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The purpose of this paper is to present a case study of this type--the holdings of short-term foreign assets by the German banks. The ratio of short-term foreign asset to the total asset is explained by various yields on alternative assets. In addition, the effect of short-term constraint variable on the adjustment of actual stock to the desired stock of asset holdings is incorporated in the analysis. The variables included perform rather well in explaining the monthly fluctuations of the asset ratios. This paper presents a case study of the international movements of short-term banking funds with the application of the asset portfolio approach which has been so fruitful in the investigation of demand for domestic financial assets. The study demonstrates that when a balance-sheet framework can be clearly defined, the portfolio balance analysis provides a very effective approach to the study of capital flows between countries. The experience of the holding of short-term foreign assets of the German banks is investigated. With the holding of foreign assets treated as one of many assets (and liabilities) in a well-defined balance sheet for the German banks, the portfolio approach is applied with some success. The importance of such variables as total asset holdings (LA), yields on alternative assets (r[sub 1]), and flows of liquid funds (CBM) in affecting the asset holdings is borne out by the results obtained. Some 70 per cent of the fluctuations of the ratios of foreign assets to total liquid assets are explained by the variables r[sub L], r[sub LA[sub d]] - r[sub FA], and CBM/LA[sub t-1]. The estimated coefficients are all significant. The incorporation of variables LA and CBM also helps improve the estimation of interest rate variables, giving us a very satisfactory result for the estimated coefficients for interest rates. The scope of the paper is obviously limited. Those problems such as the need for non-linear equation, the importance of adopting simul... [ABSTRACT FROM AUTHOR]

Close bank relationships are thought to ameliorate firms' liquidity constraints--a phenomenon frequently measured by liquidity sensitivity of investment. Using German firms during the formative years of universal banking (1903-1913), this paper shows that, even controlling for selection bias, investment is more sensitive to internal liquidity for bank-networked firms than unattached firms. The firm exhibiting the greatest liquidity sensitivity, however, faced no apparent liquidity constraint. The findings yield two implications: they support recent research rejecting a linear relationship between liquidity sensitivity and financing constraints, and they suggest that relationship banking provides no consistent lessening of firms' liquidity sensitivity. [ABSTRACT FROM AUTHOR]

In periods of frequent realignment of foreign exchange rates, interest focuses understandably on the causes of capital movements. The difficulty with studies of such movements usually lies in obtaining data sufficiently disaggregated so as not to force too many types of motivation into one all-encompassing specification. This was the problem M. Porter as well as W. H. Branson and R. D. Hill faced when studying capital movements of OECD countries. C. F. Ou started from a much more narrowly defined asset category but failed to distinguish between demand balances held for transactions requirements and interest earning assets. Despite the attention that capital flows have received of late, their importance for the present system of international exchange rates and the conduct of monetary policy as well as the shortcomings of the studies to date may justify another inquiry. Specifically, the present paper will review briefly the theoretical underpinnings for German banks' decisions to hold short term assets abroad. The main purpose is twofold: 1) to determine which interest rates and scale variables yield the best explanation of actual changes in the stock of such assets held by German banks; 2) to obtain an estimate of changes in the short term capital account of the German balance of payments that can be attributed to banks' portfolio adjustments in the face of interest rate changes at home and abroad. [ABSTRACT FROM AUTHOR]

Most of the existing studies on the international capital market are based on a segmented market approach. This approach treats the different national capital markets as separated entities, hardly related to each other. For this reason (under the assumption of market segmentation), comparable capital assets may differ in their return on different national markets. Although market segmentation enjoys a surprisingly large following, it is not the only possible interpretation of the international capital market. The alternative hypothesis, i.e., that prices of capital assets in the international capital market behave as if there is one multinational perfect capital market, should be considered. The one market hypothesis has the advantage of being consistent with much of the accepted economic theory. Also the one market hypothesis is unambiguous where market segmentation can stand for any number of specific imperfect market formations. Market segmentation is widely accepted as the only possible structure of the international capital market. Different currency areas, separated political organizations and trade barriers have been given as a priori evidence for the segmentation of the international capital market. This, however, is not necessarily the case. An examination of the behavior of capital asset prices reveals that the price behavior is consistent with the one market hypothesis. It should be noted, however, that a certain body of data can be consistent with both the one market hypothesis and any one of several specific forms of market segmentation. But as the main theme of this study is to show the validity of the one market approach to the multinational equity market, it is sufficient to show that one cannot reject the one market hypothesis with regard to this market. [ABSTRACT FROM AUTHOR]

The article discusses the discipline of the balance of payments in Western Europe. The article's first section attempts to demonstrate that, in most of Western Europe, the normal balance-of-payments discipline operated against chronic external deficits, which was in fact operative only to a limited extent during the first half-dozen years after World War II. The second section of the article focuses on the operation of the discipline against chronic external deficits throughout the late 1950s and early 1960s. In the third section the question of balance-of-payments discipline in situations of chronic external surplus is considered, with a particular focus on Germany.

