nep-his New Economics Papers
on Business, Economic and Financial History
Issue of 2016‒04‒04
23 papers chosen by

  1. The fall of the elephant. Two decades of poverty increase in Côte d’Ivoire (1988-2008) By Denis Cogneau; Kenneth Houngbedji; Sandrine Mesplé-Somps
  2. The Pitfalls of External Dependence: Greece, 1829-2015 By Reinhart, Carmen M.; Trebesch, Christoph
  3. The International Monetary Fund: 70 Years of Reinvention By Reinhart, Carmen M.; Trebesch, Christoph
  4. Racial Sorting and the Emergence of Segregation in American Cities By Allison Shertzer; Randall P. Walsh
  5. Pouvoir de marché, stratégies et régulation: Les contributions de Jean Tirole, Prix Nobel d'Economie 2014 By David Encaoua
  6. Political Business Cycles 40 Years after Nordhaus By Eric Dubois
  7. Commercial revolutions, search, and development By Maurizion Iacopetta;
  8. Three-generation Mobility in the United States, 1850-1940: The Role of Maternal and Paternal Grandparents By Claudia Olivetti; M. Daniele Paserman; Laura Salisbury
  9. Network Contagion and Interbank Amplification during the Great Depression By Kris James Mitchener; Gary Richardson
  10. French Fertility and Education Transition: Rational Choice vs. Cultural Diffusion By David de la Croix; Faustine Perrin
  11. Labor Economics in a Planned Economy: F. A. Hayek and John Jewkes on the Impossibility of Democratic Socialism By Makovi, Michael
  12. The economics of density: evidence from the Berlin Wall By Gabriel M. Ahlfeldt; Stephen Redding; Daniel M. Sturm; Nikolaus Wolf
  13. State Capacity and Public Goods: Institutional change, Human Capital and Growth in Early Modern Germany By Jeremiah Dittmar; Ralph R. Meisenzahl
  14. Inheritance Flows in Switzerland, 1911-2011 By Marius Brulhart; Didier Dupertuis; Elodie Moreau
  15. The Schumpeter Legacy By Accolley, Delali
  16. Optimal Currency Area: A 20th Century Idea For the 21st Century? By Joshua Aizenman
  17. "Labour, profit and housing rent shares in Italian GDP: long-run trends and recent patterns" By Roberto Torrini
  18. The Labor Market Consequences of Electricity Adoption: Concrete Evidence from the Great Depression By Miguel Morin; ; ;
  19. Finanças Públicas Portuguesas Sustentáveis no Estado Novo (1933-1974)? By Ricardo Ferraz
  20. Capital, growth and inequality in Piketty's approach. Is it able to explain level and changes of inequality in the personal income distribution? By Renata Targetti Lenti
  21. Has Globalization Really Increased Business Cycle Synchronization? By Eric Monnet; Damien Puy
  22. Networks in Economics: A Perspective on the Literature By Sanjeev Goyal; ; ;
  23. Money and Velocity During Financial Crises: From the Great Depression to the Great Recession By Richard G. Anderson; Michael Bordo; John V. Duca

  1. By: Denis Cogneau (IRD - Institut de Recherche pour le Développement); Kenneth Houngbedji (EHESS - Paris School of Economics - Paris School of Economics); Sandrine Mesplé-Somps (IRD - Institut de Recherche pour le Développement)
    Abstract: At the end of the 1980s, Côte d’Ivoire entered a deep macroeconomic crisis that put an end to the often-praised ‘Ivorian miracle’. After the death of the founding father Houphouet-Boigny, unrestrained political competition added to bad economic conditions and led to the nightmare of civil war. Drawing from a series of five household surveys covering two decades(1988-2008), we tell the story of this descent into hell from the standpoint of poverty and living standards. In 2008, after five years of civil war and another episode yet to come (2010-11), theextreme US$1.25 poverty headcount had reached a historical record, with Northern areas deeplyimpoverished by the partition.
