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The present paper analyses spatial distribution of EU financial support for territories according to their distance from regional centres, and tests the measurement method based on the t-statistic of sign frequency in order to apply R. Fisher function's arcsin transformation. The measuring of EU funds distributions is based on the analysis of sign frequency in sample groups with sign frequency in all municipalities of Latvia. The author has concluded that comparing different programs, radical differences in the spatial distribution of Latvian EU business development support can be observed. [ABSTRACT FROM AUTHOR]

This paper reviews how central banks in emerging market countries assess fiscal positions, and discusses two aspects of fiscal transparency that have recently gained importance from central banks' perspective: off-budget activities and special fiscal funds. By increasing uncertainty about the true fiscal position of the government, these activities are of concern both to central banks that set monetary policy on their own, taking fiscal policy as given, and to those that have adopted an institutional framework for coordinating monetary and fiscal policies. [ABSTRACT FROM AUTHOR]

In this book I provide a theory of how hegemonic-party autocracies sustain their rule and of the process by which those autocracies can undergo democratization, illustrating this theory with the case of Mexico. Hegemonic-party autocracies are remarkably effective at constructing political order (Huntington, 1968). After the True Whig Party, which ruled Liberia from 1878 until 1980, when it was ousted by a military coup; the Mongolian People's Revolutionary Party (MPRP), which ruled for seventy-five years, from 1921 to 1996; and the Communist Party of the Soviet Union (CPSU), which ruled for seventy-two years, from 1917 to 1989, the Mexican Institutional Revolutionary Party (PRI) was the longest-lived autocratic regime of the twentieth century. The PRI governed for seventy-one years, from 1929, when the precursor to the party was created, until 2000, when the PRI lost the presidency to the long-standing opposition party, the National Action Party (PAN). Unlike the MPRP and CPSU, the PRI held regular elections during all these years for all levels of elective office. Parties other than the PRI were allowed to compete, and Mexico continuously replaced government officeholders electorally, including the president. Like the Mexican PRI, many other autocracies have perpetuated their rule in spite of regular multiparty elections. Some examples are the Senegalese Socialist Party (PS), which governed for forty years, from the nation's independence in 1960. [ABSTRACT FROM AUTHOR]

A central empirical implication of my theory presented in Chapter 1 is that there would be budget cycles or an increase in government spending around elections, when the hegemonic coalition is most vulnerable to potential challengers, including those resulting from splits within the ruling party. Budget cycles would occur even when elections were not competitive, and would become more pronounced when the opposition strengthened. My approach also predicts that splits within the ruling party would tend to occur in part due to failures to distribute enough material rewards to the members of the ruling coalition. This chapter tests these hypotheses against the empirical evidence. I answer the following questions: first, is there systematic empirical evidence that the PRI flooded districts at election time with generous amounts of government spending? Second, is there evidence that electoral business cycles took place even when elections were not competitive? Third, do other policy instruments and variables, such as the money supply, inflation, and economic growth, also move according to the electoral calendar? The chapter unfolds as follows. The first section summarizes the literature on electoral business cycles, which was developed for competitive democracies. The second section presents a discussion of budget cycles in light of some conventional views about the Mexican political system. The third section analyzes government spending patterns between 1938 and 2000. The fourth and fifth sections present evidence of the movement of inflation, the money supply, nominal wages, and the exchange rate according to the electoral calendar. [ABSTRACT FROM AUTHOR]

The evolution of the monetary system is governed by the interaction between advances in economic theory and major shocks. This hypothesis is corroborated by the articulated process that led from the downfall of the gold standard to the Bretton Woods agreements and then to the sudden abandonment of the spirit of the treaty. A detailed examination of the actual working of Bretton Woods, however, is beyond the scope of the present work. This concluding chapter thus focuses exclusively on the factors behind the system's eventual collapse and the prospects for the development of the international monetary system. The Bretton Woods conference was unique to monetary history. It designed a new monetary order from scratch. John Ikenberry, for one, noted: The Bretton Woods agreements, negotiated largely between Britain and the United States and signed by forty-four nations in 1944, were remarkable in a variety of ways. First, they represented an unprecedented experiment in international rule making and institution building – rules and institutions for post-war monetary and financial relations. Second, the Bretton Woods agreements were the decisive step in the historic reopening of the world economy. Agreement was reached, at least in principle, whereby the world economy would abandon regional currency and trade groupings in favor of a liberal multilateral system. Third, Bretton Woods created an entirely new type of open system – something that the capitalist world had not seen before. The Anglo-American agreements established sophisticated rules that would attempt to reconcile openness and trade expansion with the commitments of national governments to full employment and economic stabilization.[…] [ABSTRACT FROM AUTHOR]

