Browse

Whereas the emergence of the classical gold standard (1870‒1914) has attracted considerable attention in the economic literature, only very few authors have inquired into the protracted confidence crisis of silver. Building on the results of Calomiris, Oppers, and Flandreau, this book explores the evolution of management practice in exchange banks in Asia. Using ‘forensic accounting’, it attempts to show that contemporaries were aware of problems caused by the gyrations of the silver price after 1870, and that they sought to actively remedy their harmful effects on trade between gold and silver using countries. It describes how the experiment with financial instruments, although originally mishaps, eventually led to success. Next, and contrary to the commonly held belief that nineteenth-century bankers did not have a sophisticated understanding of hedging strategies, it shows, in a quantitative way, that hedging strategies existed, impacting banks’ operations in profound ways. More specifically, it uses the mostly unexplored accounting data and archives of the Yokohama Specie Bank (YSB; the world’s third largest exchange bank before World War II) to describe the bank’s wrought management history in the tumultuous years around the turn of the twentieth century. YSB had to come to grips with Japan’s effort at adopting the gold standard (1897), the difficult expansionary ‘postbellum administration’ after the Sino-Japanese War (1894‒5), and the consolidation of the country’s imperialism (after the Russo-Japanese War of 1904‒5)—all events shaping not only the bank’s operations and expansion in Asia, but also affecting the organization of its branch network and management of its flow-of-funds.

This book reassesses the twin projects of structural reform and European integration in the wake of the Great Recession and the European Sovereign Debt Crisis. A brief introduction compares the pre-crises debate to the current situation, and highlights a number of ways in which both reform and further integration may have become more difficult, but also less complementary. The first chapter surveys the state of the structural-reform agenda, its successes, failures, and priorities for further action. The second chapter focuses on the fiscal-policy response to the crisis, advocating a greater balance between supply side reforms and demand side management. The third chapter focuses on the asymmetric shocks across economies in the monetary union, and discusses institutional mechanisms to reduce their frequency and impact. Chapter 4 examines the cyclical behaviour of output and financial indicators, as well as the counter-cyclical role of macro-financial policies, both at the national and the European level. The fifth chapter studies changes in Europeans’ attitudes, showing how the recent crises eroded public confidence in European institutions. The sixth chapter tackles the demographic challenges facing Europe, and particularly the way that demographic change may impact the reform agenda. Chapter 7 highlights the under-appreciated extent to which ‘Europe,’ taken as a whole, is characterized by a substantial amount of inequality and geographical income clustering, and the challenge these facts pose for further integration.

The increase in life expectancy is arguably the most remarkable by‐product of modern economic growth. In the last 30 years we have been gaining roughly 2.5 years of longevity every decade both in Europe and in the United States. This progress has outpaced the most optimistic scenarios and documented that demographic projections are no more reliable than economic forecasts. This book looks closely into those challenges, raising a few fundamental issues at both the macroeconomic and microeconomic levels. Among these: is it possible to turn the challenges faced by ageing and longevity into a long‐term productive opportunity? Can advanced economies engineer a healthy ageing scenario with long‐term spillovers in terms of enhanced technological progress and acceleration of long‐term growth? What is the microeconomic relationship between ageing and productivity, and how can specific policies postpone any age‐related decay in productivity at the firm and individual levels?

Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In this book, scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors.

Among the nations most seriously affected by the Great Recession, Ireland has been hailed as a ‘poster child’ for austerity, particularly following the country’s exit from a severe austerity programme, agreed with the Troika of the International Monetary Fund (IMF), the European Central Bank (ECB), and the European Commission (EC), and its return to economic growth. In this multidisciplinary book, Ireland’s leading social scientists present the first systematic study of the Great Recession, austerity, and recovery in Ireland. Over seventeen chapters, the book assesses the effects of the recession and austerity programme on Ireland’s economy, business and financial systems, consumption, regulation, politics, relations with international agencies, workplaces, the labour market, migration, public service reform, inequality, the housing market, and culture. The book is critical of Ireland’s delineation as Europe’s ‘poster child’ for austerity. It sets out the great social costs entailed by the cutbacks implemented under austerity. It shows how many of the reforms agreed with the Troika were implemented partially and incompletely. It argues that Ireland’s economic recovery can largely be attributed to the importance of foreign direct investment and exports in the Irish economy and the revival of leading economies outside the Eurozone with which the country has well- and long-established trading relationships.

