Search

The decade of the 1960's was a period of severe challenge to reserve-position management techniques of large commercial banks. Credit demands levied on banks increased rapidly throughout the decade, while traditional exogenous sources of loanable funds followed a more modest growth pattern. Moreover, large banks were apparently willing to commit themselves to an aggressive policy of accommodating the credit requests of their preferred customers. Under these conditions the differences in growth patterns between loan demand and exogenous deposits resulted in increasing pressure on banks' reserve-positions, and forced banks to an early and continued reliance on short-term reserve-asset markets as a means of making reserve-position adjustments. This investigation of reserve-position behavior during the 1960's rests on two key postulates of managerial strategy. On the one hand banks are assumed to anticipate the strength of pressure on their reserve-positions and to alter desired reserve-positions according to their expectations. Further, banks must be able to evaluate the permanence of short-run deviations between actual and desired reserve-positions and, when necessary, enter reserve-asset markets to restore equilibrium. Consequently, reserve-position adjustments will be strongly influenced by uncertainty over the permanence of a discrepancy between desired and actual levels and by the terms on which access to reserve-asset markets is gained. [ABSTRACT FROM AUTHOR]

The article examines the problem of the coexistence of reserve currency and substitute dollar reserves (SDR) in the United States. It is explained that there are two important considerations regarding SDRs, which the coexistence problem does not acknowledge. The first consideration is that no attention is given to the question of just how large the amount of SDRs created ought to be. Another consideration is the "link" proposal, which is the idea to have new SDR allocations placed first in the hands of developing countries.

The article focuses on comparative merits of fixed exchange rates as compared to flexible exchange rates. It suggests that with a constant price level, equilibrium between the markets is ensured because of the interdependence of markets and the operation of budget constraints. It states that the margin of safety can be significantly increased with reserve pools that are at the disposal of a nation more or less automatically. It suggests that the stability of the world economy on the domestic economy can be imposed through short-run fixity of the parity.

The general absence of legal reserve requirements upon the reserves of non-U.S. banks offering dollar-denominated deposit facilities (hereafter Eurobanks) provides a unique opportunity for analysis of reserve determination by a fractional-reserve financial intermediary. This paper presents evidence that the reserve ratio in the Euro-dollar system is low and falling and is in fact determined by behavior which is consistent with the hypothesis that Euro-bank dollar deposits in U.S. commercial banks (excluding loans to home offices) are held as precautionary reserves. The demand for such loans to home offices largely determines their level. Since the theory of precautionary balances held by commercial banks is consistent only with the profit maximization principle of commercial banks' asset management, where commercial banks' responses to market forces determines portfolio behavior, we shall be concerned here primarily with the determination of Euro-banks demand deposit claims on U.S. commercial banks, exclusive of loans to home offices. Evidence reported below does in fact suggest that the behavior of liabilities to foreign branches of U.S. banks is not consistent with the profit maximization principle. [ABSTRACT FROM AUTHOR]

Money supply control and behavior are importantly influenced by the institutional and legal framework in which money is produced. An important change in that framework was activated on September 12, 1968 when drastically revised procedures for calculating and meeting the Federal Reserve's reserve requirement (Regulation D) were put into effect. The implications of these rule changes have been examined elsewhere; it is the more limited objective of this paper to examine the evidence for what I call the vault cash game. Under the new rules of 1968, reserves eligible for meeting the current week's reserve requirement consist of the current week's average daily deposits at the Fed plus the average daily vault cash held two weeks ago. This provision inadvertently introduces a source of potential reserve adjustment not present under the earlier rules where vault cash was not lagged in the reserve calculation. Although shifting reserves from vault cash to deposits at the Fed does not affect the level of reserves (R), it does affect the volume of reserves eligible for meeting the reserve requirement in the current period (R[sup a]). This occurs because vault cash in the current period is not counted toward the current reserve requirement while deposits at the Fed are. The purpose of the 1968 changes in Regulation D was to improve the reserve adjustment mechanism, and thereby smooth the behavior of the money markets where reserves are traded, and improve the Federal Reserve's control over the relation between reserves and deposits, and hence over the money supply. The particular contribution of lagging vault cash was that its fairly regular monthly cycle then tended to offset the similar monthly cycle in Federal Reserve Float. The vault cash game, however, tends to weaken the Federal Reserve's control over reserves (R[sup a]), hence over the money mechanism. [ABSTRACT FROM AUTHOR]