In a detailed reconstruction of international monetary developments between the wars, Barry Eichengreen (1992a) underscores the period's continuity with the gold standard and the decisive role of the monetary system in aggravating the depression and propagating its effects from the United States to the rest of the world. He identifies two factors underlying the success of the gold standard until 1914: the credibility of the official commitment to gold and international cooperation. The loss of credibility after World War I could only have been remedied by even stronger cooperation, whose absence made the crisis inevitable (Eichengreen 1992a, xi). Credibility and cooperation are important elements of the gold standard, but the relation between them appears to be more complex than a simple inverse relation, suggesting a link that is not in the nature of a trade-off. In general, how the gold standard worked has always been controversial. A clarifying analysis of its properties is therefore essential to understanding the evolution of the monetary system in the interwar years, especially the contrast between the success of the gold standard and the failure of the gold exchange standard. The monetary gyrations and economic instability of the 1920s and 1930s showed the need to devise new rules, which eventually led to the Bretton Woods negotiations and the creation of a new international monetary order. [ABSTRACT FROM AUTHOR]

Over the course of the twentieth century, the monetary system underwent an epochal change. Money's link to a commodity was severed, eliminating the basic feature of the system since the beginning of coinage and producing a break in the evolution of monetary institutions. This transformation was the product of a gradual process extending from World War I to the suspension of dollar convertibility on 15 August 1971, an act that merely gave official recognition to a preexisting state of affairs. The transition from the commodity standard to fiat money was driven by the interplay of the extreme shocks of the interwar period and advances in monetary theory, which were instrumental in designing the new monetary arrangements. The study of the Bretton Woods agreements, then, is best viewed in this context, in which economic analysis acquires a central role. Looking at the Bretton Woods architecture from the perspective of the history of economics thus serves not only to account for the reconstruction of international monetary relations and the key aspects of the reform, but also to shed light on the rise of fiat money. THE BRETTON WOODS ENIGMA During the quarter-century in which the Bretton Woods system governed monetary relations, the world economy experienced rapid and relatively stable growth, especially after the leading European currencies restored convertibility on 27 December 1958 (Bordo 1993, 12–27). This date divides the life of the system into two equal subperiods. [ABSTRACT FROM AUTHOR]

Chapter one of the book "Essays on the Great Depression" is presented. It provides a selective survey of the current understanding of the Great Depression. It gives emphasis to insights drawn from comparative macroeconomic research on the international level. It distinguishes factors affecting aggregate demand and those affecting aggregate supply. It discusses the impacts of falling money supplies and price levels on interwar economies.

Demand for urban goods and services There is a striking contrast between any analysis of changing demand in the late middle ages and that of earlier centuries. Changes in the period 600–1300, at least at the level of generalisation attempted in Chapter 5, may be summarised with the broad statement that the rising income of landlords, the growth of rural demand and the expansion of long-distance trade were all favourable to the growth of urban incomes over long periods of time. For most of that long period the evidence is not good enough for any much more subtle refinement. No comparable simplicity is viable for the shorter and much better documented period from 1300 to 1540, and it is difficult to generalise about the performance of late medieval urban economies with any firm assurance. As in the past, the urban households of landlords often contributed a large and distinctive part in the composition of demand affecting townsmen. This was not true only of the small episcopal or monastic towns where it is most obvious. One of the most striking instances is Westminster, where the royal Court with its associated institutions of government, together with Westminster Abbey, and the visitors to both, generated trade both in Westminster itself and in London nearby. Besides numerous manufacturing industries that could prosper in this context, the victualling trades conspicuously benefited. The court and the abbey generated an exceptional demand for meat and so created local employment in grazing and butchering. Heavy dependence upon the presence of large households was the lot of many smaller towns. [ABSTRACT FROM AUTHOR]

Demand for urban goods and services No definition of the word town is very convenient for the analysis of medieval economies. It is tempting to take the contemporary term burh or burgus as a proxy, but this needs resisting because there was so little consistency or stability in the way the word was used. Population levels might serve as a guide if they were reliably known for each town, but they are not. Differences of taxable wealth are on record, and for 1334 can be charted for most of England, but they depend upon the size of the assessed area and the social distribution of wealth to such an extent that there is considerable overlap between places with ‘urban’ features (craftsmen, traders, marketing institutions) and places dependent solely on rural pursuits. It will be assumed here, first, that a necessary condition for being considered a town is that a settlement should have some institutional apparatus for regular local or long-distance trade; from the eleventh century onwards this would normally mean at least a weekly market. Secondly, a settlement with this institutional provision is classifiable as a town if its income depends to a perceptible degree upon the sale of manufactures and services to buyers external to the body of townsmen. Buyers external to the urban community, in this context, may mean large households or bodies of administrative personnel adjacent to the town; describing such purchasers as external is justifiable because large households of all kinds normally drew most of their income from outside the town in which they were placed. [ABSTRACT FROM AUTHOR]