This book is about using game theory to model money and financial institutions. Using the backdrop of a simple two-good economy with two continua of traders, we propose a strategic market game to explicitly model the moves that accomplish trade. We then study variations on this simple model, to understand such things as changing the type of money used in the economy (consumable storable money vs gold vs fiat money) and/or the trading structure (buy-sell vs sell all), the role of banks (both central banks and private banks), the market structure for banking (monopoly vs oligopoly vs perfect competition), bankruptcy, and credit clearinghouses. We are also able to examine the process of a gold demonetization in favor of fiat money. The key feature that allows this is that the players’ decision problems are dynamic, each with a fully defined state space. The physical money is tracked throughout. Hence the players’ optimizations all have inequality constraints reflecting their cash flows. Indeed, our models link the timeless general equilibrium analysis with the fully dynamic complex world around us where the institutions constrain the dynamics. We are able to solve (most of) the models analytically, using the solution concept of (perfect) noncooperative equilibrium. This allows us to perform sensitivity analyses, which show how the “phases” of the economies change as a function of the amount of money in the economy. Finally, we comment throughout the book on how overly simplified the models have to be in order to portray the above phenomena while still being solvable. Hence by themselves they are not realistic. However, they do represent a first step in building a more realistic theory of money and financial institutions.

In the wake of recent events, macroeconomics has come under intense scrutiny, often from non-economists. Yet because macroeconomics is now a highly technical undertaking, it will be very hard for non-specialists on their own to sift through the body of knowledge we have accumulated, or to assess the manner in which we structure inquiries. Unless one finds this satisfactory, and I do not, the profession has some work to do. This book is an attempt to describe, in entirely nontechnical (i.e. plain English) terms, where modern macroeconomics gets its ideas from and how it goes about its business. The target audience is that of thoughtful and curious readers who lack the narrow background or time needed to read either advanced textbooks or articles in academic economics journals.

This book provides a history of British financial crises since the Napoleonic wars. Interest in crises lapsed during the generally benign financial conditions which followed the Second World War, but the study of banking markets and financial crises has returned to centre stage following the credit crunch of 2007–8 and the subsequent Eurozone crisis. The first two chapters provide an overview of British financial crises from the bank failures of 1825 to the credit crunch of 2007–8. The causes and consequences of individual crises are explained and recurrent features are identified. Subsequent chapters provide more detailed accounts of the railway boom-and-bust and the subsequent financial crisis of 1847, the crisis following the collapse of Overend Gurney in 1866, the dislocation of London’s money market at the outset of the Great War in 1914 and the crisis in 1931 when sterling left the gold standard. Other chapters consider the role of regulation, banks’ capital structures, and the separation of different types of banking activity. The book examines role of the Bank of England as lender of last resort and the successes and failures of crisis management. The scope for reducing the risk of future systemic crises is assessed.

This collection of work by Ruttan and Hayami spans their long career in the economics of technical and institutional change. At both a theoretical and empirical level, their analysis of induced innovation provides a solid foundation for understanding how and why technologies and institutions evolve in response to factors that constrain them. This book provides a sweeping explanation of this process. As scholars, Ruttan and Hayami’s abilities and experiences complemented each other. Together, they had great success in working across contexts to integrate Western models of technological change and more holistic Asian perspectives on multi-factorial interaction. Their perspectives are wide ranging, covering large geographical areas and thoroughly examining the historical development of agriculture in the United States, Japan, and many other countries. This volume collects their most influential papers, from which much can be learned.

Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. This book examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, this book considers mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability.

The purpose of this book is to demonstrate that most of the central propositions of economic analysis can be derived without any reference to hyperrationality, optimization, perfect competition, perfect information, representative agents or so-called rational expectations. These include the laws of demand and supply, the determination of wage and profit rates, technological change, relative prices, interest rates, bond and equity prices, exchange rates, terms and balance of trade, growth, unemployment, inflation, and long booms culminating in recurrent general crises. In every case, the theory developed in the book is applied to modern empirical patterns, and contrasted with neoclassical, Keynesian and post-Keynesian approaches to the same issues. The object of analysis is the economics of capitalism, and economic thought on the subject is addressed in that light. This is how the classical economists, as well as Keynes and Kalecki, approached the issue.

The book describes the long and difficult process that led to the central banking model prevailing in most advanced economies at the end of last century. The critical institutional basis of that model is an independent central bank with price stability as its dominant objective. The book, which looks in particular at the Federal Reserve of the United States (Fed) and at the European Central Bank (ECB), also presents the essential components of that model, while noting that financial stability did not fit well in it and was the neglected child of central banks before the Great Recession. The book then illustrates the hits that the Great Recession delivered to that model and asks whether a radical rethinking of the model is necessary. In particular, it examines whether the renewed importance of the financial stability objective, the blurred borders between fiscal and monetary policies, the moral hazard created by the central bank’s forceful actions, and, finally, the actions of the ECB to protect the euro have jeopardized the pre-crisis central bank model. The answer to this question is that, while it is not possible to simply return to the pre-crisis central bank model, the adaptations that are needed are more incremental than radical when considered in a long historical perspective. They nevertheless require changes in the statutes of both the Fed and the ECB, and thus will have to overcome a high institutional hurdle.