This paper analyzes the role of the Federal Reserve to money markets and bank management regarding their reserves. The author outlines three goals: to test the applicability of a model that views bank borrowing from the Reserve's discount window as a buffer to short-run reserve flows; to examine how the price of Federal Funds is influenced by the eight large money market institutions; and to investigate the existence of structural changes in the market. Weekly data from 1960-1968 is used throughout the paper.

The analysis of the graduated reserve proposal, the present city-country bank classification system and the uniform reserve plan reveals that none of them would have made control of total demand deposits or the money supply by the Federal Reserve more difficult. The absence of a Federally controlled, single reserve ratio applied to the demand deposits of non-member banks has resulted in a few fairly large errors of prediction, but these may be a function of discontinuous reporting by non-member banks rather than their non-control. The analysis of reserves on time deposits shows that, for shifts in time deposits to be neutralized, the required reserve ratio should be either zero or equal to that on demand deposits, depending upon what one wants to neutralize. But since the effects of changes in time deposits appears predictable, the ratio can be whatever is desired for reasons other than monetary control.
The question of which required reserve plan is optimal thus comes down to the question of equity among institutions. The analysis shows that the present system and the graduated reserve plan, which impose higher reserves against larger banks, reinforce the bias against larger banks that already exists. The different Federal and state reserve requirements impose a bias against member country banks. And reserves required against time deposits represents a bias against commercial banks. [ABSTRACT FROM AUTHOR]

The authors respond to comments about their article "The Determinants of Member Bank Borrowing: An Econometric Study," concerning perceived flaws in the empirical research in the article. They discuss concerns about their use of unborrowed reserves and their inclusion as independent variables in their regression equations and admit that their original explanation of the role that unborrowed reserves plays is incomplete but still necessary. They state that criticisms concerning seasonal-adjustment procedures, the justification of lagged borrowings, and the failure to take account of reserve requirement changes have no merit.

The arrangements for international trade and payments embodied in the Bretton Woods agreements reflected two aspects of the experience of the interwar period. On the one hand, many economists felt that a domestic policy aimed at full employment, could at times, be inconsistent with fixed exchange rates and a liberal trade policy. On the other hand, the attempts of individual countries to free domestic policy from the constraints of the balance of payments, by unilateral devaluations, or by protectionist devices, led to retaliation, competitive devaluations, and competitive increases in trade restrictions, which disrupted international trade. [ABSTRACT FROM AUTHOR]

The article examines the impact of monetary policy on commercial bank demand deposits, focusing on the time lag involved between changes in unborrowed bank reserves and changes in demand deposits. A close relationship between changes in bank reserves and earning assets is present from 1954 to 1963. The author tests if changes in demand deposits of the banking system are the result of the change in aggregate unborrowed reserves during the same time period. Virtually no lag in the response of banks to changes in their unborrowed reserves was observed.

The article discusses how anti-recessionary policies involving low interest rates might put pressure on the foreign reserve position of the United States by bringing about a conversion of foreign-held dollar balances in gold. The article also examines the influence of monetary and fiscal measures on current account. The article's general conclusion is that those movements in foreign holdings between gold and dollar assets throughout the years, which could be attributed to interest-rate changes, account for only a small fraction of total foreign dollar holdings.

The article provides an outlook for federal reserve and treasury policy in the U.S. for 1959. The author discusses the economic trends of 1957, citing the large capital investment boom and the inflationary pressures of that year. The author discusses the state of credit policy in 1959. He examines the decline in yields which he states have been in a fast decline since 1953-54. The author states that during the increase in business in 1959, fiscal policy had not been used to any important magnitude.

