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The article discusses changes in the federal funds market and bank reserve accounting, particularly how this particular market would fair if contemporaneous reserve accounting were no longer used. Robert D. Laurent's proposed reverse reserve accounting (RRA) method and William Poole's own suggested method for calculating bank reserves are used here to determine how using either of these, instead of CRA, would change the federal funds market. The article concludes that using RRA and the U.S. Federal reserve's own reserve clearings did yield fewer forecast errors.

The article comments on the article "What Do Money Market Models Tell Us About How to Implement Monetary Policy?" by Richard G. Anderson and Robert H. Rasche, published in the November 1982 issue of the "Journal of Money, Credit, and Banking." The article discusses the role of the model for bank loans in determining money and reserves and the influence of interest rate volatility on monetary control. The authors provide a comparison between different models. Several tables and equations are provided to help illustrate the study.

The article comments on the article "How Regulations Affect Monetary Control" by James L. Pierce, published in the November 1982 issue of the "Journal of Money, Credit, and Banking." The article describes the reserve requirement structure for members and time deposits and the influence of cash items in process of collection on the measurement of money. The author provides some details of the Monetary Control Act. The article also examines contemporaneous reserve requirements (CRR) which the author says would enforce a resource cost on depository institutions.

The article focuses on monetary policies in the United States. It states that in 1979, the Board of Governors of the Federal Reserve System shifted to a reserve aggregate approach. It examines the reserve aggregate procedure compared to a second multiplier forecasting model and concludes that it would allow the Federal Open Market Committee (FOMC) to achieve target ranges for monetary aggregate growth. It mentions that the conclusions assumed the FOMC would be able to achieve the level of controlled reserve aggregate consistent with money targets, and that the forecasting models would remain stable in a reserve aggregate control regime.

The article discusses how money stock can be controlled by the monetary authority through economic policy as a way to accomplish the goals of its intermediate targets. The root-mean-square deviation (RMSC) is used to assess the control of the intermediate targets. The optimal control framework used here is based on an econometric model that represents the economy and it is assumed that the model is linear. The version of the model that is used in this experiment is based on a short run money market model that was developed by the U.S. Federal Reserve Board.

The article presents a comparison of the contemporaneous reserve accounting (CRA) and lagged reserve accounting (LRA) methods and the different policies related to both. A theoretical model is used that considers how banks will behave given specific variables like cash in reserve management, the time between bank deposits, money supply, and borrowing by reserve banks. Many calculations are used to demonstrate the uses of CRA and LRA and the actual method for determining the appropriate amount of bank reserves.

The primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets. The crux of this reconciliation is the distinction between "technical" discount rate changes that are endogenous and "nontechnical" changes which contain some informative policy implications. In essence, we attempt to separate expected discount rate changes from unexpected changes, or equivalently, the expected component of discount rate changes from the unexpected component. If markets are efficient, the former should have no announcement effects while the latter may be associated with an announcement effect. Accordingly, the focus of the empirical analysis is on the interaction between discount rate exogeneity, the specific monetary policy regime, and announcement effects. In addition, we examine whether the behavior of these markets in the postannouncement period is consistent with the rapid price adjustment implied by market efficiency. [ABSTRACT FROM AUTHOR]

A microeconomic model of bank demand for borrowed reserves from the Federal Reserve is developed based upon constrained cost minimization. The derived demand function was found to correspond to behavior appropriate to the unknown switchpoint switching regression problem. When estimated, parameters generally conformed to theoretical expectations. The model was also tested for existence of switching regression behavior against a model similar to Goldfeld and Kane. Significance exceeded 99% in all cases. With the advent of reserve intermediate targeting, it appears especially necessary to reinvestigate the behavior determining this important source of reserves. [ABSTRACT FROM AUTHOR]

This paper argues that current discount window policy, coupled with non-borrowed reserve targeting of the Federal Reserve, makes the quantity of high-powered money endogenous. Examination of the advisability of this procedure in a stochastic environment is conducted using a general equilibrium financial model. It is concluded that the current policy reduces the destabilizing effects of shifts between various depository financial assets, but increases the effect of other asset portfolio shifts and aggregate supply disturbances. These results are consistent with the work of Poole inasmuch as the current debate over discount policy is a repackaging of the debate over interest rate or aggregates control for monetary policy. [ABSTRACT FROM AUTHOR]