The operation and properties of the classical gold standard are well recognized. However, one aspect that has not been dealt with is that gold has the characteristics of a durable, but depletable resource. In this chapter, we compare the simple classical model of the gold standard with a model of the gold standard that incorporates the durable, depletable nature of gold. Using numerical simulation techniques, we demonstrate an inescapable tendency to long-run deflation when account is taken of the resource constraint. These results are consistent, with and without technological progress and variable real rates of return. Introduction Recent dissatisfaction with high rates of inflation and real economic instability in the U.S. and elsewhere has led to criticism of the operation of the present fiat-based monetary system. Some economists have advocated a return to the classical gold standard, based on a government maintained fixed price of gold in terms of the national currency, on the grounds that the gold standard would provide greater price stability than under current arrangement. Indeed, such interest led to the establishment of the U.S. Congressional Gold Commission in 1981. A second desirable attribute of the gold standard stressed by its advocates is that the monetary gold stock and hence the money supply is determined by competitive market forces according to the classical commodity theory of money largely independent of government policy. The classical tradition of Thornton (1802), Mill (1865), Fisher (1922), and Friedman (1953) viewed the monetary gold stock and hence the money supply and the price level under the gold standard as determined by two offsetting sets of equilibrating forces producing a tendency to long-run price stability: [ABSTRACT FROM AUTHOR]

The widespread dissatisfaction with almost two decades of worldwide inflation has prompted interest in a return to some form of a gold standard. Some crucial questions must be answered, however, before such interest can be taken seriously. Two questions immediately come to mind: How did the actual gold standard operate? What was its record for providing stable prices and overall economic stability? This chapter attempts to answer these two questions. It focuses primarily on what is commonly referred to as the “Classical Gold Standard,” which prevailed in its most pristine form between 1880 and 1914. The first section discusses some fundamentals of the gold standard. This is followed by a discussion of the “Managed Gold Standard,” which characterized much of the pre–World War I period. Following that is a brief narration of the history of the gold standard. Next, some empirical evidence is presented on the performance of the economies of the United States and the United Kingdom under the gold standard. Finally, the case for a return to the gold standard is examined. The evidence presented in this chapter suggests that, in several respects, economic performance in the United States and the United Kingdom was superior under the classical gold standard to that of the subsequent period of managed fiduciary money. In particular, both the price level and real economic activity were more stable in the pre–World War I gold standard era than in the subsequent six-and-one-half decades. [ABSTRACT FROM AUTHOR]

After twenty years of floating exchange rates, there is now considerable interest, among those concerned over its perceived shortcomings, in an eventual return by the world to a fixed exchange rate regime. This interest has been enhanced by the apparent success of the European Monetary System (EMS) and the prospects for European monetary unification. The Bretton Woods system was the world's most recent experiment with a fixed exchange rate regime. Although it was originally designed as an adjustable peg, it evolved in its heyday into a de facto fixed exchange rate regime. That regime ended with the closing by President Richard Nixon of the gold window on 15 August 1971. Twenty years after that momentous decision, a retrospective look at the performance of the Bretton Woods system is timely. This chapter presents an overview of the Bretton Woods experience. I analyze the system's performance relative to earlier international monetary regimes – as well as to the subsequent one – and also its origins, operation, problems, and demise. In the survey, I discuss issues deemed important during the life of Bretton Woods and some that speak to the concerns of the present. The survey is limited to the industrial countries – the G-10 and especially the G-7.1 do not examine the role of the International Monetary Fund (IMF), the fundamental organization of Bretton Woods, in the economies and international economic relations of the developing nations. [ABSTRACT FROM AUTHOR]