    Keywords: welfare,Economic history,Côte d’Ivoire,poverty
    Date: 2016
  2. By: Reinhart, Carmen M.; Trebesch, Christoph
    Abstract: Two centuries of Greek debt crises highlight the pitfalls of relying on external financing. Since its independence in 1829, the Greek government has defaulted four times on its external creditors – with striking historical parallels. Each crisis is preceded by a period of heavy borrowing from foreign private creditors. As repayment difficulties arise, foreign governments step in, help to repay the private creditors, and demand budget cuts and adjustment programs as a condition for the official bailout loans. Political interference from abroad mounts and a prolonged episode of debt overhang and financial autarky follows. We conclude that these cycles of external debt and dependence are a perennial theme of Greek history, as well as in other countries that have been “addicted” to foreign savings.
    JEL: F3 G01 H6 N10 N13 N14
    Date: 2015–10–18
  3. By: Reinhart, Carmen M.; Trebesch, Christoph
    Abstract: A sketch of the International Monetary Fund’s 70-year history reveals an institution that has reinvented itself over time along multiple dimensions. This history is primarily consistent with a “demand driven” theory of institutional change, as the needs of its clients and the type of crisis changed substantially over time. Some deceptively “new” IMF activities are not entirely new. Before emerging market economies dominated IMF programs, advanced economies were its earliest (and largest) clients through the 1970s. While currency problems were the dominant trigger of IMF involvement in the earlier decades, banking crises and sovereign defaults became they key focus since the 1980s. Around this time, the IMF shifted from providing relatively brief (and comparatively modest) balance-of-payments support in the era of fixed exchange rates to coping with more chronic debt sustainability problems that emerged with force in the developing nations and now migrated to advanced ones. As a consequence, the IMF has engaged in “serial lending”, with programs often spanning decades. Moreover, the institution faces a growing risk of lending into insolvency, most widespread among low income countries in chronic arrears to the official sector, but most evident in the case of Greece since 2010. We conclude that these practices impair the IMF’s role as an international lender of last resort.
    Keywords: IMF; currency crashes; financial crises; sovereign default; lender of last resort; international borrowing
    JEL: E5 F33 F4 F55 G01 G2 G15 N0
    Date: 2015–12–10
  4. By: Allison Shertzer; Randall P. Walsh
    Abstract: Residential segregation by race grew sharply in the United States as black migrants from the South arrived in northern cities during the early twentieth century. The existing literature emphasizes discriminatory institutions as the driving force behind this rapid rise in segregation. Using newly assembled neighborhood-level data, we instead focus on the role of “flight” by whites, providing the first systematic evidence of the role that prewar population dynamics played in the emergence of the American ghetto. Leveraging exogenous changes in neighborhood racial composition, we show that white departures in response to black arrivals were quantitatively large and accelerated between 1900 and 1930. Our preferred estimates suggest that white flight was responsible for 34 percent of the increase in segregation over the 1910s and 50 percent over the 1920s. Our analysis suggests that segregation would likely have arisen in American cities even without the presence of discriminatory institutions as a direct consequence of the widespread and decentralized relocation decisions of white urban residents.
    JEL: J15 N32 R23
    Date: 2016–03
  5. By: David Encaoua (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)
    Abstract: Cet article est consacré à une mise en perspective des travaux réalisés par Jean Tirole sur les thèmes mentionnés par le communiqué du Nobel, à savoir l'analyse du pouvoir de marché, ses modalités de contrôle et la régulation des activités de réseaux et de monopole naturel. Il se développe en trois parties. La première explicite pourquoi et comment ces travaux ont participé à un profond renouveau de l'Economie Industrielle. La seconde présente les contributions participant à l'élaboration d'une véritable économie de l'innovation. La troisième partie se réfère aux travaux sur la régulation. Dans chacune de ces parties, l'accent est mis sur trois aspects : i/ l'état des connaissances au moment de ces travaux, ii/ les instruments d'analyse utilisés, et iii/ les enseignements que l'on peut en tirer. L'article cherche également à illustrer une caractéristique commune à plusieurs de ces travaux, celle de combiner, d'une part, une recherche théorique conduisant à un véritable renouvellement de nos connaissances dans différents champs de l'analyse économique, et d'autre part, un choix de questions motivées par une forte préoccupation à trouver des moyens de résolution de nombreux problèmes économiques contemporains, se fondant sur une sérieuse analyse théorique préalable. Abstract: This article is devoted to a perspective of the works of Jean Tirole on the topics mentioned by the Nobel Committee, namely the analysis of market power, its control mechanisms and the regulation of network activities and natural monopoly. It develops in three parts. The first explains why and how these works have contributed to a profound renewal of the Industrial Organization field by offering strong theoretical foundations. The second presents different contributions that advance our understanding of the Economics of Innovation. The third part refers to the works on the Economics of Regulation. In each part, the focus is on three aspects: i / the state of knowledge at the time of the work, ii / the analytical instruments and iii / the lessons that can be drawn. The article seeks to illustrate a common feature in many of these works, that of combining theoretical research leading to the knowledge's enlargement in various fields of economic analysis, and a choice of questions motivated by a strong concern to find solutions to some contemporary economic problems, based on a serious prior theoretical analysis.
