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Showing papers on "Currency published in 1973"


Journal ArticleDOI
01 Jan 1973

514 citations


Book
01 Jan 1973
TL;DR: In this paper, the International Monetary System (IMSIS) is used as an algebraic primer to International Parity Conditions (IPCC) for the international currency exchange market.
Abstract: Part I: Global Environment Chapter 1: Globalization and the Multinational Enterprise Chapter 2: Financial Goals & Governance Chapter 3: The International Monetary System Chapter 4: The Balance of Payments Chapter 5: Current Multinational Financial Challenges: Crisis Part II: Foreign Exchange Theory and Markets Chapter 6: The Foreign Exchange Market Chapter 7: International Parity Conditions Appendix: Algebraic Primer to International Parity Conditions Chapter 8: Foreign Currency Derivatives Appendix: Currency Option Pricing Theory Chapter 9: Interest Rate and Cross Currency Swaps Chapter 10: Foreign Exchange Rate Determination & Forecasting Part III: Foreign Exchange Exposure Chapter 11: Transaction Exposure Appendix: Complex Options Chapter 12: Operating Exposure Chapter 13: Translation Exposure Part IV: Financing the Global Firm Chapter 14: The Global Cost and Availability of Capital Chapter 15: Sourcing Equity Globally Chapter 16: Sourcing Debt Globally Part V: Foreign Investment Decisions Chapter 17: International Portfolio Theory & Investment Chapter 18: Foreign Direct Investment Theory & Strategy Chapter 19: Multinational Capital Budgeting Part VI: Managing Multinational Operations Chapter 20: Multinational Tax Management Chapter 21: Working Capital Management Chapter 22: International Trade Finance

432 citations


Posted Content
TL;DR: In this article, the authors developed a monetary approach to the theory of currency devaluation, where the role of the real balance effect was emphasized and a distinction was drawn between the relative prices of goods, the exchange rate and the price of money in terms of goods.
Abstract: This paper develops a monetary approach to the theory of currency devaluation.1 The approach is "monetary" in several respects. The role of the real balance effect is emphasized and a distinction is drawn between the relative prices of goods, the exchange rate and the price of money in terms of goods. Furthermore, money is treated as a capital asset so that the expenditure effects induced by a monetary change are spread out over time and depend on the preferred rate of adjustment of real balances.2 The latter aspect gives rise to the analytical distinction between impact and long-run effects of a devaluation. The first part of this paper develops a one-commodity and two-country model of devaluation. The simplicity of that structure is chosen quite deliberately to emphasize the monetary aspect of the problem as opposed to the derivative effects that arise from induced changes in relative commodity prices. Trade is viewed as the exchange of goods for money or a means of redistributing the world supply of assets. A devaluation is shown to give rise to a change in the level of trade and the terms of trade, the price of money in terms of goods. In the second part the implications of the existence of nontraded goods are investigated, and induced changes in the relative prices of home goods enter the analysis.

