David Friday

J. H. Riddle

Walter Lichtenstein

Winfield W. Riefier, Chairman

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the
National Bureau of Economic Research
Volume Title: A Program of Financial Research Vol 2: Inventory
of Current Research on Financial Problems
Volume Author/Editor: Exploratory Committee on Financial
Research
Volume Publisher: UMI
Volume ISBN: 0-870-14459-6
Volume URL: http://www.nber.org/books/expl37-2
Publication Date: 1937
Chapter Title: Currency and Bank Deposits
Chapter Author: Winfield W. Riefier, Chairman, David Friday,
Walter Lichtenstein, J. H. Riddle
Chapter URL: http://www.nber.org/chapters/c0801
Chapter pages in book: (p. 103 - 115)A. CURRENCY AND BANK DEPOSiTS
I. BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, DIVISION OF RESEARCH AND STATISTICS
Factors affecting changes in deposits
Member bank, Federal Reserve bank, and Treasury
statements are analyzed and integrated for the purpose
of measuring factors affecting changes in the volume
of bank deposits, such as gold movements, currency in
circulation, Treasury balances, and loans and invest-
ments of banks.
This is a continuing Research Division project and the
results appear in current analyses in the publications of
the Board. A description of the method with a compila-
tion of data will be published when they have been im-
proved.
See also hA7
2. BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, DIVISION OF RESEARCH AND STATISTICS
interdistrict movement of funds
Information obtained from member bank, Federal Re-
serve bank, and Treasury statements and from records
of the Gold Settlement Fund and of currency in circu-
lation are analyzed currently for the purpose of segre-
103104 Part II
gating factors responsible for or reflecting the inter-
regional flow of funds in the United States. While no
data are available concerning some of the more im-
portant factors, such as merchandise movements, travel,
and investment purchases, the analysis throws some light
on the nature of interregional movements of funds.
Changes in bank reserves resulting from the interdistrict
flow of funds is one aspect of the study; changes in bank
deposits another.
This is a continuing study of current developments
and its results appear from time to time in the publications
of the Board and also in those of some of the Federal
Reserve banks.
3. BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, DIVISION OF RESEARCH AND STATISTICS
Measurement of the volume of deposits of all banks
Statistics compiled by State and Federal banking au-
thorities are being studied for the purpose of obtaining
comprehensive and comparable series for a long period
of demand deposits, adjusted for interbank balances and
items in process of collection, and of time deposits.
In preparation as a special project of the Division of
Research and Statistics. \'Vhen available, results will be
published in the Federal Reserve Bulletin.
See also hA7
4. BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, DIVISION OF RESEARCH AND STATISTICS
Nature and causes of changes in currency in circulation
This study analyzes the statistics of money in circulation
by denominations and in terms of seasonal, cyclical, andQuantity and Behavior of Credit 105
otherfluctuations. Special reports from Reserve and
member banks and other special inquiries concerning the
movements of currency in circulation may be used from
time to time.
This is a continuing study of current developments as.
well as of past movements, and its results will appear
from time to time in publications of the Board.
See also 11A6
5. BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM, DIVISION OF RESEARCH AND STATISTICS
Velocity of deposits at reporting member banks
Statistics obtained weekly since September 1934 of
debits to various types of deposit account at reporting
member banks in leading cities are being studied for the
purpose of determining the nature and significance of
fluctuations in velocity of deposits. Comparisons are be-
ing made by size .of bank, size of city, economic nature
of region in which bank is located, and other charac-
teristics. One aim is to improve the current statistics of
bank debits and relate them more specifically to deposits.
In preparation as a special study of the Division of
Research and Statistics, the results are expected to be
published in the Federal Reserve Bulletin.
See also hA9 and ig; VA7
6. U. S. DEPARTMENT OF COMMERCE, BUREAU OF FOREIGN
AND DOMESTIC COMMERCE, FINANCE DIVISION
International currency movements, 1919—1936
Originallyundertaken for the purpose of obtaining bal-
ance-of-payments data, this inquiry will reveal also the
monetary significance of international currency move-io6 Part II
ments during the post-War period. The study deals with
the quantitative importance of currency movements in
the balance of payments of the United States, their rela-
tionship to other balance-of-payments items, and sea-
sOnal influences affecting their volume.