    Keywords: patent pools,two-sided markets,O34 Key words: oligopoly,L51,L42,réseaux,incitations,asymétries informationnelles,standards technologiques,pools de brevets,marchés bifaces,systèmes non propriétaires,non-proprietary systems,vertical restraints,patent race,oligopole,restrictions verticales,forclusion,course au brevet,technological standards,asymmetric information,incentives,networks,regulation
    Date: 2015–02
  6. By: Eric Dubois (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The aim of this article is to survey the huge literature that has emerged in the last four decades following Nordhaus's (1975) publication on political business cycles (PBCs). I first propose some developments in history of thought to examine the context in which this groundbreaking contribution saw the light of the day. I also present a simplified version of Nordhaus's model to highlight his key results. I detail some early critiques of this model and the fields of investigations to which they gave birth. I then focus on the institutional context and examine its influence on political business cycles, the actual research agenda. Finally, I derive some paths for future research.
    Keywords: political business cycles,politico-economic cycles,electoral cycles,opportunistic cycles,conditional political business cycles
    Date: 2016–02–01
  7. By: Maurizion Iacopetta (OFCE Sciences Po and Skema BusinesSchool);
    Abstract: A society can reap more benefits from an improvement in communication and transportation when the gap between privileged and less-privileged individuals is narrow. This hypothesis is investigated in a Kiyotaki-Wright search environment where people enjoy different rental positions. Historical evidence concerning the rise of Italian seaport cities during the Middle Ages, of the Netherlands in the 17th century, and the nobility ís resistance to trade in pre-revolutionary France is used to support the hypothesis.
    Keywords: ,Privileges, resistence to trade, speculative strategies
    JEL: O11 N13 C61 C63 D63
    Date: 2016–03
  8. By: Claudia Olivetti; M. Daniele Paserman; Laura Salisbury
    Abstract: This paper estimates intergenerational elasticities across three generations in the United States in the late 19th and early 20th centuries. We extend the methodology in Olivetti and Paserman (2015) to explore the role of maternal and paternal grandfathers for the transmission of economic status to grandsons and granddaughters. We document three main findings. First, grandfathers matter for income transmission, above and beyond their effect on fathers' income. Second, the socio-economic status of grandsons is influenced more strongly by paternal grandfathers than by maternal grandfathers. Third, maternal grandfathers are more important for granddaughters than for grandsons, while the opposite is true for paternal grandfathers. We present a model of multi-trait matching and inheritance that can rationalize these findings.
    JEL: J12 J62 N31 N32
    Date: 2016–03
  9. By: Kris James Mitchener; Gary Richardson
    Abstract: Interbank networks amplified the contraction in lending during the Great Depression. Banking panics induced banks in the hinterland to withdraw interbank deposits from Federal Reserve member banks located in reserve and central reserve cities. These correspondent banks responded by curtailing lending to businesses. Between the peak in the summer of 1929 and the banking holiday in the winter of 1933, interbank amplification reduced aggregate lending in the U.S. economy by an estimated 15 percent.
    JEL: E44 G01 G21 L14 N22
    Date: 2016–03
  10. By: David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Center for Operations Research and Econometrics (CORE)); Faustine Perrin (Department of Economic History, Lund University)
    Abstract: We analyze how much a rational-choice model can explain the temporal and spatial variation in fertility and school enrollment in France during the 19th century. The originality of our approach is in our reliance on a structural estimation technique that exploits the restrictions implied by the first-order conditions to identify the deep parameters. Another new dimension is our use of gendered education data, allowing us to have a richer theory that includes mothers, fathers, boys and girls. Results indicate that the rational-choice model explains 38 percent of the variation of fertility over time and across counties, as well as 71 percent and 83 percent of school enrollment of boys and girls, respectively. The analysis of the residuals (unexplained by the economic model) indicates that additional insights might be gained by considering cross-county differences in family structure and cultural barriers.
