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on Business, Economic and Financial History |
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Issue of 2005‒10‒04
ten papers chosen by |
| By: | Flandreau, Marc; Komlos, John |
| Abstract: | A natural experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience. |
| Keywords: | Austria-Hungary; covered interest parity; credibility; market efficiency hypothesis; monetary model; monetary policy; target zone |
| JEL: | F31 N32 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5199&r=his |
| By: | Lawrence Christiano (Department of Economics, Northwestern University, 2001 Sheridan Road, Evanston, Illinois 60208, USA); Roberto Motto (European Central Bank, Kaiserstr. 29, D-60311 Frankfurt am Main, Germany); Massimo Rostagno (European Central Bank, Kaiserstr. 29, D-60311 Frankfurt am Main, Germany) |
| Abstract: | We evaluate the Friedman-Schwartz hypothesis that a more accommodative monetary policy could have greatly reduced the severity of the Great Depression. To do this, we first estimate a dynamic, general equilibrium model using data from the 1920s and 1930s. Although the model includes eight shocks, the story it tells about the Great Depression turns out to be a simple and familiar one. The contraction phase was primarily a consequence of a shock that induced a shift away from privately intermediated liabilities, such as demand deposits and liabilities that resemble equity, and towards currency. The slowness of the recovery from the Depression was due to a shock that increased the market power of workers. We identify a monetary base rule which responds only to the money demand shocks in the model. We solve the model with this counterfactual monetary policy rule. We then simulate the dynamic response of this model to all the estimated shocks. Based on the model analysis, we conclude that if the counterfactual policy rule had been in place in the 1930s, the Great Depression would have been relatively mild. |
| Keywords: | General equilibrium; Lower bound; Deflation; Shocks |
| JEL: | E31 E40 E51 E52 E58 N12 |
| Date: | 2004–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040326&r=his |
| By: | Timothy Cogley (Department of Economics, University of California, Davis, O ne Shields Avenue, CA 95615, USA); Thomas J. Sargent (Corresponding author: Department of Economics, New York University, 269 Mercer Street, 7th Floor, New York,) |
| Abstract: | Previous studies have interpreted the rise and fall of U.S. in ation after World War II in terms of the Fed's changing views about the natural rate hypothesis but have left an important question unanswered. Why was the Fed so slow to implement the low-in ation policy recommended by a natural rate model even after economists had developed statistical evidence strongly in its favor? Our answer features model uncertainty. Each period a central bank sets the systematic part of the in ation rate in light of updated probabilities that it assigns to three competing models of the Phillips curve. Cautious behavior induced by model uncertainty can explain why the central bank presided over the in ation of the 1970s even after the data had convinced it to place much the highest probability on the natural rate model. |
| Keywords: | Natural unemployment rate; Phillips curve; Bayes' law; anticipated utility; robustness. |
| JEL: | E31 E58 E65 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20050478&r=his |
| By: | Stefan Voigt |
| Abstract: | In economics, there is currently an important discussion on the role of "legal origins" or "legal families". Some economists claim that legal origins play a crucial role until today. Usually, they distinguish between Common Law, French, Scandinavian and German legal origin. When these legal origins are compared, countries belonging to the Common Law tradition regularly come out best (with regard to many different dimensions) and countries belonging to the French legal origin worst. International arbitration provides an ideal "natural experiment" to test this view empirically: in international trade, the contracting parties are free to choose the substantive law that suits their interests best. If the literature just cited was correct, we would expect that rational traders would structure their interactions according to some substantive law based on the Common Law tradition such as British or US American law. Although exact statistics are not readily available, the evidence from cases that end up with international arbitration courts (such as the International Court of Arbitration run by the International Chamber of Commerce in Paris) clearly demonstrates that this is not the case. |
| Keywords: | Legal Origins, International Arbitration, Choice of Substantive Law |
| JEL: | F23 K12 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:21-2005&r=his |
| By: | Jean-Pascal Bassino |
| Abstract: | This paper investigates the relationship between physical stature, per capita income, health,and regional inequality in Japan at the prefecture-level for the period 1892-1941. The analysis shows that inequality in income and access to health services explains differences in average body height of the population across the 47 Japanese prefectures during this period and that variation in income contributed to changes in height during the 1930s. Annual regional time series of height indicate that Japan experienced a regional convergence in biological welfare before 1914, and that a divergence occurred during the interwar period; personal inequality followed a similar pattern. |
| Keywords: | physical stature, height, health, midwives, inequality, income distribution, regional convergence, Japan |
| JEL: | I31 N35 N95 O15 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:hst:hstdps:d05-114&r=his |
| By: | Ulrich Bindseil (DG Human Resources, Budget and Organisation, European Central Bank) |