The results of most recent econometric studies of the banking sector which employ quarterly data suggest that commercial banks close less than half the gap between their actual and "desired" levels of excess and/or borrowed reserves per quarter. At this rate, the banking system would take a full year to close nine-tenths of the gap. The length of this lag has been regarded as implausible by many researchers. Among the skeptics, many have expressed suspicion of the statistical techniques underlying the estimates. This paper investigates two commonly-proposed statistical sources of bias. The investigation reveals that one of them, temporal data aggregation (averaging over time), does exaggerate the lag. Nonetheless, even after correction for this bias, the estimates indicate a full adjustment period of a quarter or more. The primary purpose this paper is to explain the remaining lag. The major hypothesis of this study is that the lag in the aggregate is caused by lagged interactions among banks in different regions. As this paper demonstrates, when Federal Reserve Member Banks are disaggregated by region, estimated adjustment speeds rise dramatically. Moreover, the lag in the aggregate is well explained statistically by the impact of some regions' reserve adjustments on other regions. The more important of these interregional effects are identifiable and statistically significant, and they are shown to be useful in analyzing the timing of the regional impacts of monetary policy. [ABSTRACT FROM AUTHOR]

Beginning September 12, 1968, a set of changes in Regulation D went into effect, including two major ones which are referred to as the lagged accounting system. One of these sets required reserves in the current period (week) according to deposits two weeks ago, while the other specifies that a bank's "current" reserves consist of current reserve balances on deposit at the Fed and vault cash two weeks ago. It is the object of this paper to examine some implications of these two regulations for the control of the money supply via reserve aggregates. [ABSTRACT FROM AUTHOR]

This paper shows that the spread between the 3-month Treasury bill and the federal funds rate has significant predictive power for the future change in the federal funds rate during the volatile nonborrowed reserves operating regime, but it has less and no predictive power during the borrowed reserves regime and the federal funds targeting regime, respectively. These findings suggest that Treasury bill rates forecast future federal funds rates most accurately when the Federal Reserve follows a well-defined rule that does not smooth the impact of shocks on the federal funds rate. [ABSTRACT FROM AUTHOR]

The article presents a brief conversation with Italian banker Giorgio Cigliana Piazza on the financial relations between Italy and the U.S. between 1946-1950. Various topics discussed include opening of the Bank of Italy in 1946, management of government reserves, and interrelation between monetary policy and currency.

This study employs pure-sign-restriction approach analysing the macroeconomic impacts of foreign reserve accumulation and discusses the foreign exchange sterilization behaviour of the People’s Bank of China (PBoC). Sign restriction analysis shows that the effects of reserve accumulation shock are initially ambiguous on all variables, but later a positive influence only on base money can be observed. With regard to sterilization intervention, the effect is significant even though it degrades gradually over time. In China, the monetary authority actively undertakes sterilization intervention in order to remove the influence of passive release of base money caused by foreign reserve accumulation. [ABSTRACT FROM PUBLISHER]

The article comments on two papers published within the issue; "The New Exchange Rate Regime and the Developing Companies," by Alexandre Kafka, and "The Balance of Payments Adjusted Process Revisited," by Helen B. Junz. The author discusses Kafka's view of exchange rate fluctuations and less developed countries (LDC). He also looks at Kafka's table of percentage changes in real effective exchange rates. The author also discusses several of Helen Junz' theories regarding the functioning of the balance of payments adjustment process under floating rates.