    Keywords: Quality-quantity tradeoff, Education, Gender Gap, Demographic transition, France
    JEL: J13 N33 O11
    Date: 2016–03–03
  11. By: Makovi, Michael
    Abstract: Milton Friedman (1962) is associated with the claim that political and economic freedom cannot be distinguished (cf. Lawson and Clark 2010), using the famous example that there can be no freedom of speech where the government owns the printing presses. Less well-known is F. A. Hayek's example, drawn from labor economics, used to illustrate the same principle. Hayek was joined in this by his less well-known colleague, John Jewkes. Hayek and Jewkes argued that without a freely operating price system, central economic planning cannot function without compulsory regimentation of labor. Similarly, no state may simultaneously fix “fair” wages and demand a given pattern of productive output and employment. It is impossible to both achieve income equality and accomplish an economic plan. Hayek's and Jewkes's examples help explain why democratic socialism is impossible, in the sense that it cannot accomplish what its advocates desire.
    Keywords: Hayek; Road to Serfdom; democratic socialism; market socialism; economic democracy; totalitarianism; public choice; government failure; impossibility; corvee; corvée; serfdom; slavery; involuntary; coercive; compulsion; compulsory; labor; servitude
    JEL: A12 B24 B25 B51 B53 D7 J0 J00 J20 J30 J47 P10 P20 P30 P50
    Date: 2016–03–21
  12. By: Gabriel M. Ahlfeldt; Stephen Redding; Daniel M. Sturm; Nikolaus Wolf
    Abstract: This paper develops a quantitative model of internal city structure that features agglomeration and dispersion forces and an arbitrary number of heterogeneous city blocks. The model remains tractable and amenable to empirical analysis because of stochastic shocks to commuting decisions, which yield a gravity equation for commuting flows. To structurally estimate agglomeration and dispersion forces, we use data on thousands of city blocks in Berlin for 1936, 1986 and 2006 and exogenous variation from the city’s division and reunification. We estimate substantial and highly localized production and residential externalities. We show that the model with the estimated agglomeration parameters can account both qualitatively and quantitatively for the observed changes in city structure. We show how our quantitative framework can be used to undertake counterfactuals for changes in the organization of economic activity within cities in response for example to changes in the transport network.
    Keywords: agglomeration; cities; commuting; density; gravity
    JEL: N34 O18 R12
    Date: 2015
  13. By: Jeremiah Dittmar; Ralph R. Meisenzahl
    Abstract: What are the origins and consequences of the state as a provider of public goods? We study legal reforms that established mass public education and increased state capacity in German cities during the 1500s. These fundamental changes in public goods provision occurred where ideological competition during the Protestant Reformation interacted with popular politics at the local level. We document that cities that formalized public goods provision in the 1500s began differentially producing and attracting upper tail human capital and grew to be significantly larger in the long-run. We study plague outbreaks in a narrow time period as exogenous shocks to local politics and find support for a causal interpretation of the relationship between public goods institutions, human capital, and growth. More broadly, we provide evidence on the origins of state capacity directly targeting welfare improvement.
    Keywords: State Capacity, Institutions, Growth, Education, Human Capital, Persistence
    JEL: I25 N13 O11 O43
    Date: 2016–03
  14. By: Marius Brulhart; Didier Dupertuis; Elodie Moreau
    Abstract: We estimate the size of inheritance flows in Switzerland as a share of total wealth and of national income over a long span of data, in close analogy to the study for France by Piketty (2011). We find that inheritance flows had been growing more slowly than national income up until the 1970s, but have been outpacing income growth since. According to our central estimates, the annual flow of inheritance amounted to 2.7% of the stock of private wealth and to 13.1% of national income in 2011. These values are higher than our corresponding (though more approximate) estimates for 1911. The share of total wealth that is attributable to inheritance has remained relatively stable over time, uctuating between 40% and 50%.