The article presents comments of the author on the paper "A New Dimension to Breakeven Analysis," by Rene P. Manes that was published in Spring 1966 issue of the periodical "Journal of Accounting Research." The author states that Manes attempted to integrate breakeven analysis with the techniques used in capital budgeting. He explains that Manes' example shows how to calculate the total net present value and the equivalent annual profit of a machine at various levels of output. He also states that Manes' example illustrates how each of the following may be incorporated into the analysis changes in the discount factor, changes in the method used to calculate depreciation for tax purposes, a steady rate of change in sales volume, and a steady rate of change in prices.

The article investigates the feasibility of measuring current cost depreciation. The authors discusses the basis of the minimum variance test and the consideration of the concept of fair market value. The authors state that the results of this study it can be concluded that historical costs are more objective but are not univocal or verifiable and the current values are probably no worse with regard to these latter two characteristics. The article also discusses the disadvantages of an alternative valuation. [ABSTRACT FROM AUTHOR]

The article examines the relationship between double-declining-balance depreciation and sum-of-the-years-digits depreciation. The author discusses the determination of infinity values and the inclusion of the taxable payer. The author states that the depreciation methods can be classified as either biased or neutral with respect to asset lives. The article states that a method is biased if it permits more rapid depreciation for assets with some useful lives than for others, and neutral if it does not. The article also discusses the consideration of the accumulated depreciation. [ABSTRACT FROM AUTHOR]

This article discusses the correlation between accelerated depreciation and deferred tax allocation. The author states that firms which elect to use accelerated depreciation for tax purposes while using straight-line for reporting purposes have only one approved method for recording the difference between book tax expense and the tax liability. He explains that this method relies on a deferred credit account in which the difference between the tax expense and the actual tax paid is recorded. The article says that the reported net income resulting from this procedure is the same as it would have been if straight-line depreciation were taken for tax purposes.

This article discusses the concept of least squares allocation model. The authors explain that the model offers one approach to the unification of a broad class of allocation problems and provides a basis for summarizing, comparing, and evaluating diverse allocation schemes. They state that first, the model formally unifies a number of accounting problems so that methods that have been proposed to account for joint product costs, depreciation and installments sales, share a common allocation model. The article says that this unification of different accounting problems gives insight into their comparative nature.

The article informs that accounting needs a framework within which alternative proposals can be evaluated. The author states that the dispersion criterion is particularly useful since it conforms to at least one use of the term objectivity, i.e., verifiability. He explains that the displacement criterion cannot be applied until the attribute that is being measured is clearly specified and that both the cost and the timeliness criteria are sufficiently familiar to require no comment. The article says that the empirical data reported for automobiles provide evidence that direct reference to available market price indicators results in less disperse measures than those now obtained under "generally accepted accounting principles."

The article evaluates the theory of depreciation argued by O.G. Ladelle. Ladelle derived a general formula to determine the annual amount of depreciation chargeable against an asset's life provided the expectations that are held during the period of purchase are fulfilled. He also claims that there is no effect on the annual depreciation charges determined at the point of purchase when the expectations are not fulfilled. This was done through the theory that a specific asset was purchased by multiple persons in a joint venture and each person has the right to the net services of that asset for a single year.

In the preceding comment, Duggar disagrees with several aspects of our recent article. We shall argue that, in the main, Duggar's criticisms arise from a totally different, and, we think, erroneous conception of the goal of the analysis in our article. As we consider Duggar's objections, we shall attempt to point out where his conception of our work is inaccurate, thereby giving rise to his somewhat misdirected criticism. [ABSTRACT FROM AUTHOR]

Examines the need for reserves under full and limited flexibility of exchange rates in the European Economic Community (EEC) countries. Proposals for increased flexibility of exchange rates; Devaluation of the United States dollar; Effects on the need for reserves of a narrowing of the exchange rate margins between the EEC countries.

This article discusses the key features of precautionary demand for reserves. It is the purpose of this paper to show that, if the precautionary demand model is modified to take into account the economics of planning and information, the elasticity of the demand for precautionary reserves with respect to scale may be quite different. Using resources for planning one's activities reduces uncertainty, the risk of surprises, and the associated costs of adjustment. Holding inventories of safety reserves is another method of reducing these costs. One of the main functions of precautionary reserves is, therefore, to save planning and information costs. The scale economies implied by the stochastic character of the model can manifest themselves in ways other than a relative decline of reserve holdings.