271 citations


Journal ArticleDOI
TL;DR: Mundell et al. as discussed by the authors presented a plan for a European currency with limited exchange rate flexibility based on Laffer's Laffer-Laffer argument and the theory of optimal regional association.
Abstract: Foreword Robert A Mundell Participants Introduction Harry G Johnson and Alexander K Swoboda Part 1: The Economics of Fixed Exchange Rates 1. Two Arguments for Fixed Rates Arthur B Laffer Comments Gottfried Haberler, Bela Balassa 2. The Flexibility of the Gold-Exchange Standard and Its Limits Jurg Niehans 3. The Price-Specie-Flow Mechanism and the Gold Exchange Standard: Some Exploratory Empiricism Relating to the Endogeneity of Country Money Balances Thomas J Courchene 4. The Dual Currency System Revisited Ronald I McKinnon Part 2: The Economics of Common Currency Areas 5. Some Early Views on Monetary Integration Thomas Guggenheim 6. The Theory of Optimum Regional Associations Herbert G Grubel 7. Uncommon Arguments for Common Currencies Robert A Mundell 8. Policy Conflict, Inconsistent Goals and the Co-ordination of Economic Policies Alexander K Swoboda 9. A Plan for a European Currency Robert A Mundell Comment Bela Balassa 10. The Impact of External Markets for National Currencies on Central Bank Reserves Robert Z Aliber 11. Joint Balance: Capital Mobility and the Monetary system of a Currency Area Sven W Arndt 12. Optimum Currency Areas and Latin America Alexandre Kafka Part 3: The Economics of Flexible Exchange Rates 13. The US Balance of Payments: Freedom or Controls Gottfried Haberler 14. Flexing the International Monetary System: The Case for Gliding Parities Richard N Cooper 15. Specific Proposal for Limited Exchange Rate Flexibility William Fellner 16. Flexible Exchange Rates and Traded Goods Prices: The Role of Oligopoly Pricing in the Canadian Experience Robert M Dunn, Jr. 17. The Optimal Rate of Devaluation Ruben Almonacid Manuel Guitian. Index

115 citations


Journal ArticleDOI
TL;DR: In this article, the effects of currency devaluation in a two-commodity, two- country, and two-money model with full employment and price flexibility were investigated.
Abstract: This paper investigates the effects of devaluation in a two-commodity, two- country, and two-money model with full employment and price flexibility. Primary emphasis is placed on the effect of a change in the real value of money on real expenditure and on the effects on relative prices of a redistribution of expenditure between countries. The stability properties of the model are related to the transfer problem in barter theory and to the Marshall-Lerner condition. Given stability, it is shown that a devaluation will improve the balance of payments.

108 citations


Book
01 Jan 1973
TL;DR: Ernst as mentioned in this paper provides and analytical case study of the impact on America of British monetary policy during a period of dramatic shifts in the Atlantic economy and suggests that earlier studies are questionable because of theoretical misconceptions concerning the importance of visible money.
Abstract: Although it is obvious that politics, money, and economic conditions were closely interrelated in the twenty years before the Revolution, this is the first account to bring together these strands of early American experience. Ernst also provides and analytical case study of the impact on America of British monetary policy during a period of dramatic shifts in the Atlantic economy and suggests that earlier studies are questionable because of theoretical misconceptions concerning the importance of visible" money."Originally published in 1973.A UNC Press Enduring Edition -- UNC Press Enduring Editions use the latest in digital technology to make available again books from our distinguished backlist that were previously out of print. These editions are published unaltered from the original, and are presented in affordable paperback formats, bringing readers both historical and cultural value.

29 citations


Journal ArticleDOI
TL;DR: The Patman Report as mentioned in this paper revealed that by the late 1960s the commercial banks were managing trust accounts aggregating about $250 billion, heavily concentrated in the larger trust institutions, and 49 leading trust banks were shown to have 5,270 separate holdings of 5 percent or more of the stock of portfolio companies with these larger holdings in many cases paralleled by director interlocks.
Abstract: Several recent developments have rekindled the interest of radicals and reformers in corporate control and the role of banks in the corporate system: among them, the conglomerate movement of the 1960s, the continued growth of the multinational corporation, and the movement for corporate reform spearheaded by Ralph Nader and his associates and allies. At least as important as these, however, was the 1968 publication of the House Committee on Banking and Currency's report, Commercial Banks and Their Trust Activities: Emerging Influence on the American Economy (hereafter referred to as the Patman Report), which disclosed for the first time that by the late 1960s the commercial banks were managing trust accounts aggregating about $250 billion, heavily concentrated in the larger trust institutions. The 49 leading trust banks were shown to have 5,270 separate holdings of 5 percent or more of the stock of portfolio companies with these larger holdings in many cases paralleled by director interlocks as well.This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