    Keywords: inheritance, Switzerland
    JEL: D31 H24 N34
    Date: 2016–03
  15. By: Accolley, Delali
    Abstract: This is a biography of Joseph Alois Schumpeter, the father of both the concept of creative destruction and the elite theory of democracy. The influence of his works has gone beyond the Economics field. He has influenced both economists through his explanations of business cycles and innovations and Political Scientists through his theories of democracy. Recently, in the wake of the 2008 financial crisis, Schumpeter's thesis on the self-destruction of capitalism has been revisited by economists.
    Keywords: Schumpeter, creative destruction, innovation
    JEL: B3
    Date: 2011–03–20
  16. By: Joshua Aizenman
    Abstract: This paper takes stock of the history of the European Monetary Union (EMU) and pegged exchange-rate regimes in recent decades, pointing out the need to reshape the optimal currency area (OCA) criteria into the twenty-first century. While contributions from the 1960s regarding the OCA remain relevant, they were written during the Bretton Woods system when financial integration among countries was low and banks were heavily regulated. The post-Bretton Woods greater financial integration and under-regulated financial intermediation have increased the cost of sustaining a currency area and other forms of fixed exchange-rate regimes. A key lesson learned from financial crises is that fast-moving asymmetric financial shocks interacting with real distortions pose a grave threat to the stability of currency areas and fixed exchange-rate regimes. Thus, the odds of a successful currency area depend on the viability of effective institutions and policies that deal with adjustment to asymmetric shocks. The financial crises of recent decades illustrate that the endogeneity of the OCA is time dependent, and that deeper trade and financial integration impacts the stability of the OCA in differential ways. Members of a currency union with closer financial links may accumulate asymmetric balance-sheet exposure over time, becoming more susceptible to sudden-stop crises. In a phase of deepening financial ties, countries may end up with more correlated business cycles. Down the road, debtor countries that rely on financial inflows to fund structural imbalances may be exposed to devastating sudden-stop crises, subsequently reducing the correlation of business cycles between currency area’s members, possibly ceasing the gains from membership in a currency union. A currency union of developing countries anchored to a leading global currency stabilizes inflation at a cost of inhibiting the use of monetary policy to deal with real and financial shocks. Currency unions with low financial depth and low financial integration of its members may be more stable at a cost of inhibiting the growth of sectors depending on bank funding. Similar trade-offs apply to other forms of fixed exchange-rate regimes.
    JEL: F15 F33 F4 F41
    Date: 2016–03
  17. By: Roberto Torrini (ANVUR and Bank of Italy)
    Abstract: The share of labour increased in the first half of the 1970s, declined slowly to its 1960s level in 2001, and since then has been rising. Between 1975 and 2001, the decline in the labour share was due in part to the recovery in profits, and in part to a steady increase in housing rents on GDP, to 13 per cent of value added (5% in 1975) and almost 40 per cent of capital income (20% in the mid-1970s). Net of housing rents, the share of profits fell to a historical low during the great recession. In the business sector net of housing, recovery of the labour share, magnified by the recent recession, was evident in manufacturing and industries other than regulated sectors (energy, transport, communications and finance), where privatizations and changes to regulation provoked a marked drop in the labour share in the late 1990s. I tentatively explain the trend reversal in the labour share, which started well before the onset of the crises, as due to a compression in the mark-ups on marginal costs and the difficulty experienced by Italian firms to be rewarded for their innovation efforts (product quality upgrading) in a more competitive environment.
    Keywords: factor shares, returns on capital, productivity, mark-ups
    JEL: E25 E22 E24 L32 L33 J30
    Date: 2016–03
  18. By: Miguel Morin; ; ;
    Abstract: When the adoption of a new labor-saving technology increases labor productivity, it is an open question whether the economy adjusts in the medium-term by decreasing employment or increasing output. This paper studies the effects of cheaper electricity on the labor market during the Great Depression. The first-stage of the identification strategy uses geography as an instrument for changes in the price of electricity and the second-stage uses labor market outcomes from the concrete industry—a non-traded industry whose location decisions are independent of the instrument. The paper finds that electricity was an important labor-saving technology and caused an increase in capital intensity and labor productivity, as well as a decrease in the labor share of income. The paper also finds that firms adjusted to higher labor productivity by decreasing employment instead of increasing output, which supports the theory of technological unemployment.