Introduction Monetary economists have long been interested in economic history as a laboratory for the testing of theory. For the monetary economist, unusual monetary disturbances such as gold discoveries and hyperinflations, unique institutional arrangements such as free banking, and unique monetary standards such as bimetallism provide the raw materials for the testing of theories. Monetary economics has focused mainly on the experience of Western Europe and North America since the beginning of the nineteenth century, because of the availability of data and of continuity to modern times of institutions then established. However, there has also been considerable interest in episodes from the preceding three centuries, e.g., the Price Revolution of the sixteenth century [Hamilton (1934)], Colonial money issues [Smith (1985), Wicker (1985)], the assignat hyperinflation [White (1985)], the historical sources of hyperinflation [Capie (1986)], and the South Sea Bubble [Neal and Schubert (1985)]. One largely overlooked episode of history of great potential interest to the monetary economist is the late Middle Ages in Northwestern Europe. Topics of interest for recent theory from this episode include: conflicting monetary and real explanations for long-run price level and real output movements, the operation of early commodity money standards, early attempts at inflationary finance, time-inconsistent monetary policies, and the issue of credibility. I first present an overview of the key themes in late medieval monetary history highlighting the debate between realists and monetarists. I then examine the issue of politics and money, focusing on debasement as a policy tool, following which I assess an excellent recent contribution to this literature, H. Miskimin's Money and Power in Fifteenth Century France (1984). [ABSTRACT FROM AUTHOR]

In the nineteenth century, industrial empire brought new force into the transformation of agrarian regions. Britain controlled the corridors of mobility in southern Eurasia. English became the imperial language. A new rupee homogenised the money supply. In 1800, cowry shells from the Andamans were the currency in Sylhet, and dozens of different silver, gold, and copper coins filled markets from Surat to Chittagong. Money changers worked every corner. But in the 1820s, the Company's silver rupee set the monetary standard and market prices began a tumble that lasted thirty years. In these hard decades, markets contracted along routes of imperial expansion, real taxation increased, seasons of scarcity were common, and overseas cloth exports died. The Act of 1793 had established a permanent settlement with no survey, no records of rights, and no definite method of assessment; after 1820, zamindari settlements required the recording of rights, annual assessments of cultivated land, and periodic reassessments. Almost everywhere, routine revenue collections provoked struggles and dislocations. When indigo stocks crashed on the London exchange, Bihari peasants lost their income and tenants lost their land. The Torture Commission in Madras reported routine beatings by revenue officers. Company critics multiplied in London but could not quite topple the old regime before rebellions killed the Company in 1857. Crown rule ended an imperial crisis. Prices had begun moving upward again by 1855, and decades of inflation then steadily lowered the real cash burden of revenue and rent. Land became more attractive for investors as a veneer of modernity covered British India. [ABSTRACT FROM AUTHOR]

The article informs that after the industrial revolution it is not the market itself which is historically new, but rather the all-encompassing reach and enormous tempo of market transactions, that is, the exchange of goods and services in the form of commodities. By "reach" is meant not only the physical and spatial extension to the whole planet, but also the functional-spatial process of the integration of everything into a system of cool calculating market-like exchange. Human life became dependent upon the market. Even money, which is as a rule understood by economists as a pure medium of exchange and therefore as a "money veil," becomes a commodity and therefore completely integrated in the market processes. A money market emerges which today is expanded on to a global scale in which different moneys are traded like sides of pork, iron ore or soybeans with fatal consequences for national economies. In this totality of exchange relations in which only owners of commodities or monetary wealth can participate there is little room for inter-subjective bonds via gifts or offerings, for reciprocity and solidarity for reciprocal "generosity" or for human "community." Thus the historical process of "disembedding" is indeed a "great transformation" from traditional to modern relations. In place of the exchange of products, which has a very long history, all areas of human communication are taken over by forms of commodity exchange.

While unanimous decision such as McCulloch tend to support the theory of a judicial branch devoid of subjectivity and partisanship, the four major decision relating to the validity of paper money and legal tender paper lead to a contrary conclusion. At present, the government, through the U.S. Federal Reserve System, is largely responsible for determining the money supply at any given period. The story of how Congress acquired unlimited authority to issue paper money and confer on it legal tender status involves the Supreme Court and some decisions that are highly controversial with respect to both the substance and the judicial disposition of the issue.