The implementation of monetary policy has changed significantly since 2008. In particular, very large excess reserves in the financial system have led to the creation of new tools to manage the federal funds rate. Given these changes, some observers have wondered how money market interest rates would respond to "liftoff," the Fed's first interest rate increase from effectively zero. Since liftoff in December 2015, it appears that the Fed's influence over short-term interest rates remains intact. [ABSTRACT FROM AUTHOR]

One of the primary and most important tasks of any central bank is conducting monetary policy in the state. In Macedonia the only central and issuing bank is the National Bank of Macedonia, which is responsible for the monetary and financial stability in the country, while performing important functions, without which the overall economic and financial system could not exist. In exercising its functions, the National Bank of Macedonia uses a set of economic instruments and policies, from which in RM the most efective is the required resserve. This monetary tool is showing the best results in developing countries where the financial markets are not developed and where there is a high concentration of the banking sector (in RM banks occupy a good 98% of total financial institutions). The role of the reserve will be analyzed through the prism of its effects on the process of multiplication the money supply in the country and its contribution to generating or withdrawal of money by the central bank. The main goal of the paper is to research the required reserve, as a monetary instrument, and to qualify its impact on the monetary creation in the Republic of Macedonia. The basic methods, used in this paper are the positive analysis, comparative analysis and deductive approach. [ABSTRACT FROM AUTHOR]

The United States has relied heavily on reserve accumulation by foreign central banks to finance its current account deficit since 2000 on. However, the currency composition of reserves has changed gradually over the past decade and the share of U.S. dollar holdings has steadied. This fact may imply that the U.S. will need to start its adjustment process very soon. [ABSTRACT FROM AUTHOR]

This paper examines past evidence of prolonged periods of reserve accumulation in Asian emerging market economies and the direct and indirect implications for monetary stability through the potential impact of such episodes on financial stability. The empirical research focuses on identifying periods of prolonged interventions and correlations with key macrofinancial aggregates. Related changes in central bank balance sheets are also examined, especially in periods when the interventions are linked to strong capital inflows. In particular, we consider whether changes in the central bank's balance sheet from prolonged intervention lead to spillovers to the balance sheet of the private sector. We explore the possible forms of the spillovers and the consequences on asset prices (e.g., housing prices, equity prices, the growth in domestic credit). Policy implications are drawn. Finally, we propose a new indicator of reserves adequacy and excessive foreign exchange reserves accumulation based on a factor model. Two broad conclusions emerge from the stylized facts and the econometric evidence. First, the best protection against costly reserves accumulation is a more flexible exchange rate. Second, the necessity to accumulate reserves as a bulwark against goods price inflation is misplaced. Instead, there is a strong link between asset price movements and the likelihood of accumulating foreign exchange reserves that are costly. [ABSTRACT FROM AUTHOR]

Why did most central banks continue to purchase dollar reserves during the 2000s even though they suffered mounting financial losses as a result of this policy? This paper argues that domestic political considerations determine whether policy makers accumulate or dump the reserve currency. We hypothesize that central bank independence decreases support for the dollar because independent central banks reduce the political clout of exporters and increase the salience of financial performance. This argument is tested using data on countries' holdings of US Treasury securities between 2000 and 2008. The statistical results indicate that countries with independent central banks were more likely to sell and less likely to purchase US treasuries. Our findings suggest that a complete understanding of the international dollar standard requires greater attention to domestic politics and how political institutions influence the balance of power between competing interest groups. [ABSTRACT FROM PUBLISHER]

The conventional Exchange Market Pressure Index (EMPI), originated from Girton and Roper (1977) and popularized by Eichengreen et al. (1994, 1995) and Weymark (1995), uses weighted average of loss of foreign reserves and depreciation of local currency to capture foreign exchange market pressure. However, it does not take into account the effect of capital control on foreign exchange market pressure. With effective capital control, the conventional EMPI tends to under- or overestimate the actual foreign exchange market pressure, depending on the magnitude of capital control. We adopt a monetary approach to derive a formula for new EMPI under capital control. Then we test the difference between the old and the new EMPI with China's data. The result shows that the conventional EMPI overestimates the actual foreign exchange market pressure by 91% in average. [ABSTRACT FROM AUTHOR]