In preparation under the direction of August Maifry
as a Finance Division project. Although completion of
the study is expected in 1937, no definite arrangements
for publication have been made.
See also IA4
7.FEDERALDEPOSIT INSURANCE CORPORATION, DIVISION OF
RESEARCH AND STATISTICS
Quantitative aspects of insured bank deposits
Under this project, the reports from more than 14,000
insured banks for the last two years and of 3,400 offices
of insured multiple office banks for May i3, 1936, show-
ing the number and classification of accounts of less than
and more than $,ooo, are being intensively analyzed in
order to provide more accurate statistical information
on insured bank deposits. The important items to which
investigation is devoted include: (i) insurance coverage
in various states by class of bank, type of account, and
class of depositor;(z)the shifting of deposits from
individual communities by class of bank, type of deposit
and class of depositor; ()changesin total and insured
deposits resulting from seasonal factors, long time trends,
and special influences; (.)changesin deposits of sus-
pended banks prior to suspension; ()concentrationof
risk to the Corporation in banks of various sizes and
types; (6) the amount of protection afforded depositors
by deposit insurance in suspended banks.
In preparation under the direction of Florence HelmQuantity and Behavior of Credit 107
asa Research Division project. Some of the results of the
project were published by the Corporation in a pamphlet
entitled 'Insurance of Deposits' (November 30, 1936);
some of the results will be published in the Annual Report
of the Corporation for the year ending December 31,
1936; and some will be made available in subsequent pub-
lications and articles.
See also IIAi and 3
8.•U. S. TREASURY, DIVISION OF RESEARCH AND STATISTICS
Statistics of capital movements between the
United States and foreign countries
Statistics of international capital transactions between the
United States and foreign countries, and related foreign
exchange market data, are collected by the Treasury
Department, through the Federal Reserve banks, from
persons engaged in such transactions having their prin-
cipal place of business in the United States. Data are re-
ported on a weekly basis by all banks, bankers, brokers
and dealers whose aggregate transactions exceed $5,000
in any seven-day reporting period. Bulletins presenting
these statistics are now being issued every three months,
divided into the following sections: Section I, containing
a general summary of reported capital movement and
foreign exchange market data; Sections II—IV, covering
foreign assets and liabilities reported by banking institu-
tions and securities dealers; Sections V—Vu, covering Se-
'curity transactions between the United States and foreign
countries reported by banking institutions and securities
dealers; Sections VIII—X, embracing data of foreign cx-
change dealings, 'spot' and 'forward' as reported by
banks and bankers in the United States. The last section,io8 Part II
Section XI, includes a graphic analysis of significant
summary data tabulated under Section 1.
These statistics are available for all weeks since the
beginning of 1935.Thefirst published bulletin, issued in
November 1936, covered the period, January iç
throughSeptember 1936; the second, issued in April
1937,coveredthe last three months of 1936 and sum-
marized the data for the entire period, January 1935
throughDecember 1936. Additional reports are to be
issued by the Treasury Department every three months.
They are prepared under the direction of George C.
Haas, Director of the Division of Research and Statistics
of the Treasury Department.
See also IAi
9. BROOKLYN COLLEGE, BUREAU OF ECONOMIC RESEARCH
Deposit activity in mutual savings banks
Savings deposits and withdrawals of mutual savings banks
from 1900 to 1935 in Connecticut, Massachusetts, New
Jersey and New York, as reported by state banking
supervisors, are being intensively analyzed. It is expected
that the investigation will throw new light upon the
behavior of savings deposits in industrial states in various
phases of the business cycle, and afford a more adequate
quantitative basis for evaluating savers' habits and the
extent to which consumer balances of individuals with
low incomes are deposited in savings accounts. Calcula-
tions of the turnover of savings deposits of mutual
savings banks are being made by years for each state,
although the inclusion of Christmas Club data in the
reported figures for New Jersey and New York render
turnover estimates for these states more difficult and less
reliable than those for Connecticut and Massachusetts.Quantity and Behavior of Credit 109
In preparation under the direction of V. H. Steiner as
a Bureau project, it is to be completed in spring 1937.