Introduction The Second World War led to a complete reversal in the perception of the role of the state in the national economy of The Netherlands. The passive role of laissez-faire which it had adopted in the 1930s had been markedly unsuccessful. After the war, therefore, an active policy was implemented which led to the creation of a welfare state. Before we examine the social and economic policies that resulted in the welfare state, we will look closely at the 1940s, where the story is one of war and reconstruction. Special attention must be paid to the financial consequences of the German occupation, notably to the ballooning public debt and money supply, as well as to the ways in which these major financial problems were handled after liberation. In the financial sector, the post-war period began with the demarcation lines between the different financial institutions still pretty well intact: the various kinds of financial institutions all had their market segments well defined. The late 1950s saw the beginning of a process of diversification and expansion. We will describe this process, sketch the development of the payments system and end by describing how the Nederlandsche Bank reacted to the changing environment. War and peace The German occupation The pressure on the Dutch economy mounted throughout the war years. As in other countries, one of the conditions imposed as part of the surrender to Nazi Germany was the recognition of German occupation currency, the so called Reichskreditkassenscheine. [ABSTRACT FROM AUTHOR]

Introduction In the course of the seventeenth century, Dutch finance became intricately connected to the world economic system. Its development was bolstered by favourable developments in international trade, which allowed the Dutch to exploit their geographic position and their harbours to the full, and by an economic boom which lasted long enough for considerable capital accumulation. The political and social structures were well suited to the preservation of wealth and allowed for high propensities to save. The accumulated funds in The Netherlands are estimated to have grown enormously since approximately 1500, even during the less favourable eighteenth century. Van Zanden calculated for Holland alone a rise in capital wealth from ten to twelve million guilders around 1500 to approximately 1,750 million guilders around 1790 (Van Zanden 1993, p. 23). In the beginning, the swell of capital was mainly diverted to domestic investments and trade. Increasingly, the Dutch funds came to be invested in public loans and foreign assets. The demand by public authorities, in particular for government loans, had increased considerably (cf. previous chapter). But during the eighteenth century, foreign governments came to attract Dutch capital too, specifically for the underwriting of warfare loans. As such, the Amsterdam capital market served to link varied networks of funds and fortunes, both of domestic and of foreign origin. The development was the more remarkable as the Dutch financial institutions did not excel in innovation. On the contrary, the establishment remained basically oriented towards the past. Several Italian cities and also the English state, in the meantime, moved ahead of the Dutch. [ABSTRACT FROM AUTHOR]

The development of the banking system: from ‘revolution’ to stagnation As a result of the relatively slow development of the banking system in the nineteenth century, its size and structure in 1913 differed from that of banking systems in other industrialised countries. The data presented in table 6.1 illustrate these differences clearly. The system of monetary transfer was much less developed in The Netherlands than in neighbouring countries; the proportion of total money supply (Ml) accounted for by notes and coins in circulation was 64 per cent, about twice the corresponding figure for Belgium and Germany. The importance of the composition of the money supply was reflected in the structure of commercial banks' liabilities: in The Netherlands the relationship between equity and deposits was much more favourable than in other countries. The background to this situation, a situation Johan de Vries has labelled archaic (Joh. de Vries 1989, p. 44) is discussed in chapter 5. The foremost factor behind this delayed development of commercial banking in The Netherlands was the large and very efficient prolongatie system, which brought together the supply of and the demand for short-term credit. As a result, banks played a relatively modest role in the money market and, because of the small or absent differences between short-term and long-term interest rates, had difficulties in attracting deposits to enlarge their activities. Only after about 1906 did the large commercial banks, which had hitherto almost exclusively provided short-term credit to commerce, begin to expand rapidly (figure 6.1 and table 6.2). [ABSTRACT FROM AUTHOR]

The economic functions of the party The Communist Party is heavily involved in Soviet economic affairs. Although little is known about how the Central Committee and its apparatus works, the committee is known to set general priorities, which are implemented through its executive arms, the Council of Ministers and Gosplan USSR. The Central Committee is organized into branch departments that supervise industrial ministries but are not held responsible for the ministries' results. The committee plays a key role in high-level staffing decisions through its cadres department. Western literature and Soviet autobiographical sources reveal that Central Committee involvement has gone beyond policy setting and appointments to include direct intervention in operational economic decisions. The micromanagement by high party officials has been chronicled since the trouble shooting by war communism commissars. Stalin and Molotov were known for their micromanagement of the economy, and the agendas of the Central Committee focused on operational matters during the early 1980s. Respondents reported numerous cases of micromanagement by high-ranking party officials of the Central Committee and republican central committees. The preoccupation of the Central Committee with economic affairs is evidenced by the fact that more than half of all its decrees deal with economic matters. The Central Committee stands at the apex of the Soviet party structure. The local party apparatus occupies the middle level of the party organization. The term “local” (mestny) party apparatus is misleading because the “local” level encompasses party organizations ranging from the central committees of powerful regions and the city committees of Moscow or Leningrad at the top to small regional organizations (regional committees, or raikomy) at the bottom. [ABSTRACT FROM AUTHOR]