This article examines the dynamic growth of international reserves for the entire group of Latin American countries in an international comparative perspective and with respect to variables such as imports, current account balances, capital flows and gdp. We also present a review of the theories to analyze the causes, and a balance of benefits and maintenance costs. We have used the Wijnholds methodology to determine the necessary levels of international reserves for the period 2005-2008, considering the commitments of public and private external debt in the short term, and potential leakage of deposits from the local financial system. It is estimated that, for the last year, levels of excess reserves are equivalent to between US$ 170-200 billions. Also, the annual maintenance cost is equivalent to 0.8 per cent of gdp for all the countries surveyed. Finally, it outlines a set of proposals to take advantage of these circumstances. [ABSTRACT FROM AUTHOR]

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Quantitative Easing consists of asset purchases by the central bank from both banks and non-banks with the help of reserve creation. While the operation could have a potential danger of inflationary pressure due to the money multiplier (banks create broad money from the reserves), the leverage is reduced due to the capital constraints of the banking sector. In this paper we explain how these capital constraints can be effective, hence curbing the inflationary impact of the Quantitative Easing measures. [ABSTRACT FROM AUTHOR]

Many scholars believe with the United States' increasing debt, the global position of the dollar is weakening. As the dollar declines, China, now the largest holder of U.S. dollars in the world, is understandably concerned. China's controversial peg to the U.S. dollar, combined with its $2.4 trillion in foreign reserves and trade imbalances, is debated daily by politicians and economists. This article presents arguments for and against the current China monetary policy in economic and political contexts. Statements from China's leaders, other global leaders, and economists are reviewed. Economic and political obstacles and incentives in the context of their influence on the China government are considered. Finally, milestones for business leaders to look for are suggested to help determine China's possible path to a fully convertible yuan. © 2010 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

Countries hold foreign currency reserves to support and influence exchange rate. This paper examines the causal relationship between exchange rate and reserves in six Asian countries. We obtain divergent evidence regarding the long-run and stable relationship between reserves and exchange rate in the sample countries. There is evidence of bidirectional causality between reserves and exchange rate in India, while no-causality in Bangladesh. There is unidirectional causality from reserves to exchange rate in Pakistan, Sri Lanka and Thailand and unidirectional causality from exchange rate to reserves in Philippines. It is concluded that holding of reserves is necessary for supporting exchange rate and vice versa. [ABSTRACT FROM AUTHOR]

The article presents an economic overview of the reserves and the challenges for monetary policy in the U.S. in 2010. It discusses the reserves trends considering the reserves levels and the factors affecting it along with significant monetary policies conducted by the Federal Reserve Board. It states that the greater the level of excess reserves, the greater the banking system's rate of expanding along with a greater risk of the monetary policy to fall behind the curve.

The behavior of exchange rates has been an important issue in the international finance literature. Although exchange rate is erratic and unpredictable in the short run, its long-run behavior is believed to be guided by economic fundamentals. This paper empirically tests the long-run determinants of the exchange rate by focusing on the Taiwan/US case. After incorporating productivity differential, foreign reserves, and monetary base in the absolute Purchasing Power Parity (PPP) proposition, where the relative price is the only determinant of the exchange rate, the Johansen's maximum likelihood test results indicate these determinants and the exchange rate are indeed cointegrated: thus a long-run relationship can be established. [ABSTRACT FROM AUTHOR]

This paper estimates the equilibrium exchange rates for Korea's real effective rates using Clark and MacDonald's (1999) behavioural equilibrium exchange rate (BEER) approach. The estimation result suggests that the real exchange rate was substantially overvalued during the period prior to the currency crisis of 1997-98. The subsequent adjustment, however, was disorderly in the sense that the real exchange rate overshot its long-run equilibrium value. There was also a large deviation, from the BEER, indicating that the sharp depreciation was not an equilibrium phenomenon. [ABSTRACT FROM AUTHOR]