See also hA5 and i; VA7
10. NATIONAL BUREAU OF ECONOMIC RESEARCH
Analysis of cyclical behavior (Business Cycles, Volume
it, Part 2)
Inconnection with the National Bureau's investigation
of business cycles, analysis is being made of the cyclical
behavior of such credit and financial data as money in
circulation, bank deposits, security dealings, savings and
investment, business profits and losses, the disbursement
of incomes to individuals and related series. The cyclical
patterns of these series are being carefully compared and
related in turn to other series reflective of the productive
and distributive processes.
In preparadon under the direction of Wesley C.
Mitchell, with the assistance of Arthur F. Burns. Publica-
tion plans for an investigation of the scope of the Na-
tionalBureau'sbusiness• cycle project must remain
somewhat indefinite, but it is expected that this part of
the study will be ready for publication by the end of
1938.
See also hG4
I I. OHIO STATE UNIVERSITY, BUREAU OF BUSINESS
RESEARCH
Member bank borrowings and money rates
The role of the rediscount rate in the money market and
the factors influencing the volume of member bank bor-
rowings is the subject of this study. Investigation is be-
ing directed to the relationships during 1922—36 amongiio Part ii
member bank borrowing, open market money rates and
rediscount rates for each of the twelve Federal Reserve
districts. In addition shifts in member bank portfolios,
so far as they may be related to changes in the abqve
items, are being traced.
In preparation by Robert C. Turner under the direc-
tion of Charles A. Dice, Department of Business Or-
ganization.
I 2. AMERICAN BANKERS ASSOCIATION, BANK MANAGEMENT
COMMISSION
Interest rates paid on deposits
To determine tendencies in interest rates throughout the
country on various classes of deposits, a questionnaire
survey covering 586 clearing houses and about 6,oo
banks has been made. Summary data for 1933—36 cover
the number of clearing houses paying interest at differ-
ent rates on the several classes of interest-bearing de-
posits and also changes in interest rates paid by banks on
deposits since 1935bystates. Detailed data from individ-
ual clearing houses are classified by those reporting that
member banks paid: (a) a single, uniform rate of inter-
est on each class of deposits; (b) a single rate for each
deposit class but that different rates were paid by dif-
ferent banks; (c) a scale of rates based •on the amount
of deposit or the length of time the deposit is left with
the bank. Other data compare interest rates, 1935—36,
for clearing houses that govern maximum interest rates
by rule and those that apply no rules as to interest rates.
This survey has been published by the Bank Manage-
ment Commission, American Bankers Association.1
1BulletinNo. 71, December 1936.Quantity and Behavior of Credit 'ii
13. MOODY'S INVESTORS SERVICE
Banking conditions and interest rates
This investigation is directed to the statistical relation-
ships in the past between changes in banking. data and
in interest rates, short and long term. National bank call
reports are being analyzed throughout the life of the sys-
tem in order to compile long period series that reflect
changes in banking conditions. Changes in loan and invest-
ment items and in deposit items are to be related to changes
in money and long term interest rates. In this way, it is
expected to throw new historical light on the influence
on interest rates of variations in banking conditions.
Time lags, which may be involved before the impact of
sharp changes in banking data are reflected in the long
term capital market, will be subject to special study.
In preparation under the direction of Donald B. Woo d-
ward as a firm project, it will be made available, at least
in summary form, in the regular publications of Moody's
Investors Service.
See also ID4; IIAi6; IIB(d)5; IlCi and 4
14.BROWN,W. A., JR., [BROWN UNIVERSITY]
SMIT, C. J., SILVERMAN, A. G.
The international gold standard reexamined
A wealth of quantitative materials has been assembled
in conjunction with this comprehensive study. For the
pre-War period, they extend as far back as reliable
sources cover:(a)asset and deposit data for leading
central banks, English joint stock banks and New York
City banks; (b) discount and open market interest rates
of leading international markets; (c) the London priceiiz Part 1!
of gold bullion; (d) exchange rates between principal
centers and between London and the chief debtor coun-
tries; (e) gold movements; (f) foreign capital issues on
the London market.