Britain's income distribution is like a multi-story apartment building with the numbers of residents on the different floors corresponding to the concentration of people at different income levels in any particular year. The poorest are in the basement, the richest are in the penthouse, and the majority somewhere in between. But what are the dynamics of occupancy patterns? Snapshots of the building register at different times tell us nothing about these. Over time, how much movement between floors is there, and has the frequency of moves or the distance travelled been changing over the last two decades? In particular, is there much turnover in the basement, and do basement dwellers ever reach the penthouse? Who moves the most and how far? What are the factors associated with movements up and down the income tower over time? This book addresses such questions with extensive new analysis based on data from the British Household Panel Survey (BHPS) covering 1991–2006, providing a comprehensive and original study of income mobility and poverty dynamics. There is detailed discussion of why longitudinal perspectives on the income distribution are of interest, and of the relevant concepts and measures. There is in-depth discussion of the BHPS and its household income data, and comparisons with other national and international longitudinal data sources. The book shows that patterns of income mobility in Britain have not changed over the last two decades but fewer people are persistently poor, and it discusses the reasons for these trends.

In a discipline such as economics, increasingly devoted to its computational content, the mathematical underpinnings of the computability assumptions of economic fundamentals have not been investigated systematically or reasonably exhaustively. In this book, such an attempt is made for the first time. Choice theory, adaptively rational behaviour, induction, learning, arithmetical games, computational complexity of decision processes, growth theory, and the theory of economic fluctuations are given recursion theoretic (i.e, computable) interpretations. Economic theoretic questions, posed recursion theoretically, lead to answers that are ambiguous: undecidable choices, uncomputable learning processes, algorithmically unplayable games, etc., become standard answers. The book also claims that a recursion theoretic formalization of economic analysis makes the subject intrinsically inductive and computational.

Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain in detail how to implement the computational techniques needed to solve dynamic economics models. It is based on lectures presented at the 7th Summer School of the European Economic Association on computational methods for the study of dynamic economies, held in 1996. A broad spread of techniques is covered, and their application to a wide range of subjects discussed. The book provides the basics of a tool kit that researchers and graduate students can use to solve and analyse their own theoretical models. It is oriented towards economists who already have the equivalent of a first year of graduate studies or to any advanced undergraduates or researchers with a solid mathematical background. No competence with writing computer codes is assumed. After an introduction by the editors, it is arranged in three parts: I Almost linear methods; II Nonlinear methods; and III Solving some dynamic economies.

This book gives an analytical account of the technology for the monetary policy implementation of the European Central Bank. The issue is looked at from different perspectives, corresponding to different chapters. The first chapter addresses the issue from a theoretical point of view, taking both a positive and a normative approach and considering both normal and stressed conditions. The stabilization of a short-term rate of interest in normal conditions and the countering of liquidity risk in a financial crisis are considered the objectives of monetary policy implementation. The approach in the second chapter is historical, presenting a narrative of the creation of the framework for the implementation of monetary policy in the euro area. The analysis turns to empirical tools in the third chapter, where the experience of actually working with the technology for monetary policy implementation is dealt with. Finally a forward-looking approach is taken in the last, short chapter, which attempts to identify the future challenges of monetary policy implementation. Each chapter, except for the fourth, is written by different authors but both the editors and the authors have strived to present an organic analysis of the issue in which the different approaches complement each other. The book is by no means an official account, but could definitely not have been written had the authors not been so closely associated with the implementation of monetary policy in the euro area.

This book presents an analytical review of Japanese exchange rate policy from the end of World War II to the present—how authorities, starting from imposing draconian controls over all international financial flows, moved toward eliminating virtually all state interference regulating foreign exchange transactions, including official intervention in the foreign exchange market. It describes how policy and institutional frameworks evolved, explains their domestic and international contexts, and assesses the impacts and consequences of policy actions. Following successful exchange rate-based stabilization in the early 1950s, Japan entered the world trading system with an overvalued currency, which helped perpetuate exchange and capital controls. As a culture of administrative control became ingrained, Japan took a decidedly gradualist approach to establishing current and capital account convertibility. The protracted capital account liberalization, coupled with slow domestic financial liberalization, created large swings in the yen’s exchange rate when it was floated in the 1970s. Politicization by major trading partners of Japan’s large bilateral trade surplus pressured authorities to subordinate domestic stability to external objectives. The ultimate outcome was costly: from the late 1980s, Japan successively experienced asset price inflation, a banking crisis, and economic stagnation. The book concludes by arguing that the shrinking trade surplus against the background of profound structural changes, the rise of China that has diminished the political intensity of any remaining bilateral economic issues, and the world’s sympathy over two decades of deflation have given Japan, at least for now, the freedom to use macroeconomic policies for domestic purposes.