency for real exchange rates among the major industrialized countries to converge in the long run.(1) This literature, which typically examines time series with over...
Wage Growth and the Inflation Process: A Multivariate Cointegration Analysis
A POPULAR MODEL OF THE INFLATION PROCESS is the expectations-augmented Phillips curve model that assumes that prices are set as a markup over productivity-adjusted labor costs, the latter being determined by the expected inflation rate and the degree...