25 citations


Book ChapterDOI
01 Jan 1973
TL;DR: In this article, the authors consider the economic costs of adjustment on the assumption that the rational policy-maker would select the course of action that minimises these costs, and develop criteria for measuring the cost of adjustment and apply them to the determination of optimum currency areas.
Abstract: When a country faces a disequilibrium in its Balance of Payments, it must make several choices. Paramount among them are (a) the choice (or the optimal balance) between adjustment to the disturbance and financing of the disequilibrium by the use of international monetary reserves, and (b) the choice of the optimal adjustment technique. Several factors relating to the internal as well as external position of the country have an important bearing on these decisions. This paper is concerned with the economic costs of adjustment on the assumption that the rational policy-maker would select the course of action that minimises these costs. With this in mind, the second choice listed above has implications for the optimum currency area problem, for it provides a criterion for the least cost policy to rectify external imbalances. The next two sections develop criteria for measuring the cost of adjustment and apply them to the determination of optimum currency areas. Some rough empirical estimates are also provided, with data pertaining to the 1960s. The final section is devoted to the choice between adjustment and financing, and its implications for optimal international reserves.

17 citations



Book
01 Jan 1973

13 citations


Book ChapterDOI
01 Jan 1973
TL;DR: The Rentenmark as discussed by the authors currency was introduced by Hjalmar Schacht, a capable financier on the board of one of the big private banks, who was made President of the Reichsbank and established a new currency, provisionally called rentenmark.
Abstract: Like any proper tragedy, the German drama, too, had its peripeteia, the moment in the fourth act when the action, all set for a final catastrophe, is given the chance of a happy ending. The inflation had now served its purpose and the State and industry could pay off their debts in worthless currency and the time had come to think of stability, production and profits. Hjalmar Schacht, a capable financier on the board of one of the big private banks, was made President of the Reichsbank and established a new currency, provisionally called Rentenmark.Its value was based on a mortgage of industrial and agricultural assets and it proved perfectly stable, right from the day of issue.

Posted Content
TL;DR: In this paper, a policy-oriented econometric model for the Indian economy with an emphasis on the monetary sector has been formulated and analyzed based on a sample of 20 annual observations (1948-49 through 1967-68).
Abstract: Based on a sample of 20 annual observations (1948-49 through 1967-68) a policy-oriented econometric model for the Indian economy with an emphasis on the monetary sector has been formulated estimated, and analysed. Besides national income and its components, the demand, supply, and equilibrium condition of each of the six kinds of financial assets (currency, bank reserves, government bonds, demand deposits, time deposits, and private non-bank liabilities with banks) were considered. Every effort was made to introduce as many policy variables in as many equations as permissible both on theoretical and on statistical grounds. The primary objective was to quantitatively evaluate the direct and indirect impacts of various policy variables on the model’s endogenous variables. The model should be of help in understanding the portfolio management by the different sectors of the economy.

Journal ArticleDOI
TL;DR: In this paper, the case of perfect mobility of capital is considered and the equations of change: Free currency interflow and the "Rybczynski" effect are discussed. But the case is not discussed in detail.
Abstract: I. The model, 97. — II. The equations of change: Free currency interflow and the "Rybczynski" effect, 99. — III. Comparative statics and comparative systems, 104. — IV. Concluding remarks, 107. — Appendix: The case of perfect mobility of capital, 109.

Journal ArticleDOI
TL;DR: In this paper, the problem of determining the optimal level of forward exchange purchases is considered. But the model is different from ours in the sense that the transactor can express a utility function on the domestic currency equivalent of his ending currency holdings.
Abstract: The basic model of this paper is that of a transactor who is to receive at a specified time t in the future a fixed quantity of domestic funds A d and a fixed quantity of foreign funds A f . It is further assumed that there exists a forward market in foreign exchange in which one unit of foreign currency can be bought and sold at a given and known forward rate r f , the domestic currency price of one unit of foreign currency. Let X be the net forward purchases of foreign exchange that the transactor undertakes at the market rate r f ; a negative value of X indicates net sales of forward exchange. It is assumed that at time t the foreign currency will be convertible for the transactor at a fixed but unknown spot exchange rate and that the transactor can assess or derive a probability distribution on this spot exchange rate f(r t ) for r t > 0. Finally, it is assumed that the transactor can express a utility function u on the domestic currency equivalent of his ending currency holdings. This paper considers the problem of determining the optimal level of forward exchange purchases X 0 .