The argument that any exchange rate regimes other than firmly fixed and freely floating rates were infeasible — the so-called bipolarity thesis — acquired great popularity in the wake of the Asian crisis of a decade ago, but it has almost vanished today. One reason is surely the unkind empirical evidence, which shows that intermediate regimes — measured as those where both reserve and exchange rate changes lie in an intermediate range — are not in fact tending to disappear (Levy Yeyati and Sturzenegger, 2002). Another reason is the recognition that exchange rate policy should have other objectives besides avoiding crises, and that in the world we live in today it is reasonable to give these other objectives a significant priority. And perhaps a third factor is growing recognition that it is possible to design or operate intermediate regimes in ways that avoid exposing them to the dangers that were focused on by the disciples of bipolarity. This article starts by distinguishing the options that countries face in choosing an exchange rate regime. It examines the advantages and disadvantages of each of them, finally suggesting that for most countries the real choice lies between freely floating rates, floating rates disciplined by a reference rate system, and an ill-defined managed floating with the management undefined. Three issues may influence the choice between those alternatives: transparency; perceived consistency with that pillar of current macroeconomic thinking, inflation targeting; and the theory of what determines exchange rates. In the latter context, it is argued that the current conventional wisdom of the economics profession is wrong, and that a more convincing diagnosis of the process of exchange rate determination lends support to the proposal for a reference rate system. [ABSTRACT FROM AUTHOR]

The article examines the reforms made by the International Monetary Fund (IMF) regarding their credit policies for emerging market borrowers. Several factors were taken into account including the Greenspan-Guidotti benchmark, Chiang Mai Initiative of bilateral swaps and reserve accumulation in Latin America. As of Spring 2007, the credit outstanding to emerging market borrowers has been listed to be approximately at 12 billion special drawing rights (SDR). Key information about the Fondo Latinamericano de Reservas (FLAR) in Latin America is presented.

Through a mathematical programming setup, reserve accounting is shown to be auxiliary to accomplishing monetary policy operating objectives. This article outlines a theoretical way of comparing the potency of open market operations under different reserve accounting procedures. It is shown that if the interest sensitivity of reservable liabilities is greater than the interest sensitivity of reserves, then lagged reserve accounting makes Federal Reserve open market purchases and ‘sells’ of securities more powerful in affecting the federal funds rate. [ABSTRACT FROM AUTHOR]

We test for asymmetry in a model of the dependence between the Deutsche mark and the yen, in the sense that a different degree of correlation is exhibited during joint appreciations against the U.S. dollar versus during joint depreciations. We consider an extension of the theory of copulas to allow for conditioning variables, and employ it to construct flexible models of the conditional dependence structure of these exchange rates. We find evidence that the mark–dollar and yen–dollar exchange rates are more correlated when they are depreciating against the dollar than when they are appreciating. [ABSTRACT FROM AUTHOR]

In this paper, Lance Girton & Don Roper's (1977) monetary model of Exchange Market Pressure (EMP) is applied to the Turkish economy in the period of 1993-2004. The results provide strong evidence of negative relation between domestic credit and exchange market pressure (EMP) and indicate that the Central Bank of the Republic of Turkey (TCMB) absorbed most of the exchange market pressure by adjusting the foreign reserves. [ABSTRACT FROM AUTHOR]

This paper studies the links between macroeconomic adjustment and poverty. The first part summarizes some of the recent evidence on poverty in the developing world. The second reviews the various channels through which macroeconomic policies affect the poor, whereas the third is devoted to the specific role of the labor market. It presents an analytical framework that captures some of the main features of the urban labor market in developing countries and studies the effects of fiscal adjustment on wages, employment, and poverty. The fourth part presents cross-country regressions linking various macroeconomic and structural variables to poverty. Higher levels and growth rates of per capita income, higher rates of real exchange rate depreciation, better health conditions, and a greater degree of commercial openness lower poverty, whereas inflation, greater income inequality, and macroeconomic volatility tend to increase it. Moreover, the impact of growth on poverty appears to be asymmetric; it seems to result from a significant relationship between episodes of increasing poverty and negative growth rates. [ABSTRACT FROM AUTHOR]

Argues that reserve requirement ratio changes should not be viewed simply as a tool for monetary policy or as a tool used to directly alter the liquidity of financial institutions in the U.S. Criticism of the notion that higher reserve requirements lead to greater safety and lower default risk for depository institutions; Evidence on the 1992 reserve requirement ration changes and perceived bank safety; Relationship between reserve requirement changes and monetary policy.

