The inflationary effects of the use of reserve ratio reductions, or open market purchases, to reduce market interest rates: a theoretical comparison

Interest rates ; Monetary policy

A public finance analysis of multiple reserve requirements

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to present a model in which it is possible for a multiple reserves regime to improve social welfare relative to simpler regimes involving reserve requirements and/or deposit taxes. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive historical experience with multiple reserve requirements.Finance, Public ; Developing countries ; Mexico ; Bank reserves

DISCLOSURE AND LIQUIDITY

The purpose of this paper is to test empirically the relationship between two important concepts: disclosure and liquidity. Using a sample of Spanish quoted firms between 1994 and 2000 we show that the estimation of the relationship between disclosure and liquidity depends crucially on two factors: a) the multidimensionality of the concept of liquidity; b) the use of an econometric methodology that deals properly with the features of the sample used. However the use of the Amihud (2002) illiquidity measure provides evidence in favour of a positive relationship between disclosure and liquidity.

Disclosure and liquidity

The purpose of this paper is to test empirically the relationship between two important concepts: disclosure and liquidity. Using a sample of Spanish quoted firms between 1994 and 2000 we show that the estimation of the relationship between disclosure and liquidity depends crucially on two factors: a) the multidimensionality of the concept of liquidity; b) the use of an econometric methodology that deals properly with the features of the sample used. However the use of the Amihud (2002) illiquidity measure provides evidence in favour of a positive relationship between disclosure and liquidity

On business cycles and countercyclical policies

Since the third quarter of 2000, the U.S. economy began to experience a slowdown in its rate of growth. This slowdown serves as a reminder that the business cycle is still alive and raises the following questions: What do we know about the driving forces behind the business cycle? What should policymakers do in the face of economic fluctuations? ; The authors examine two explanations for business cycles that are well-known in academic circles: the animal spirits theory and the real business cycle theory. The former is closely connected with the Keynesian economic tradition and identifies market participants' mood swings as the key source of economic fluctuations. The second explanation is rooted in the classical economic tradition and views productivity shocks as the driving force behind economic fluctuations. The article then looks at what these theories suggest about countercyclical policies, which try to eliminate business cycle fluctuations or insulate market participants from their effects. The authors conclude that neither theory makes an unambiguous case supporting countercyclical policies. ; This conclusion may come as a surprise to government and business economists who have an ingrained belief in the benefits of such policies. It is important to remember, however, that attempts to understand business cycles and the effects and desirability of policies that may (or may not) moderate them are still at a very early stage.Business cycles ; Monetary policy ; Keynesian economics

THE REPUTATIONAL CONSEQUENCES OF DISCLOSURES

In our study we focus on the determinants of reputation and, in particular, on the relation between the quality of annual report disclosures of companies and their reputation. We try to bring together two strands of literature: the literature on corporate reputation and the literature on corporate disclosures. Using data on corporate reputation and on quality of annual report disclosures for a sample of Spanish companies, we test the hypothesis that annual report disclosure quality is a crucial determinant of corporate reputation. After controlling for other possible determinants, especially size, we find significant evidence in favour of our hypothesis. Firms with a better annual report disclosure score are more likely to be rated among the top 50 national companies in terms of corporate reputation. Moreover the disclosure score positively affects the reputation score. Nuestro trabajo se centra en los determinantes de la reputación y, en particular,en la relación entre la calidad de la revelación de los informes anuales de las empresas ysu reputación. Tratamos de entrelazar dos grandes ramas de la literatura: la literaturarelativa a la reputación corporativa y la relacionada con revelación en los informesanuales. Utilizando datos de reputación empresarial y de calidad de los informes anualespara una muestra de empresas españolas, contrastamos la hipótesis de que la calidad dela revelación del informe anual es un determinante significativo de la reputaciónempresarial. Después de controlar el efecto de otros posibles determinantes,especialmente el tamaño, encontramos evidencia significativa a favor de nuestrahipótesis. Las empresas con mayor calidad de información en sus informes anualestienen más posibilidades de figurar entre las 50 mejores empresas españolas en términosde reputación.reputación empresarial, calidad de la revelación, informe anual. corporate reputation, disclosure quality, annual report, financial performance

Stability of steady states in a model of pleasant monetarist arithmetic

In this paper the authors study the stability properties of the alternative steady-state equilibria that arise in a neoclassical production model that delivers pleasant monetarist arithmetic. They show that if the government’s monetary policy rule involves a fixed money supply growth rate, then “pleasant arithmetic” steady states—steady states from which a permanent increase in the money growth and inflation rates is associated with a permanent decrease in the real interest rate and a permanent increase in the level of output—are dynamically stable.Econometric models ; Monetary policy

A public finance analysis of multiple reserve requirements

This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements: in the basic reserve requirements model, any allocation that can be supported by a multiple-reserves regime can also be supported by a single-bond reserve requirement. We go on to present extended versions of the model in which it is possible for a multiple-reserves regime to improve social welfare relative to any single-reserve (currency or bond) and/or deposit-tax regime. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive historical experience with multiple reserve requirementsDeveloping countries ; Finance, Public

On government credit programs

Credit rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the macroeconomic consequences of a typical government credit program in a small open economy. We show that such programs increase long-run production if the economy is in a development trap and that such programs often lead to endogenously arising aggregate volatility. On the other hand, they may eliminate certain indeterminacies created by endogenous credit market frictions.Banks and banking, Central ; Credit ; Productivity

Socially excessive bankruptcy costs and the benefits of interest rate ceilings on loans

The authors study the capital accumulation and welfare implications of ceilings on loan interest rates in a dynamic general equilibrium model. Binding ceilings on loan rates reduce the probability of bankruptcy. Lower bankruptcy rates result in lower bankruptcy and liquidation costs. The authors state conditions under which the resources freed by this cost-saving result increase the steady state capital stock, reduce steady state credit rationing, and raise the steady state welfare of all agents. The authors also argue that the conditions stated are likely to be satisfied in practice. Finally, their results hold even if initially there is capital over-accumulation.Loans ; Interest rates ; Bankruptcy