Using a sample of small firms that defaulted on their bank debt in France, Germany, and the United Kingdom, we find that large differences in creditors' rights across countries lead banks to adjust their lending and reorganization practices to mitigate costly aspects of bankruptcy law. In particular, French banks respond to a creditor-unfriendly code by requiring more collateral than lenders elsewhere, and by relying on collateral forms that minimize the statutory dilution of their claims in bankruptcy. Despite such adjustments, bank recovery rates in default remain sharply different across the three countries, reflecting very different levels of creditor protection. [ABSTRACT FROM AUTHOR]

A German broker's clients place similar speculative trades and therefore tend to be on the same side of the market in a given stock during a given day, week, month, and quarter. Aggregate liquidity effects, short sale constraints, the systematic execution of limit orders (coordinated through price movements) or the correlated trading of other investors who pick off retail limit orders do not fully explain why retail investors trade similarly. Correlated market orders lead returns, presumably due to persistent speculative price pressure. Correlated limit orders also predict subsequent returns, consistent with executed limit orders being compensated for accommodating liquidity demands. [ABSTRACT FROM AUTHOR]

Why does stock volatility increase when output declines? The theory of investment under uncertainty implies that political uncertainty may simultaneously increase volatility and reduce output. Though cause and effect are typically hard to separate, the transition from Imperial to Weimar Germany offers a natural experiment because major political events left clear traces on stock prices. Current and past increases in volatility are associated with output declines, consistent with U.S. experience. However, political events are more clearly the source of volatility, and the results support the view that the relationship between volatility and output reflects the joint effects of political factors. [ABSTRACT FROM AUTHOR]

The higher taxation of dividends in the United States gave rise to theories that explain why companies pay dividends. Tax-based signaling models propose that the higher tax on dividends is a necessary condition to make them informative about companies' values. In Germany, where dividends are not tax-disadvantaged and in fact are taxed lower for most investor classes, these models predict that dividends are not informative. However, we find that the stock price reaction to dividend news in Germany is similar to that found in the United States. This suggests other reasons, beyond taxation, that make dividends informative. [ABSTRACT FROM AUTHOR]

The article looks at three aspects of European capital markets. It considers the characteristics of integrated capital markets, the relationship of integration to efficiency, the extent to which developments have affected integrated capital markets, and the prospects for future development. The author notes that, while Europe contains capital markets of importance, no European capital market exists, leaving markets for long-term capital to be organized on unintegrated national lines. The efficiency of European capital markets are considered from an international point of view. Capital markets in Germany, Sweden, Great Britain, and other European countries are discussed.

The article focuses on the financial policies of Germany in the post World War II period, outlining the treatment of foreign exchange controls and external mark debts initiated in the 1930s and readdressed in the 1950s. Germany's efforts to unfreeze as many foreign fund sources as possible are discussed in depth. Blocked funds including not only banking loans, but also real estate holdings, security investments, and other long term assets are considered. Details of the conditions before the war which led to the developments are explained along with discussion of its ongoing efforts to resolve the problem.

The article discusses basic aspects of the German postwar debt settlement. Including the prewar debt, Germany has over $5.5 billion in outstanding debt. A settlement accord was reached in England and is important to Germany's economic future and stability but also the system of international lending. The author explains certain aspects of the settlement such as the negotiations to reduce the prewar debt based on territorial changes. Also, the United States wrote down the money owned to it by almost $2 billion.

The article examines the actual role of cigarettes as currency in the German economy at the end of World War II, as opposed to popular mythology surrounding the events. Details are given describing the institution of a limited barter economy alongside the black market and traditional system and the presence of cigarettes as a primary commodity within them. Connections between the restrictions of Reichmark-American dollar exchanges are analyzed. Conclusions are offered suggesting that while cigarettes did serve in a monetary capacity, it was a limited one.

The article discusses the regulation of money and capital markets in Germany from 1933 to 1938. Central bank policy during that period focused on four aims, including the regulation of the money market, use of capital markets for the sale of government debt, determining supply and demand for seasoned government bonds, and maintaining low interest rates. The author discusses each policy objective in turn, and notes how German bank officials miscalculated the willingness of the Nazi regime to scale back on armaments once German economic power had been re-established.