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This paper studies an arbitrage-free, competitive and frictionless market with trading in a single risky asset and money market account, where the risky asset exhibits a price bubble. We analyze two sets of self-financing and admissible trading strategies in this market. The first are simple trading strategies, and the second are trading strategies that replicate or super-replicate the risky asset's payoffs at the model's horizon. We show that in both sets there exist wealth preserving trading strategies, i.e. trading strategies whose initial value equals the present value of its future cash flows. And, in the second set, we show that there are wealth preserving replicating trading strategies that dominate buying and holding the risky asset. The practical applications of these insights are discussed. [ABSTRACT FROM AUTHOR]

The article discusses asset substitution, monetary volatility and monetary aggregates of the U.S. Federal Reserve System during the 1980s. The behavior of M1, M2, and M3 monetary aggregates, m1, m2, and m3 base multipliers, and component ratios are examined in a Brunner (1961) base-multiplier framework to determine if the source of volatility is the monetary base or multipliers. Data is given for: volatility measures for monetary aggregates, base, multipliers, and component ratios; beta coefficients for multiplier response to component ratio shock; and estimates of elasticities of asset substitution. Non-passbook liquid savings, overnight Eurodollars, money market deposit accounts, SuperNOW accounts, and shifts in asset-holding decisions by the public are mentioned.

Money market funds have grown dramatically, increasing from $4.6 billion in January 1978 to over $184 billion in December 1981. Investors are attracted to money market funds (MMFs) by their safety of principal, high yields, liquidity, and limited check-writing privileges. The Board of Governors of the Federal Reserve System at one time requested the authority to extend reserve requirements to checkable MMFs to avoid further erosion of monetary control; the argument for reserve requirements is based on the potential use of checkable MMFs as transactions balances. As suggested by Goodfriend, et al., and Hester, the movement of funds from reservable deposits in depository institutions to MMFs to be used as transactions balances outside the reserve requirement system further loosens the link between reserves and money. This note discusses the effect of the substitution of MMF deposits for transaction balances at depository institutions on monetary control and tests the hypothesis that MMF deposits are a substitute for money in traditional money demand models, and thus should be considered part of M1 and subject to the regulations imposed on other transactions accounts. [ABSTRACT FROM AUTHOR]

The article discusses research relating to money market mutual funds (MMMF). The growth of MMMFs was accelerated by the piecemeal nature of the financial deregulation process. Analysts say the rapid growth and proliferation of the funds is a rational response by the consumer investor to the inability of regulated financial institutions to offer market interest rates on deposit accounts. They describe this as a "demonstration or consumer education effect." The consequences of the deregulation of the financial markets has led to a major distortion of credit flows.

The decision to use any combination of the general instruments of monetary control is usually based on inadequate information since it depends on the relative short-and long-run effects of open market operations, variable reserve ratios, and discount policy. This study attempts to answer but a single question: whether open market operations are an effective instrument for controlling all classes of banks within a reasonable time period. Although banks in all regions may participate in open market operations, the operations themselves are carried out in the central money markets; hence, it is reasonable to investigate the hypothesis that there is a significant lag in the effects on nonmoney market banks relative to money market banks. [ABSTRACT FROM AUTHOR]

In his paper "Financial intermediaries, Credit Availability, and Aggregate Demand," Robert Shapiro has presented a "Keynesian" type model with the accent on illustrating the interplay of the bond and money markets. This modal is then extended to handle the case of financial intermediaries--a departure of considerable pedagogical value. In this note an attempt will be made to review and clarify certain concepts in the presentation of Professor Shapiro's basic model of aggregate demand, the point being that his integration of financial intermediaries into the analysis should, if possible, follow from a model free from certain misunderstandings. [ABSTRACT FROM AUTHOR]

In the 1990s, the empirical relationship between money demand and interest rates began to fall apart. We analyze to what extent financial innovations can explain this breakdown. For this purpose, we construct a microfounded monetary model with a money market that provides insurance against liquidity shocks by offering short-term loans and by paying interest on money market deposits. We calibrate the model to U.S. data and find that the introduction of the sweep technology at the beginning of the 1990s, which improved access to money markets, can explain the behavior of money demand very well. Furthermore, by allowing a more efficient allocation of money, the welfare cost of inflation decreased substantially. [ABSTRACT FROM AUTHOR]

This article discusses the Money Market Fund Reform rule issued on July 23, 2014 by the U.S. Securities and Exchange Commission (SEC). Topics covered include the potential impact of the Reform on banks that offer money market deposit accounts (MMDAs), an overview of money market mutual funds (MMMFs), and attempts by the SEC to decrease the riskiness of MMMFs in the wake of the 2008 financial crisis and the "breaking of the buck" event in September 2008. The future of MMMFs is also related.

Purpose -- The purpose of this paper is to investigate the extent to which the size of multilateral banks (MBs) influences their usage of currency derivatives to manage currency risk. It provides an empirical assessment of whether economies of scale and scope found in other studies apply to MBs. Design/methodology/approach -- A quantitative hypothesis regarding the relationship of the size of MBs to their usage of currency derivatives was tested using regression, correlation and analysis of variance. Findings -- The results show that there is a significant positive relationship between size (as measured by total assets) of MBs and the total principal amounts of currency derivatives used. These results suggest that MBs are enjoying economies of scale and scope in using currency derivatives in managing currency risk. Research limitations/implications -- The data used were obtained from annual reports that may not fully provide relevant information that could influence the usage and size of currency derivatives. Future studies may therefore use surveys to obtain data to conduct multivariate regression analysis to provide further insights on other determinants of currency derivatives usage. Originality/value -- The study is of value to those interested in multilateral banking. It breaks new ground by using non-survey method for the first time in investigating the relationship between size and currency derivatives used by MBs. The results are also useful for financial institutions selling currency derivative products to MBs in identifying which to target. For managers of small MBs it may be cost effective for them to use internal hedging techniques as economies of scale applies in currency derivative markets. The results of the study are also useful to policy and regulation of MBs. [ABSTRACT FROM AUTHOR]