Restructuring the bureaucracy Without the support of the bureaucracy, Gorbachev's perestroika (restructuring) program cannot be implemented. Western experts presume that distinct elements of the Soviet bureaucracy oppose perestroika. They fear that bureaucratic opponents will pay it lip service, while quietly sabotaging it. This chapter attempts to anticipate how the Soviet economic bureaucracy will respond to perestroika and to determine whether the widespread fears of bureaucratic sabotage are justified. The Western literature often presents a black and white picture of Soviet bureaucratic thinking: Bureaucrats above the enterprise level are presumed to oppose reform because they fear loss of jobs, loss of power, and reduction of perquisites. In contrast, enlightened managers are presumed to favor reform that gives them increased freedom of action. They want to be free from the petty tutelage (opeka) of the ministries and intervention by the local party (podmen) to run their enterprises efficiently. This chapter shows that this categorization of the reluctant bureaucrat and enthusiastic manager obscures important undercurrents. An understanding of how the Soviet economic bureaucracy works – its rules of the game, its goals, and its methods – sheds light on the bureaucracy's probable reception of perestroika. The Soviet economic bureaucracy is diverse – much depends on personalities, assessment of responsibility and risk, and institutional affiliations – and consequently its reactions to perestroika will not be uniform. Nevertheless, how each person and bureaucratic organization deals with perestroika will determine, in the long run, its success or failure. [ABSTRACT FROM AUTHOR]

Dealing with scarcity Every society must deal with scarcity. The Soviet economy is no exception. Claims on society's resources exceed its ability to meet them. Capitalist societies use market allocation to determine who gets scarce resources and how they are used. This chapter examines how the Soviet economic bureaucracy administers the allocation of scarce resources among claimants. Four key groups of questions are raised concerning Soviet resource allocation. First, how are output targets and resource limits determined in the actual planning process. How is it that one ministry or enterprise has easier targets and more abundant resources than other ministries or enterprises? What systematic patterns underlie the bargaining process? Second, how are output targets and resource limits “corrected” during the process of plan fulfillment? How is it that one ministry or enterprise can convince its superiors to lower its output targets or increase its resource limits whereas another ministry or enterprise is stuck with its original targets? Third, what formal and informal techniques, levers, and procedures do ministries and enterprises use to ensure the successful fulfillment of their tasks once they have achieved their “best deal” from their superiors? Fourth, how are financial resources – particularly wage bills – allocated among claimants? This chapter is not a comprehensive account of Soviet planning. It focuses on the bargaining and decision making that take place during and after planning. [ABSTRACT FROM AUTHOR]

Implementation of the bureaucratic design The preceding chapter elaborated the logical design of the Soviet economic bureaucracy. We turn in this chapter to the implementation of this design in Soviet practice. We discuss the roles of the Council of Ministers, Gosplan, the functional committees, and the industrial ministries. Using the literature and interviews with middle-level bureaucrats as a basis, we study the functions, staff, and hierarchical conflicts of the Soviet economic bureaucracy. The oversight level: the Council of Ministers The USSR Council of Ministers (Sovet Ministrov SSSR) is the highest oversight and executive committee of the Soviet economic bureaucracy. It is responsible for the enactment of the economic policies of the Communist Party by the state bureaucracy. Functions. The Council of Ministers is the highest executive organ of state power. Its duties and authority are spelled out in the Soviet constitution, which empowers the Council of Ministers to issue decrees and to monitor their execution. The Council of Ministers is the main source of economic legislation, orders, and decrees. Its edicts (called postanovlenie) vary from important statements of enterprises or ministry law to routine guidelines for individual ministries or organizations. The Council of Ministers coordinates and directs the activities of the state committees and the ministries and the organizations subordinate to them. It supervises national economic planning, the state budget, and credit and currency systems. It forms state committees and has the right to countermand orders of ministers and heads of state committees. [ABSTRACT FROM AUTHOR]

Introduction In this chapter we examine the impact of changes in the quantity of money on aggregate economic variables in Britain over the years 1870 to 1913. This subject has been examined by two of the present authors (Capie and Wood 1984) but the statistical techniques used were fairly rudimentary, and the analytical framework within which hypotheses were tested was set out rather sparsely. This chapter sets out to remedy these deficiencies. Its structure is as follows. Section 9.1 outlines the historical background of the period; it gives an account of what is currently the conventional view of macroeconomic developments in this era. Section 9.2 sets out the analytical framework we use to organise the empirical work. This analytical framework is the traditional model of the impact of money on real and nominal interest rates. This framework has two advantages for the present purpose. It provides a most detailed account of the effect of money on key macroeconomic variables, and, secondly, it lets us consider various explanations of the Gibson Paradox, a phenomenon which, although certainly noted and discussed before this period, was named and came to prominence as a result of examination of data from the years examined in this volume. The data themselves are then described. This prepares the way for the statistical work. The chapter then concludes with a discussion of the results of that work, focusing first on the Gibson Paradox and then on how the results contribute to an understanding of the role of money in Britain in the late nineteenth and early twentieth centuries. [ABSTRACT FROM AUTHOR]