| Abstract: | Before 1914, there was little doubt that central bank policy meant first of all control of short term interest rates. This changed dramatically in the early 1920s with the birth of “reserve position doctrine” (RPD) in the US, according to which a central bank should, via open market operation, steer some reserve concept, which would impact via the money multiplier on monetary aggregates and ultimate goals. While the Fed returned to an unambiguous steering of short term interest rates only in the 1990s, for example the Bank of England never adopted RPD. This paper explains the astonishing rise and fall of RPD. The endurance of RPD is explained by a symbiosis of central bankers who may have partially sympathised with RPD since it masked their responsibility for short term interest rates, and academics who were too eager to simplify away some key features of money markets and central bank operations. |
| Keywords: | operational target of monetary policy, monetary policy instruments, monetary policy implementation, instruments’ choice problem |
| JEL: | E43 E52 B22 |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040372&r=his |
| By: | Oldrich Kyn (Boston University) |
| Abstract: | This paper was presented at the Belgrade conference for one hundred years anniversary of 'Das Kapital'. Marx himself said very little about the concrete organization of a socialist economy. His general remarks about socialism were 'elaborated' by his followers by inference from Marx's criticism of capitalism and by inclusion of principles that did originate with other socialist or 'Marxist' thinkers. This explains why certain views about the organization of the socialist economy that are today presented as 'Marxian' may be in direct contradiction to some of Marx's own views. Marx could not disengage himself completely from his own historical determination. It is quite obvious that to a large extent he was influenced by the topics and analytical tools of his theoretical forerunners and contemporaries. But the evolution of economic theory continued after Marx. New problems appeared and new methods were developed, especially mathematical methods, which Marx could not have used in his time. Marx believed that market must be replaced by a rational planned control of the economy because he saw the market mechanism as functioning purely on ex post basis and that the lack of ex ante coordination of production decisions leads necessarily to the spontaneous imbalances and cyclical fluctuations in market economies. But market does not function solely in an ex post manner. No producer works completely 'in the dark', he always has some information, albeit incomplete, that allows him to anticipate demand and thus determine what is to be produced. The quality of the coordination done by the market depends on how good is the anticipation of future demand. In the XXth century forecasting methods have undergone fast development. Methods of demand analysis make it possible to predict changes in demand for individual types of commodities. Those and many other new developments greatly anhance the available information and improve the ex ante decision-making of firms and thus limit necessary corrections which the market must make ex post. |
| Keywords: | Marx, Market Economy, Socialism, Central Planning, Alienation, |
| JEL: | B |
| Date: | 2005–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0509005&r=his |
| By: | Fabrice Collard (CNRS-GREMAQ, Manufacture des Tabacs, bât. F, 21 allée de Brienne, 31000 Toulouse, France.); Harris Dellas (Department of Economics, University of Bern, CEPR, IMOP. Address:VWI, Gesellschaftsstrasse 49, CH 3012 Bern, Switzerland.) |
| Abstract: | Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a scenario suggested by Clarida, Gali and Gertler, 2000)? We study this question within the NNS model with policy commitment and imperfect information, requiring that the model have satisfactory overall empirical performance. We find that both explanations do a good job in accounting for the great inflation. Even with the commonly used specification of the interest policy rule, high and persistent inflation can occur following a significant productivity slowdown if policymakers significantly and persistently underestimate ”core” inflation. |
| Keywords: | Inflation; imperfect information; Kalman filter; policy rule; indeterminacy. |
| JEL: | E32 E52 |
| Date: | 2004–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040336&r=his |
| By: | Alfred A. Haug (Department of Economics, York University); William G. Dewald (Ohio State University, Department of Economics.) |
| Abstract: | We study how fluctuations in money growth correlate with fluctuations in real and nominal output growth and inflation. We pick cycles from each time series that last 2 to 8 (business cycles) and 8 to 40 (longer-term cycles) years, using band-pass filters. We employ a data set from 1880 to 2001 for eleven countries, without gaps. Fluctuations in money growth do not play a systematic and important role at the business cycle frequency. However, money growth leads or contemporaneously affects nominal output growth and inflation in the longer run. This result holds despite differences in policies and institutions across countries. |
| Keywords: | Band-pass filters; 2 to 8 year cycles; 8 to 40 year cycles. |
| JEL: | E3 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040382&r=his |
| By: | Maarten Bosker; Steven Brakman; Harry Garretsen; Marc Schramm |
| Abstract: | Many modern trade and growth models are characterized by multiple equilibria. In theory the analysis of multiple equilibria is possible, but in practice it is difficult to test for the presence of multiple equilibria. Based on the methodology developed by Davis and Weinstein (2004) for the case of Japanese cities and WWII, we look for multiple equilibria in a model of German city growth. The strategic bombing of Germany during WWII enables us to assess the empirical relevance of multiple equilibria in a model of city-growth. In doing so, and in addition to the Davis and Weinstein framework, we look at the spatial inter-dependencies between cities. The main findings are twofold. First, multiple equilibria seem to be present in German city growth. Our evidence supports a model with 2 stable equilibria. Second, the explicit inclusion of geography matters. Evidence for multiple equilibria is weaker when spatial interdependencies are not taken into account. |
| JEL: | F12 R11 R12 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1553&r=his |