In this issue, John T. Cuddington and Daniel Jerrett from the Colorado School of Mines examine whether metals prices are in a "super cycle" upswing driven by intensive economic growth in China, in particular. Using evidence from U.S. Social Security records, James E. Duggan, Robert Gillingham, and John S. Greenlees look at the empirical relationship between mortality and lifetime income. Pär Österholm and Jeromin Zettelmeyer analyze the effect of external conditions on growth in Latin America, while Junko Koeda presents a debt overhang model for low-income countries. The issue also includes a comprehensive index for Volume 55 (2008) by author, subject, and title.
This study analyzes the circumstances under which monetary policy can be conducted to improve the stability of both monetary growth and exchange rates. For this purpose, the paper develops a portfolio balance model and tests its implications using parameter estimates for the United States and the United Kingdom. The principal finding is that there is a limited set of conditions in which stability of monetary growth and stability of exchange rates are consistent policy objectives. The two intervention rules compared here are stylized versions of rules that are commonly employed by central banks in countries with well-developed financial markets: control of the growth of the monetary base and control of a short-term interest rate. It is shown that a general rule is that when the supply function for money is more variable than the demand function, then monetary stability and exchange rate stability are likely to be operationally consistent targets.
This chapter examines if there was a fundamental shift in the demand for international reserves of countries in 1973 because of the change in the international monetary system from one of generally fixed exchange rates to one of greater exchange rate flexibility. Particular attention was also paid to the question whether the relationship between reserves and certain important variables remained stable during the period 1973–1976. The results indicated that there was a shift in the demand for reserves by industrial countries in response to the move to floating, however, that this shift occurred toward the end of 1973 rather than at the beginning of the year. Obviously, there was some lag in the response of these countries to the change in the system; however, the behavior of non-oil developing countries did not appear to be affected by the change. This can perhaps be attributed to the fact that most of these countries continued to peg their currencies to another currency, and thus there was no real change in the exchange rate regime relevant to them.
This chapter focuses on the special drawing rights (SDR) scheme and the working of the gold exchange standard. This paper discusses the main influences involved in the relationship between SDRs and other reserve assets in a context of future reserve growth and suggests certain general conditions that may be necessary for SDRs to become the predominant source of reserve growth. The central question considered in this paper can be approached by asking in what ways the availability of SDRs as a supplement to other reserve growth should be expected to influence the basic forces operating under the gold exchange standard. The approach requiring the smallest element of international control would be to make the return on SDRs more attractive by comparison with that available on foreign exchange holdings, that is, to raise the SDR interest rate. A substantial increase in this rate would involve several separate considerations, which can be given only summary consideration here.
This paper focuses on problems of economic policy in terms of targets and instruments. Both the fixed-targets approach and the welfare-economics approach tend to favor a multiplication of policy instruments, the former so as to increase the number of targets that can be attained and the latter so as to permit all objectives to be more closely approximated. It is necessary that policies be centrally coordinated, and in each country, there is a limit to the number of policies that can be successfully coordinated by the political and administrative machine. For this reason, the costs of applying any given policy instrument will depend not only on the degree of its use but also on the number and nature of the instruments already in use. The existence of both kinds of cost, and particularly the latter, will set a limit on the number of policy instruments that can appropriately be brought into operation.
This paper explores trends in payment imbalances between 1952 and 1964. When desired reserves deviate appreciably from actual holdings, the authorities will sooner or later readjust their economic policies to reduce the magnitude of the deviation. On the assumption that the priorities given in individual countries to domestic and external objectives of economic policy and the attitudes toward the use of various policy instruments remain unchanged, desired reserves would tend to rise chiefly as a result of the increase in the size of expected payments fluctuations. International reserves of all 65 countries of the study rose over the period studied by 2.5 per cent a year. This low rate of increase reflects, however, the large reduction in US reserves. For all countries of the study excluding the United States, the reserves grew by 6.0 per cent a year. Leaving aside the loss of reserves by the United States, reserves of all countries appear, therefore, to have grown roughly in proportion to the value of trade and to the size of payments imbalances.
This paper outlines the extent of the IMF with its present policies and practices or with some modification of those policies and practices that is capable of dealing satisfactorily with certain problems of international liquidity. Liquidity that is conditional in any of these senses may be somewhat less prized by the country possessing it than would be an equivalent amount of unconditional liquidity; but the imposition of such conditions may be for the general advantage of the international community, and may make countries having surpluses in their balances of payments readier to provide, or to facilitate the provision of, additional liquidity. An increased supply of the type of liquidity of which the use is subject to policy conditions will have somewhat different results. Although it will probably increase the amount and the financing of external deficits, even this is not certain. The various types of liquidity are to some extent substitutes for each other.
This paper presents views of Professor Robert Triffin on international liquidity and the role of the IMF. The paper is an exposition of Triffin's diagnosis of present and prospective difficulties in the international financial area and of his prescriptions for dealing with these difficulties. It should be noted at the outset that Triffin has focused attention upon some major problems of international liquidity and international financial organization. His diagnosis of present and prospective difficulties, and his recommendations for meeting these difficulties, are acute and thought provoking. The expanded IMF is nowhere clearly directed to provide an adequate rate of growth of reserves, the prospective inadequacy of which is responsible for its being, nor is it told what an adequate rate of growth would be. The reader must conclude that Triffin proposes to expand the functions of the IMF and give it a full armory of central bank instruments, but that he is unwilling to provide it with an explicit statement of policy objective, let alone any specific guides to operations policy.
This paper explores the role of the IMF in promoting price stability. The IMF has one of its major objectives is to eliminate exchange restrictions that are due to balance of payments reasons. It carries on extensive annual consultations with its members toward that end; and, once the post-war transition is at an end, these members cannot impose exchange restrictions on current transactions without the approval of the Fund. This paper has consistently dealt with the IMF in its role of helping members to avoid inflation. Inflation is the subject of our meeting; and, in the post-war world as it has in fact developed, inflation, latent or realized, has been the perennial problem. Recessions have been short lived. Wherever a member is under pressure, either from external causes such as shrinkage in its foreign markets or from its own policies at home, the IMF stands ready to help it through its period of adjustment. Also with the notable strengthening of its resources that is now in the mill, it should prove to be an even more powerful bulwark against deflation. In such a world, those major countries that are maintaining the most stable and orderly price systems will set the standard to which others must repair.