Introduction This chapter is concerned with the development of the financial sector and the availability of close money substitutes in pre-1914 Britain. The financial sector is important to economic historians for a number of reasons. Firstly it is widely believed that an adequate financial system is a necessary, but not a sufficient, condition for the process of industrialisation and growth. The late Victorian/early Edwardian periods are frequently characterised as years of relative economic decline. It is therefore interesting to examine to what extent this might be explained by the failure of suitable financial instruments to develop. For example, this could be the case if the institutions which were capable of channelling small savings failed to develop, thus reducing the savings rate and lowering capital growth. A second source of interest derives from one of the great policy debates of the early nineteenth century, that between the Currency and Banking schools. Collins (1978) has argued that the central proposition of the Banking school was that expansion of the stock of close money substitutes would frustrate any attempts to enforce strict monetary discipline. Thus the extent to which such substitutes were available is of interest. Finally a number of studies of the macroeconomics of the Victorian era have made use of the demand for money function as a central part of the analysis. The best-known example of this is McCloskey and Zecher's (1976) analysis of the pre-1914 gold standard. It is therefore important to assess to what extent the correct monetary aggregate has been chosen and whether or not the functions used are adequately specified. [ABSTRACT FROM AUTHOR]

The neoclassical view is that which is typically regarded as the statement of the “rules of the game” of the gold standard. A widely cited source of this view is the Cunliffe Committee Report, written in 1918, describing the workings of the prewar system. Thirteen years later, the Macmillan Committee gave a drastically different view of how the prewar system had in fact worked. Furthermore (and more interesting), it appears that the Cunliffe Committee described a system that never had existed: the difference between their description of the system and a more detailed analysis of the operations of the Bank of England, Sayers (1936), is striking. Emphasizing the Bank of England's activities here is, I think, perfectly justified. The revisionists argue that the prewar gold standard was really a sterling standard (see Chapter 7). But even hard line gold standardists would agree that Great Britain was very much at the center of the system and that the Bank of England played a crucial and leading role in its working. The Cunliffe Committee and its report The Cunliffe Committee, the “Committee on Currency and Foreign Exchanges after the War,” was appointed by the Treasury, in January 1918 “to consider the various problems which will arise in connection with currency and the foreign exchanges during the period of reconstruction and report upon the steps required to bring about the restoration of normal conditions in due course.” [ABSTRACT FROM AUTHOR]

A brief summary of the highlights of the nineteenth century will serve as a background to later developments. I draw heavily on secondary sources, Fetter (1965), O'Brien (in his fascinating introduction to The correspondence of Lord Overstone, 1971: 70–82) and Viner (1937). The first two do not concentrate specifically on international considerations, but then the early monetary discussions distinguished less than did later ones between closed and open economy analysis. This justifies the muted distinction made by writers such as Fetter and O'Brien (and even, to a certain extent, Viner). I can think of several reasons for this: The openness of the British economy, which led naturally to the assumption that one was dealing with an open economy model. By contrast, the American economy (whence much of the later discussion issued) was, at least until recently, relatively closed. The institutional differences: throughout most of the nineteenth century, a metallic standard meant that bank notes were convertible into gold (and/or silver) at will, whether internally or externally. Thus, issues of the integrity and convertibility (into metal) of the liabilities of either the central or private banks were essentially independent of who was demanding the specie or bullion and what they planned to do with it. Bagehot indeed did distinguish between internal and external drains, but this came later, towards the end of the nineteenth century. Most of the literature I shall deal with here is British. [ABSTRACT FROM AUTHOR]