    Keywords: electricity, technical change, Great Depression, labor market, employment, labor productivity, labor share of income.
    JEL: J24 N12 N62 O33
    Date: 2015–04–24
  19. By: Ricardo Ferraz (Centro de Investigação GHES (do consórcio CSG) do ISEG e Assembleia da República)
    Abstract: No período 1933-1974 vigorou em Portugal um regime político que defendeu o princípio de "finanças sãs". Tendo por base este pressuposto, o objectivo do presente estudo foi o de aferir do ponto de vista aplicado, se as finanças públicas portuguesas foram sustentáveis no referido horizonte temporal. Deste modo, recorrendo a testes de estacionaridade e de cointegração, concluiu-se que as finanças públicas portuguesas foram sustentáveis no período do Estado Novo (1933-1974), embora essa sustentabilidade não possa ser considerada forte.
    Keywords: Estado Novo, Sustentabilidade das Finanças Públicas.
    JEL: E60 H60
    Date: 2016–03
  20. By: Renata Targetti Lenti
    Abstract: The paper is a critical review of Piketty’s book “Capital in the XXI Century”. The book provides a general theory of the functioning of a capitalist economy. Piketty’s intent is to link the functional and personal income distribution to the economic growth. The setting can be called "classic". However Piketty is not interested in explaining the role of capital accumulation on economic growth, but instead the inverse relation, that is the role of economic growth on the increase of the returns to capital, on the concentration of wealth and of income’s inequality in capitalist economies. In this review Piketty’s framework is discussed arguing that it can explain only partially level and changes of the personal income distribution. The factors which explain the dynamic of wealth (accumulation of capital) are different from those which explain the dynamics of labor income (demand and supply of skills and education, technology). It is very difficult, therefore, to reach a consensus on a shared theory of personal income distribution. Piketty links in a very innovative way the returns from capital r to the rate of growth of national income g comparing them in a macroeconomic framework. He claims that when returns on capital rise more quickly than the overall economy and taxes on capital remain low, a vicious circle of ever-growing dynastic wealth, and growing inequality, takes place. However the fact that r exceeds g explains nothing about the rise in inequality. An analysis of the generation of personal incomes, and consequently of inequality, requires a suitable framework that links personal endowments to incomes. At the end I will indicate some steps that could be required by framework suitable to analyze the personal income generation process.
    Keywords: Capitalism, Inequality, Income Distribution
    JEL: P16 P48 D31
  21. By: Eric Monnet; Damien Puy
    Abstract: This paper assesses the strength of business cycle synchronization between 1950 and 2014 in a sample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to the common wisdom, we find that the globalization period is not associated with more output synchronization at the global level. The world business cycle was as strong during Bretton Woods (1950-1971) than during the Globalization period (1984-2006). Although globalization did not affect the average level of co-movement, trade and financial integration strongly affect the way countries co-move with the rest of the world. We find that financial integration de-synchronizes national outputs from the world cycle, although the magnitude of this effect depends crucially on the type of shocks hitting the world economy. This de-synchronizing effect has offset the synchronizing impact of other forces, such as increased trade integration.
    Date: 2016–03–08
  22. By: Sanjeev Goyal; ; ;
    Abstract: It is instructive to view the study of networks in economics as a shift in paradigm, in the sense of Kuhn (1962). This perspective helps us locate the innovation that networks bring to economics, appreciate different strands of the research, assess the current state of the subject and identify the challenges.
    Date: 2015–02–24
  23. By: Richard G. Anderson; Michael Bordo; John V. Duca
    Abstract: This study offers a single, consistent model that tracks the velocity of broad money (M2) since 1929, including the Great Depression, the global financial crisis, and the Great Recession. The model emphasizes the roles of changes in uncertainty and risk premia, financial innovation, and major banking regulations. Our findings suggest an enhanced role of a broad, liquid money aggregate as a policy guide during crises and their unwinding. Following crises, policymakers face the challenge of not only unwinding their balance sheet so as to prevent excess reserves from fueling a surge in M2, but also countering a fall in the demand for money as risk premia return to normal amid velocity shifts stemming from relevant financial reforms.
    JEL: E41 E50 G11
    Date: 2016–03

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.