The objective of this paper is to estimate separate demand functions for international reserves by developed and less-developed countries (LDC's). It is shown that the behavioural parameters of the two groups are significantly different. As a by-product, it is also shown that the association between reserve holdings and the relative size of the foreign trade sector is positive. Section I presents some empirical evidence on the demand for reserves, Section II presents separate estimates of the demand for reserves by developed countries and LDC's, and Section III contains some concluding remarks. [ABSTRACT FROM AUTHOR]

The article presents the estimation of the cost of adjustment to external disequilibria. The stability of an economy may be upset by disequilibria in the commercial and financial relationships between the domestic economy and the economies of other nations. These disequilibria will either be stochastic or structural in nature. The cost of adjustment to stochastic disequilibria may be defined as the change in national income required to alter temporarily the balance of payments by one monetary unit, there by offsetting the disequilibrium by one monetary unit. That is, the cost of adjustment A is a ratio A=dV/dQ. On an a priori basis, the cost of adjustment f under expenditure changing policies can be quantified as the reciprocal of the marginal propensity to import m. In the context of the above discussion the A Model of Reverse Demand. In general form, the demand for reserves can be written as E(R)* =R[Q,H,A,W] RQ0,RH<0,RA>0,RW>0.

Se presentan noticias que tratan de la economía de los Estados Unidos. Se informa que se incrementaron en abril de 1961 la producción industrial y el ingreso personal. Se aplazaba el examen del proyecto de ley que modificaría los requisitos de la reserva legal. Se redujo en el primer trimestre de 1961 el déficit de la balanza de pagos.

El artículo presenta una reimpresión del artículo "Raising International Liquidity," que fue publicado en la revista "The Banker," en enero de 1960. Se menciona la escasez de oro y la necesidad de aumentar las reservas internacionales. Una amenaza atribuible a esta crisis es el uso de la moneda nacional como reserva internacional. El déficit de los Estados Unidos ha contribuido a la inquietud acerca del futuro del dólar y el estado de reservas.

El artículo presenta un extracto del documento "International Reserves and Liquidity," publicado por el Fondo Monetario Internacional durante el mes de agosto de 1958.

Se presentan noticias que tratan de la economía de los Estados Unidos. Se informa que Brasil quería reducir sus importaciones de trigo norteamericano. La Comisión Arancelaria de los EE. UU. habló acerca de la importación de plomo y cine. Se presentan cuadros estadísticos con información sobre la distribución de las reservas monetarias en el mundo y las reservas monetarias como porcentaje del comercio exterior.

Se presentan varios cuadros con información sobre las reservas oficiales y disponibilidad de crédito en Los Ocho y Suiza, el Grupo de Diez y Suiza, y en el resto del mundo. El primero tiene esa información para el periodo de diciembre de 1963 a diciembre de 1964. El segundo ofrece la misma información para el periodo de diciembre de 1959 a diciembre de 1963. El tercero cubre el periodo de diciembre de 1953 a diciembre de 1963.

Se presenta un informe del Grupo de Estudio sobre la creaciόn de activos de reserva a través del Fondo Monetario Internacional, presentado a los Representantes de los Ministros del Grupo de Diez en mayo de 1965. El informe incluye una introducciόn, una explicaciόn del problema y de los actuales tipos de activo de reserva, descripciones de varias esquemas examinadas por el Grupo de Estudios, y un análisis comparativo. En conclusiόn, se ofrece un resumen de los principales temas.

Se presenta una traducción al español de un ensayo de Edward M. Bernstein, publicado en "Quarterly Review and Investment Survey" en 1963. El ensayo trata del problema de las reservas monetarias internacionales. Se habla de la adecuación del sistema internacional de pagos y de los recursos del Fondo Monetario Internacional. Se discute la creación de «reserva-crédito» para mantener en orden los pagos externos. Se habla del aumento de las cuotas de los miembros del Fondo, y de las reservas monetarias nacionales.