My interpretation of the neoclassical doctrine is, to refresh the reader's memory, that it is the classical model to which has been added both the shortterm international capital mobility required to finance imbalances and the responsiveness of domestic economic activity, hence the trade balance, to changes in the rate of interest. I first discuss Bagehot's Lombard Street, the origin, or precursor, of the neoclassical position. Secondly, some attention must be given to Marshall's famous statement to the Gold and Silver Commission. This will be followed by a few of the many summary statements of what that position was supposed to have been, and thence to a more detailed analysis of the neoclassical approach, as represented by the Cunliffe Report and subsequent discussions. Bagehot Walter Bagehot's Lombard Street, A description of the money market, published in 1873, is a tract, a policy platform, and a “money and banking textbook” combined, and elegantly written besides. Its theme appears early on: “Money will not manage itself, and Lombard street has a great deal of money to manage” (Bagehot 1873: 20). Lombard Street is the financial center of London, London is the financial center of Britain, Britain is the center of the world, and the Bank of England must manage Lombard Street. This is his message. Note the emphasis on the word and the concept “manage”. He does not deal exclusively, or even primarily, with foreign drains (nor does he really spell out an adjustment mechanism vis-à-vis other countries). [ABSTRACT FROM AUTHOR]

The group of writers labelled MMM consists of Metzler (1960 [1973: Chapter 8]), Meade (1951a and 1951b), and Mundell (1968). The first two wrote about 1950. Mundell was later but he winds up this era with the beginnings of what is known as the Mundell-Fleming model. Mundell was concerned primarily with policy recommendations, and the Mundell-Fleming literature, which I do not propose to survey extensively, is generally interpreted as being based on a text-book type of IS-LM analysis. Meade's important work has for some reason dropped out of the limelight; it is, like most of his work, too detailed and “complete” to serve as a useful hand-book. Presumably, also, the fact that it puts “wages and incomes” policy on the same footing as “financial” (fiscal plus monetary) policy made it somewhat alien to the spirit of western, particularly anglophone, economics in the post-World War II period. Metzler's work is on an entirely different analytical footing from the others. It is called “Keynesian” but is much more Wicksellian. Unlike the others, it is not at all policy-oriented. The role of the central bank is simply to buy and sell foreign exchange in order to peg the exchange rate; it is therefore applicable to any regime where exchange rates are fixed and the money supply varies with the balance of payments. I shall deal with it first. Metzler Metzler's contribution in this area is the paper, “The Process of International Adjustment under Conditions of Full Employment: A Keynesian View.” [ABSTRACT FROM AUTHOR]

Keynes himself, as noted previously, nowhere presented a formal, precise statement of the application of the General theory model to an open economy. The same point is made, inter alia, by Nurkse (1947a [1947:264]). (And when Moggridge (1986: 57) defines the topics Keynes dealt with over time, he adopts a list drawn up by Williamson in the policy-oriented context of monetary reform.) When the applications did come, they came in a great rush. I shall not cover all of them, but have chosen from among them on the basis of seminal or path-breaking quality in the sense of stimulating other research and applications, frequent citations in the literature, or inherent interest. We find the following types of works: Surveys. These include those of Metzler, in his survey article (1948 [1973: Chapter 1]); Iversen (1935), assessing where the theory of international economics is, or should be, going after Keynes; and Haberler (1937 [1941]), in the international portions of Prosperity and depression. Nurkse (1944) includes a brief and cogent summary statement. More narrow direct applications of the keynesian theory to the theory of international adjustment. The two striking examples here are Machlup (1943) and the two Metzler papers (1942a and 1942b [1973: Chapters 10 and 2]), which I have labeled “Early Metzler”. Both are presented as explicitly analytical works, neither econometric nor prescriptive. Both deal with the dynamics of the adjustment; Metzler, in particular, places great emphasis on the discussion of stability conditions. […] [ABSTRACT FROM AUTHOR]

We turn to an examination of the “Taussig school”. Ohlin dubbed them the “Harvard school”; I prefer the label late classical. The books in question span (in terms of publication dates) the 1920s and most of the 1930s. I include here the following works by Taussig and his famous students: Williams (1920), Viner (1924) and (1937), Taussig (1927), and White (1933). Viner (1937) pursues a controversy with Angell, who had criticized the earlier book. I have also included Angell (1926), who would surely have objected strenuously. In terms of what he was aiming at, Bresciani-Turroni (1932) should perhaps have been included here, but I have concentrated on the people around Taussig. (Incidentally, a casual survey indicates that most of the important native-born American economists in the field of international economics until the post-World War II period were direct “descendants” of Taussig, since Kindleberger was Angell's student, and Bloomfield Viner's.) All of these are basically classical in their approach, as distinct from neoclassical. I have labeled them “late classical”, though perhaps “banking-system classical” would be appropriate. Unlike Hume, Mill, and Ricardo, they deal very explicitly with systems characterized by a modern banking system with the important characteristic of fractional-reserve banking. [ABSTRACT FROM AUTHOR]