Thomas Palley's (2004) paper 'Asset-based reserve requirements: reasserting domestic monetary control in an era of financial innovation and instability' has radical implications for monetary policy and the operations of central banks in the money markets. This comment argues that Palley's proposal may be impractical today because it overlooks banks' holding of excessive reserves (or claims on such reserves), and because reserves allocated for particular kinds of business cannot be isolated in bank balance sheets or markets. In particular, once differential reserves are imposed on particular kinds of business, banks may respond to changes in reserve requirements by varying their assets in less predictable ways than the scheme suggests. A central bank's willingness to use differential reserve requirements will be inhibited by the current policy doctrine that emphasises control of a stable money market rate of interest. In any case, it is doubtful if interest rates or reserve requirements could have the specific targeted effects that Palley's model suggests. [ABSTRACT FROM AUTHOR]

This paper analyses the pass-through of money market rates to short-term and long-term business lending rates in the four largest euro area countries. The main findings of the paper are (1) that since the start of EMU loan rates appear to have become more responsive to money market rate changes in France, Italy and Spain, but not in Germany, and (2) that German loan rates are significantly more sluggish than loan rates in the other three large euro area countries. I also test for non-linear pass-through based on an asymmetric error-correction model but do not find much evidence of non-linearity in euro area interest rate pass-through. [ABSTRACT FROM AUTHOR]

Official interest rate changes should influence short rates on money market instruments and retail products, such as deposit accounts and mortgages, but complete pass-through is often taken for granted. This paper provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual UK financial institutions. The methodology allows for asymmetries and non-linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived ‘gap’ between retail and base rates is widening or narrowing. [ABSTRACT FROM AUTHOR]

Provides information on financial and business statistics in the United States (US) as of March 27, 1998. Tabular presentation of money stock and bank credit; Policy instruments; Condition and Federal Reserve note statements; Commercial banking institutions; Financial markets.

Presents 1997 financial and business statistics in the United States. Domestic financial statistics; Domestic nonfinancial statistics; International financial statistics; Miscellaneous financial statistical releases.

Presents charts on domestic nonfinancial and financial statistics in the United States. Money stock and bank credit; Policy instruments; Federal Reserve banks; Monetary and credit aggregates; Assets and liabilities in commercial banking institutions; Financial markets; Securities markets and corporate finance; Mortgage markets and mortgage debt in real estate; Securities holdings and transactions.

Presents several charts of domestic financial and nonfinancial and international statistics in `Federal Reserve Bulletin' for January, 1997. Money stock and bank credit; Nonfinancial business activity; United States international transactions; Foreign official assets held at Federal Reserve Banks.

Presents financial and business statistics pertaining to the United States (U.S.) Federal Reserve System. U.S. budget receipts and outlays; Corporate profits and their distribution; Summary of credit market debt outstanding.

Presents information on national and international financial and business statistics. Domestic financial statistics; Domestic nonfinancial statistics; International statistics; Guide to statistical releases and special tables.

The article presents information about money market mutual funds. The money market mutual fund has become an established feature of the American financial system. More than ninety funds now exist, their assets are valued at near $90 billion, and the number of institutional and individual investors is over three million. The factors that have contributed to the fund's success have been the liquidity of shares, check-writing privileges, yields that exceed those offered by traditional thrift institutions, and the promise of gains from the professional management which the funds provide. A study was conducted to examine the surprisingly wide variation in the risk and return of a sample of prominent money funds and value of that professional management. It was found that except for 1978, the funds appear at their best when compared to the portfolios with the longest maturities, that is, those with assets of maturities from one to six months. The continual presence in this portfolio of some relatively long-term assets exposed it to wide variations in return and contributed to low volatility ratios.

This article focuses on Great Britain's dependence on the Antwerp, Belgium money market for loans or credits during the sixteenth century period. The reasons for this dependence are largely explicable in terms of the size and frequency of royal demands for credit, the inability of the English money market to satisfy such demands, and the contemporary dominance of Antwerp both as an international capital market and as a center for English trade. There can be no doubt that intermittently throughout these thirty years Britain's demands for credit were extraordinarily heavy. A few random illustrations reveal the enormous scale on which credit was periodically demanded. The localization of financial transactions in the famous bourse and an advanced system of brokerage facilitated the rapid satisfaction of borrower and lender. Also, to Antwerp there migrated, and at Antwerp were developed, some of the greatest fortunes of the sixteenth century.

The article discusses the reports by Robert Shapiro, "Financial Intermediaries, Credit Availability, and Aggregate Demand," and the one by F. E. Banks, "A Note on a Keynesian Model of Aggregate Demand," that praises the main features of the Shapiro paper concerning Keynesian analysis to financial intermediaries. Banks does disagree with Professor Shapiro's model of aggregate demand where private securities are netted out of the private sector's budget constraint, and demonstrates that retained earnings can be treated as a result of interest rates.

The article discusses J. Hirschleifer's report, "On Multiple Rates of Return: Comment," which discusses William Jean's claims that multiple rates exist only when negative cash flows come in the middle rather than at the end of a project. The author discusses the investment projects he did not treat in his report, which were those that did not meet his requirement of having a positive accounting net profit, and that had undiscounted cash inflows greater than the price and later outlays. The Budan test for root numbers is then applied to each of the projects.