Provides several information on legislation governing taxes. Treatment of deferred credits and reserves in relation to computation methods prescribed for income taxation; Statutory provisions for tax and business accounting; Justification of the position of courts to the accountants in deferred credits.

This article focuses on deduction of depreciation from original cost of a utility for calculating net investment rate. Three questions arises whether the deduction for depreciation should be based on: the existing or observed depreciation representing the "loss in value" in the utility's properties as observed or estimated by engineering experts; a computation of the reserve requirement which should exist under the straight-line or other accepted depreciation methods; the depreciation reserve actually entered on the utility's books. The first method presents the reverse side of the "fair value" method. The second method has long been espoused by advocates of thorough-going utility regulation. The third represents a transition from the first to the second based on the existing net investment made by investors in the utility's property.

Investigates the outflow of gold from government reserves into private purchasers. Impact of the surge in private demand on the monetary system; Avoidance of a de facto devaluation arising from the rise in gold demand; Deterrents to speculation.

Despite the much discussed writings of Riccardo and Malthus, and their successors, rent is a phenomenon still very little understood. Rent is acknowledged to be made up of many complicated factors which the average rent payer is seldom in a position to analyze. Nevertheless, when high rents pinch, there is the inevitable pressure that government do something about it. Over, the past forty years, governments— state, local, and federal—have been especially sensitive to pressures for political action. Two types of procedure have been tried. The opportunist approach calls for direct governmental action, such as the setting up of a public authority to act for government or to qualify special agencies to receive government subsidies to offset high housing costs. Less easily understood, by the otherwise absorbed public, have been various attempts to deal with the underlying factors that affect housing. These range from rent regulation, through mortgage insurance and tax limitation, to subsidies designed to encourage private enterprise. [ABSTRACT FROM AUTHOR]

The article focuses on the effects of alternative depreciation policies on reported profits. It also reports on the depreciation of a newly acquired asset by an accelerated method results in relatively low taxes early in the asset's life and higher taxes later on as the depreciation tax allowance declines. If operating revenues and all expenses other than depreciation are constant, and if the profits reported to stockholders are computed by using straight line depreciation, then after-tax earnings follow a reverse pattern. Depending on the rate and duration of asset growth, on debt policy, and in the case of regulated utilities, on how the benefits of the tax savings are distributed among ratepayers and stockholders, the different accounting treatments produce widely varied patterns of reported profits. The complicated interrelationships among these variables make it virtually impossible to study the problem algebraically, and the volume of calculations prevents one from working out the relationships manually. However, the problem is ideally suited for simulation analysis, and this is the principal analytic tool used in the study.

The article analyzes the present accounting theory. The concept of service-potentialities is well established in accounting. They are thought to be the homogeneous substance and the significant elements of assets. Thus, assets may be thought of as a set, the elements of which are service-potentialities. The concept of capacity, although only relatively recently named, has been used in accounting since, at least, the advent of depreciation. Assets are thought of as bundles of services and the number of services in most assets declines over time or use. Cap is the generic term for all the various units of measure that are used in accounting. The concept of account is best described as a homogeneous collection of caps. Different accounts will contain different kinds of caps and the accounts may contain different physical representations of the caps, but each account will contain only one kind of cap. The functional relationship between the quantities of caps in an exchange may be determined by a measurement operation or by a similarity transformation.

Experts have long debated the theoretical problem of defining business income and the much greater difficulties of translating any definition into an operationally feasible system of accounts. That is to say, a set of accounts that will consistently and unambiguously reveal what has occurred to net worth during a series of selected time periods. As it is, the same data can be organized according to "generally accepted accounting principles" and be made to show radically different net profits available for stockholders. Many factors are contributing to the confusion, including a variety of acceptable methods for spreading period charges. For example, the ways in which inventory or fixed assets are handled can have a significant impact upon reported profits. These profits in their turn play a key role in influencing a wide range of important private and public policy decisions. In 1954 the government permitted firms to elect accelerated depreciation, for new fixed assets as an alternative to the straight-line method.