Bank of England data for the pre-War period have
been carried back on a weekly and monthly basis to
1845, and are assembled on a semi-annual basis for the
period 1778—1843. Those of the Bank of France and
the Reichsbank, monthly, begin with 1882. Fairly com-
plete series covering other items have been assembled f9r
the period 1882—1911.
Theseand related data for the post.-1Nar period have
been intensively analyzed in terms of their seasonal and
cyclical movements, using methods developed by the
National Bureau of Economic Research, with a view to
international comparisons. In addition, special analysis
has been made of movements of foreign exchange, inter-
est differentials between markets and gold movements
in order to appraise the significance of international
arbitrage and short term capital movements. Interrela-
tionships among international financial data, such as
exchange rates, interest rates, and capital movements,
and trade currents, industrial production of important
countries, and domestic and international prices, are also
covered in the statistical investigation.
The statistical analysis has been prepared largely under
the direction 'of A. G. Silverman, and is to be published
with the main study, tentatively scheduled for comple-
tion by late fall 1937.
For the main description of this study, see IA3Quantity and Behavior of Credit ii 3
I 5. MARGET, A. W. [UNIvERsITY OF MINNESOTA]
The velocity of circulation of money
In connection with a theoretical study of the velocity of
circulation of money, the results of statistical investiga-
tions of circulation velocities are being surveyed to date,
and their significance evaluated critically. It is also planned
to present a program of further statistical investigation
in the light of the theoretical analysis of velocity con-
cepts developed in the study.
For the main description of this project, see VA7;
see also hAg and 9
i6. SKINNER, R. DANA [PELL, KIP AND SKINNER,
NEW YORK, N.
Monetary and banking factors in relation to
interest rates and prices
This project seeks to develop measures of monetary aid
banking phenomena that may logically be associated
with cyclical and other movements of bond prices, short
term interest rates, common stock prices and the general
price level. Among the measures devised to compare
with bond prices are such ratios as total member bank
deposits to total loans and government securities held by
member banks, ançl member bank reserve deposits to
total Federal Reserve credit. A second group of meas-
ures, sensitive to changes in short term interest rates, are
the ratios of total loans to total bank deposits of mem-
ber banks and Federal Reserve bills held to Federal Re-
serve deposits plus notes. A third group of measures that
together reflect conditions underlying movements in
common stock prices include:(a) bank debits to all114 Part II
other loans 'of member banks; (b) bank debits to the
general price level;(c)'net' •deposits(total deposits
minus loans) of member banks to total bank loans; (d)
circulating currency to the monetary gold stock. Meas-
ures associated with the movement of the general price
level, finally, include the ratios of bank debits (outside
New York) to total member bank loans, and total de-
posits of all banks to monetary gold stock.
Initial publication of these measures is to be made in a
volume entitled Seven Kinds of Inflation, to be released
in the late spring 1937.1
Seealso ID4; liAr3; IIB(d)5; 11Cr and
1McGraw-Hill,New York, '937.
17.TORGERSON,H. W. {NORTHWESTERN UNIVERSITY]
The behavior of time deposits of commercial banks 1
Thespecial banking problems that the experience of the
recent depression shows may arise from the combina-
tion in commercial banks of a saving or time deposit
business with a demand or checking deposit business are
the subject of this study. As a background against which
these problems may be considered, analysis is first being
made of: (a) the volume and growth of time deposits in
the United States up to 1929; (b) the investment policies
that have been followed by various institutions receiving
time deposits, and the various factors that apparently
have influenced investment policies; (c) the features of
time deposit contracts that have commonly been used
by different classes of banks and other types of savings
institution, and legislative requirements governing time
deposit contracts. The second main part of the study deals
with the behavior of time deposits in 1929—3 3, covering
in summary the changes in time deposits for all corn-Quantity and Behavior of Credit i
mercial banks in the United States and in detail the ex-
perience of Chicago banks. The experience of other
types of financial institution and of commercial banks
in states with special contracts is also being traced. A
final section is devoted to suggested remedies for prob-
lems growing out of a merged time and demand deposit
business.
Completion of this project is not expected before the
middle of 1938.
1Ph.D.thesis, Northwestern University.

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