Journal ArticleDOI
TL;DR: The Smithsonian agreement of December 18, 1971 as discussed by the authors was the last major international monetary crisis to be resolved by the United States and the other major currencies against the U.S. dollar.
Abstract: The international monetary crisis of 1971 began on August 15, 1971 with the announcement of President Nixon's "new economic policy." Domestically, it involved most dramatically a 90-day wage and price freeze. Internationally, is involved most dramatically the suspension of the convertibility of the U.S. dollar into gold for foreign central banks, together with the imposition of a temporary import tax surcharge intended to remain in force until the European countries and Japan had made realignments of their currency values in terms of the dollar satisfactory to the United States. Following 4 months of so-called dirty floating of foreign currencies against the U.S. dollar, the crisis was finally resolved by the so-called Smithsonian agreement of December 18. This entailed a realignment of the other major currencies against the dollar on more or less the scale the U.S. administration had been seeking, an 81/2 percent increase in the U.S. price of gold to be implemented at some future date-changes which in the aggregate left the average monetary value of gold more or less unchanged. It also included a widening of the band within which market rates of exchange can fluctuate about their official parities from the previous standard of under 1 percent each way to a maximum of 21/4 percent each way. The 1971 international monetary crisis was only the latest in a series of international monetary crises that have been occurring with almost monotonous annual periodicity since the mid-1960s. And while President Nixon hailed the Smithsonian agreement as "the greatest international monetary agreement in the history of mankind"-which it may have been given the president's rather elastic standards for judging the works of his own administration-there is no reason to doubt, and every reason to expect, that there will be at least one more major international monetary crisis in the not too distant future, although the principle of honor among thieves as applied in international politics is likely to ensure that any overt crisis will be postponed until after the coming presidential election. The floating of the pound in June 1972 was an uncomfortable surprise, but Britain is now too unimportant for its actions to constitute a crisis. My reasons for this view will, I hope, become apparent from the subsequent analysis. I shall attempt to place the international monetary crisis of 1971 in the context of the general theory of international monetary organization and the broad historical evolution of the international

Journal ArticleDOI
TL;DR: In this paper, the authors present an accounting framework capable of consistently describing on a worldwide scale international money (euro-currency) markets and show that interest rates on international money markets need not be explained by econometric models specific to such international markets, but could simply result from the appropriate aggregation of national economic models.