It is often argued that the persistent amounts of excess reserves in the 1934-1941 period were sought either for protective liquidity or as a signal of bank safety to depositors. More recent explanations argue that these excess reserves were unintended inventory due to the high internal adjustment costs of converting reserves m income-producing assets. Our findings support the latter expiration and reveal high internal asset adjustment costs after 1933. Thus. a monetary policy focused on increasing rescues would have been in effective. A successful monetary policy would be one that increased outside money. [ABSTRACT FROM AUTHOR]

Provides an estimate of the demand for excess reserves in the United States. Negative relation to the federal funds rate and positive relation to transactions deposits; Effect of clearing needs on the demand for reserves; Implications for monetary policy.

The very extensive literature on conditional heteroscedastic models is clearly a consequence of their success in capturing important features in financial data. The CHMs are designed to handle the leptokurtosis and the volatility clustering common in these series. Moreover, Nelson (1990) has shown that the CHMs can be interpreted as discrete approximations of a diffusion process. However, the large amount of evidence of non-linearities in the financial data raises the possibility that the CHM standardized residuals may still exhibit hidden structures. This paper is specifically concerned with the adequacy of CHMs to approximate the behavior of nominal exchange rates. The Norwegian kroner is characterized by non-linearities in both conditional mean and variance, such that the GARCH-EAR model (LeBaron, 1992) was selected. The currencies of the German mark bloc are described by a similar model as expected. Volatility shocks seem to be asymptotically persistent in the major currencies not belonging to the German mark bloc, with the exception of the Swiss franc. The volatility peaks identified by the CHMs correspond to periods of actual instability in the exchange rate market. The beginning of the depreciation of the US dollar in 1985 and the difficulties in January 1986 faced by the US authorities in undertaking deficit cuts are found in these periods.

El artículo presenta un análisis de la teoría de que se distingue la demanda de reservas en un régimen con un tipo de cambio mínimo. Además, se figura que el aumento del precio de petróleo al partir de 1973 transformó los flujos comerciales en ciertos países latinoamericanos. El artículo presenta un modelo económico que expresa esta hipótesis. La ruptura del sistema Bretton Woods provino un cambio significativo en la demanda de reservas internacionales.

Replies to a critic on an assessment on the workings and policy implications of the European Monetary System. Arguments regarding a view that fixed exchange rates are both the result and reference point of monetary policy; Basis for the use of ex post inflation-money multipliers in the analysis; Disagreement on the capacity of the banking system to buy foreign currency and create money even if it has no free reserves.

The needs for reserves, exchange rate flexibility and monetary policy are derived, the need being the result of an optimization problem. The level of domestic production, its variance and that of the domestic price level have been chosen as criteria of the benefits and costs. The effectiveness and costs of balance of payments adjustment, which appear to be co-determinants of the needs, are expressed in the parameters of an economic model. This shows that the need for reserves displays a one-to-one relation to quantities of the demand for money and to the balance of payments disturbance. Only the latter is a meaningful criterion for joining a currency area. [ABSTRACT FROM AUTHOR]

The collapse of a fixed exchange rate is typically marked by one or more balance of payments crises in which speculators acquire a large portion of the central bank's foreign reserves as the bank attempts in vain to support its currency. Economists have long attributed such crises to inappropriate domestic policies that ultimately place the central bank in the uncomfortable position of offering speculators a one-sided bet. When asset holders have perfect foresight and the current peg must eventually be abandoned, profit maximization dictates that a sharp attack on the central bank's reserves occur at some point on the economy's path. This article demonstrates the existence of circumstances in which balance of payments crises may indeed be purely self-fulfilling events rather than the inevitable result of unsustainable macroeconomic policies. Such crises are apparently unnecessary and collapse an exchange rate that would otherwise have been viable. They reflect not irrational private behavior, but an indeterminacy of equilibrium that may arise when agents expect a speculative attack to cause a sharp change in government macroeconomic policies.

