An investigation of cash management practices and their effects on the demand for money

The observed shift in statistical demand-for-money relationships during the mid-1970s was once thought to reflect an unexplainable change in behavior. More recently, economists have recognized that the conventional regressions inadequately represented the demand for money. Specifically, the standard models overpredicted money demand during the 1970s since they failed to capture the effects of sophisticated cash management techniques. In “An Investigation of Cash Management Practices and Their Effects on the Demand for Money,” Michael Dotsey examines ways of augmenting the conventional models to overcome this problem. By looking at the causes of changes in cash management practices, Dotsey finds four variables related to cash management, which he tests for ability to explain the mid-1970s shift in a standard regression explaining the demand for money. Each of the proxies reduces the instability of the equation. Indeed, one such proxy, the number of electronic funds transfers over the Federal Reserve’s wire system, captures the entire shift in the conventional model in the 1970s.Money

Japanese monetary policy, a comparative analysis

An abstract for this article is not availableMonetary policy

Monetary policy and operating procedures in New Zealand

The Reserve Bank of New Zealand operates in a highly deregulated financial environment which lacks any interest rate regulation or reserve requirements. Yet the Reserve Bank has been able to implement effective monetary policy through a quantity-based procedure. This article analyzes the operating procedures of the Reserve Bank of New Zealand and the relatively small financial costs imposed by these procedures.Monetary policy ; Banks and banking, Central

The effects of cash management practices on the demand for demand deposits

During the mid-1970s standard regressions explaining the demand for money underwent a well documented shift. This shift was largely attributed to the adoption of a more sophisticated methods of cash management practices by firms. ; A version of this work was published in the Federal Reserve Bank of Richmond's Economic Review, 1984, Vol. 70, No. 5Money

Investing in equities: can it help social security?

Social security ; Investments

Japanese monetary policy, a comparative analysis

An abstract for this article is not availableMonetary policy

Controversy over the federal budget deficit : a theoretical perspective

Recently, the Office of Management and Budget projected that the fiscal 1985 federal budget deficit would exceed $200 billion and that out-year reductions would be gradual at best. These prospects have engendered a debate concerning the economic effects of government deficits and the attendant high level of government borrowing. In this article, Michael Dotsey investigates this topic theoretically using alternative macroeconomic models. Dotsey first examines a standard Keynesian model and finds that its prediction of a depressing future effect of government borrowing stems from its unrealistic view of the determinants of consumption. He then discusses the Ricardian equivalence idea that the economic effects are the same whether the government finances its expenditures by taxation or by borrowing. His discussion includes an evaluation of several objections that have been raised against Ricardian equivalence. Dotsey also suggests that one must estimate the optimal size of the government deficit as a necessary first step in evaluating current deficit levels.Budget deficits

The importance of systematic monetary policy for economic activity

Monetary policy ; Interest rates

An examination of implicit interest rates on demand deposits

An abstract for this article is not available.Interest rates

An examination of international trade data in the 1980s

This article examines three competing hypotheses and their ability to explain events in international financial markets during the 1980s. The rival hypotheses view the trade deficit as caused alternatively by large U.S. budget deficits, by tight U.S. monetary policy, or by real shocks to investment resulting from changes in the U.S. tax code. While no entirely consistent explanation emerges, the real-shock hypothesis seems to match the data best.International trade ; Foreign exchange