Journal ArticleDOI
TL;DR: One of the major problems in the current international monetary situation is the so-called "dollar overhang," which refers to the amount of dollar reserves foreign central banks in some of the industrial nations hold in excess of what they judge they need or want as discussed by the authors.
Abstract: One of the major problems in the current international monetary situation is the so-called "dollar overhang." This term refers to the amount of dollar reserves foreign central banks in some of the industrial nations hold in excess of what they judge they need or want. The amount of such "excess" dollar holdings is a matter of conjecture. It involves a subjective judgment by each individual central bank. No official data are available on the subject, though some non-official sources have made estimates in the neighborhood of 25 billion to 35 billion dollars. Whatever the precise amount may be, the available evidence suggests that it is large enough to be a source of difficulty in negotiating an overhaul of the international monetary system. How did the central banks come to acquire more dollars than they say they really want? The explanation is simple. The exchange-rate quotations they set for buying and selling dollars in their national markets were not ones that produced subjectively satisfactory levels of dollar reserves. Too many dollars were flowing into their reserves and too few were flowing out. This happened because the central banks stood ready to buy dollars at prices, in terms of their national currencies, which the business and banking community regarded as high, in the light of supply and demand conditions. The foreign exchange dealers in those markets became large net sellers of dollars to their central banks over a period of a number of years. One may appropriately ask why the monetary authorities did not lower their quotations for dollars if they really felt that they were acquiring too many. Eventually they did, when they revalued their currencies (after, in some cases, permitting them to float) last year. But revaluation was a politically unpopular step to take, and it was deferred as long as possible, in most instances. The longer it was deferred and the greater the need became, the more difficult the action was to take. Revaluation meant that exporters in those countries thenceforth would get fewer units of their local currency for every dollar of export receipts they converted into their own currency. If they tried to offset this effect by raising their prices in terms of dollars, their sales volumes would suffer. If they did not raise their prices, their profit margins would be squeezed. In either case, the effect would be to depress profits, production and employment. After the revaluation, importers could buy dollars at a lower price than before, and this would make American goods less costly in terms of the local currency. Importation would be expanded, to the detriment of domestic producers. To some extent, these initial impacts on production and employment can be alleviated by expansionary monetary and fiscal policies. But experience has demonstrated that these tools of economic policy are impossible to employ with precision. And often there are painful transitional effects involved in shifting labor and capital from areas of expanding demand, especially when the imbalance has become large and of long duration. Unfortunately, the history of the past decade re-

Journal ArticleDOI
TL;DR: In this article, the authors investigated the efficiency of the Hungarian export sector in both pre-reform and postreform years and found that although misallocation due to bilateral currency constraints was reduced by the reform, the overall efficiency of export sector declined significantly.
Abstract: We have investigated the allocative efficiency of the Hungarian export sector in both pre-reform and post-reform years. The results indicate that, although misallocation due to bilateral currency constraints was reduced by the reform, the overall efficiency of the export sector declined significantly. While the failure of the reform in a single, although from the Hungarian viewpoint, critical sector of the economy is not direct evidence of the failure of the entire reform, it does indicate that successful reforms may be more difficult to achieve than either western or socialist economists have anticipated.

Journal ArticleDOI
TL;DR: McKinnon et al. as mentioned in this paper introduced nontraded goods as a simplifying concept which assumes all goods can be classified into those that could enter into foreign trade and those that do not because transportation is not feasible for them.
Abstract: HISTORICALLY, analyses of the determinants of a country's balance of payments position have centered on (1) relative price effects (the elasticities approach), (2) income effects (the absorption approach), and (3) asset effects (the portfolio balance approach). In their recent discussions of monetary and fiscal policy, McKinnon [8] and Mundell [9] examined the income and asset effects. Their small country assumption (given world prices of tradable goods) ruled out relative price effects. In contrast, recent discussions of currency depreciations and optimal currency areas have emphasized the importance of relative price changes by relaxing the small country assumption and by introducing nontraded goods. In his classic paper on optimum currency areas, McKinnon [7] defined nontraded goods as follows. 'The ratio of tradable to nontradable goods' is a simplifying concept which assumes all goods can be classified into those that could enter into foreign trade and those that do not because transportation is not feasible for them .... This overly sharp distinction between classes of tradable and non-tradable goods is an analytically simple way of taking transportation costs into account. By tradable goods we mean: (a) exportables, which are those goods produced domestically and, in part, exported: (b) importables, which are both produced domestically and imported.2 McKinnon's definition of an optimal currency area depended crucially on the relative size of the nontraded goods sector. Pearce's [11] analysis of a currency depreciation represents possibly the most comprehensive attempt to incorporate nontraded goods. Using a model with two traded goods and one nontraded good, Pearce concluded that It may well be that the success of exchange depreciation as a policy rests more upon its power to reduce the price of non-traded goods relative to those traded than upon its power to affect the real terms of trade.3 Despite this promising start, A. Krueger [4] noted in her review of Pearce's paper that To date, to this writer's knowledge, no other payments models have