This article attempts an analysis of official reserves and the foreign exchange rate in France, covering both fixed exchange rates and flexible exchange rates, that is, 39 quarters of fixed rates, 1962.1-1971.3, and 13 quarters of flexible rates, 1971.4-1974.4. The cost is the presence of errors in the simultaneous equation estimates of the exchange rate during the period of fixed rates. But the benefit is an econometric analysis founded on 52 observations, and yet covering three years of flexible rates. Since the errors in the estimates of the exchange rate under fixed rates are quite moderate, the cost would seem to be worth the benefit. The most important characteristic of this work is the use of a detailed structural model of bank credit and money in testing the monetary approach. The article examines the extent to which varying and tenable money measures in France yield convergent results. It take real income as given and ignores the balance of trade and the terms of trade. By eschewing information about absorption or the terms of trade, anything to do with imports or exports of commodities as such, it avoids this restriction and examines a particularly strong version of the monetary approach.

In this paper, the demand for international reserves by less developed countries is analyzed making an explicit distinction between countries that have maintained a fixed exchange rate for a long period of time and countries that have occasionally used devaluations as a means to correct payments imbalances. The results obtained indicate that both groups of countries have different demand functions for international reserves, with devaluation countries holding, on average, less reserves, and that they should not be pooled, as has often been done. Furthermore, the results indicate that the demand for international reserves function for those LDCs that have maintained a fixed exchange rate is very similar to estimates previously obtained by other authors (i.e. Frenkel, 1980) for developed countries. [ABSTRACT FROM AUTHOR]

The article examines the post-devaluation of reserves and prices under neoclassical assumptions. The re-introduction of neoclassical assumptions into balance of payments theory was done by economists M. C. Hahn in 1959 and F. Kemp in 1962. By making the assumptions that all goods were gross substitutes and normal, they were able to demonstrate the proposition that in the period in which a small devaluation by the home country takes place, (a) the balance of payments of that country improves; (b) the prices of the two commodities, expressed in home currency, increase but not proportionately with the price of foreign exchange; and (c) the foreign currency prices of the two commodities decrease, but not proportionally with the fall in the price of the home country's currency. In the first years of this decade, a further theorem was discovered which provided the rationale for the Hahn-Kemp results. It is that (1) a devaluation is equivalent, in its effects on the model's real variables and monetary variables expressed in home currency, to an equiproportional increase in the foreign money stock of the same percentage amount as the increase in the price of foreign currency; and (2) a devaluation is equivalent, in its effects on the real variables and the monetary variables expressed in foreign currency, to an equiproportional decrease in the home money stock of the same percentage amount.

Abstract. The Bank of Canada influences changes in short-term interest rates by supplying quantities of excess cash reserves to the chartered banks in amounts either insufficient or more than sufficient to meet the quantity demanded. In this study demand functions for excess cash reserves are estimated for each of the five largest Canadian banks over the period 1971 to 1977. Daily data are used to correspond to the daily cash management horizon which characterizes the individual bank's behaviour. The empirical results generally confirm the relevance of the model of bank behaviour suggested in an earlier article by Dingle, Sparks and Walker. Attention is paid to the implications of the results for the debate concerning the relative merits of short-term interest rates and the monetary base as instruments for controlling the money supply. [ABSTRACT FROM AUTHOR]

It is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate. These assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses. This paper tentatively identifies supply and demand shocks in the markets for reserves and M2 for the 1980s and contrasts them with results for the 1970s. in the later period, identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses. [ABSTRACT FROM AUTHOR]

Stabilization programs in open economies typically consist of two stages. In the first stage the rate of currency devaluation is reduced, but the fiscal adjustment does not eliminate the fiscal deficit that causes growth of debt and loss of reserves, making a future policy change necessary. Only later, at a second stage, is this followed by either an abandonment of exchange rate management or by a sufficiently large cut in the fiscal deficit. We study how different second-stage policy changes affect economic dynamics during the first stage. These changes include tax increases, budget cuts on traded and nontraded goods, and increases in the growth rate of money. [ABSTRACT FROM AUTHOR]

Examines the interdependent nature of monetary policies. Discoveries made regarding the Cournot, or noncooperative, solution and the Stackelberg leadership solution and their relation to the contract curve; Effect of creation of international reserves.