Journal ArticleDOI
TL;DR: In this paper, the suitability of suppliers' credits on Ghanaian industrialization was evaluated in terms of industrial projects and the effect of these credits on the success of industrial development.
Abstract: The hypothesis to be examined is that there were considerable net costs in the choice of suppliers' credits as a method of financing Ghanaian industrialization in the early 1960s The hypothesis will be tested in terms of industrial projects only Omitted thus is the suppliers' credit financing of prestige projects and/or "white elephants"; likewise omitted is the suppliers' credit financing of infrastructure projects, because their long gestation periods and low returns on investment make them suitable only for loans of long maturity at concessional terms Industrial projects are the only ones for which returns can be measured with any degree of certainty The returns from infrastructure projects are usually tied in with "secondary benefits," and to calculate returns on these is problematical Returns from prestige projects are, of course, intangible By concentrating on the financing of industrial projects through suppliers' credits, the intention is to put the hypothesis to a vigorous test In evaluating the suitability of suppliers' credits on Ghanaian industrialization, the proposition is advanced that in Ghana it takes about 5-6 years to bring a publicly owned plant into profitable operation (in terms of both domestic currency and foreign exchange)-assuming that the plant is feasible to begin with The effect of this longer than average


Journal ArticleDOI
TL;DR: In this paper, the authors explain the fundamental reasons for the ambivalence in Soviet financial policy, and explain how the economy could not be made to function without the use of money and other financial instruments.
Abstract: At a very early stage of tlhe Bolshevik experiment with economic planning it became obvious that the economy could not be made to function without the use of money and other financial instruments. In fact, a financial history of the Soviet economy would slhow a gradual but relentless expansion in the number and functions of financial instrumients. This expansion has been gradual largely because Soviet economists, planners, and administrators have had both ideological (theoretical) and practical reservations about the appropriate uses as well as the potential abuses to which financial instruments can be put. The process has been relenitless nonetheless, because for a number of essential economic functions the possible substitutes or alternatives to financial instrumlents are either impractical or nonexistent. Let me attempt to explain briefly the fundamental reasons for the ambivalence in Soviet financial policy. As ordinarily described, the essential functions of money in an economy are (1) as a unit of account, (2) as a medium of exchange, and (3) as a store of value. As a unit of account, money permits the aggregation and comparison of what would otherwise be incommensurable magnitudes, such as units of labor time, material inputs, final goods, and services. The need to keep track of enterprise receipts and disbursenments was recognized quite early in Soviet history. The mandatory introduction of khozraschet (economic budgeting and accounting) for all state enterprises in 1921 ensured the accountability of enterprise managers for the uses to which enterprise funds are applied.1 Both the miedium-of-exchange and the store-of-value functions, as opposed to the unit-of-account function, are quantitative functions of mnoney in the sense that each requires the existence of a stock of money (currency plus de-



Journal ArticleDOI
01 Nov 1973-Politics

Book ChapterDOI
01 Jan 1973
TL;DR: In a pioneering article published in 1961, Professor Mundell endeavoured to lay the foundations of a theory of optimum currency areas; a few important contributions have been made subsequently, notably by Professors McKinnon and Kenen.
Abstract: In a pioneering article published in 1961, Professor Mundell endeavoured to lay the foundations of a theory of optimum currency areas; a few important contributions have been made subsequently, notably by Professors McKinnon and Kenen. Mundell warned the reader not to regard the exercise as purely academic: ‘Certain parts of the world are undergoing processes of economic integration and disintegration, new experiments are being made, and a conception of what constitutes an optimum currency area can clarify the meaning of these experiments’ ([33] pp. 65–7). Now, about a decade later, it so happens that monetary unification has been pushed in the forefront of the process of economic (and political) reorganisation of Europe. And yet the promising start of the optimum currency area theory does not seem to be living up to expectations — so much so that already in 1968 Professor Ingram could comment: