Turkish Economic Review
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Will the pandemic bulge in money cause high inflation?
Full text linkAbstract. The monetary aggregate M2 increased from 19,670 billion in February 2021, or by 27.1%. Real M2 (M2 deflated by the CPI) increased similarly by 25.3%. This monetary acceleration, unprecedented outside of wartime, is apparent in a longer-run perspective. From the trough of the last business cycle in June 2009 through February 2020, annualized monthly growth rates for M2 averaged 5.9%. Over the interval March 2020 through June 2020, they averaged 65.6%. Although diminished, rapid M2 growth continued, averaging 12.9% from July 2020 through March 2021. Milton Friedman famously said that inflation is always and everywhere a monetary phenomenon. If he is right, should not this bulge in money lead to an undesirably high rate of inflation? Section 1 summarizes what the Fed must do to avoid an undesirable increase in inflation. Section 2 lays out the argument in terms of a need for procedures that ensure monetary control. Section 3 describes the Fed’s new monetary policy called “flexible-average-inflation targeting” (FAIT). It highlights how radical a departure FAIT is from the policy of the Great Moderation as a consequence of making the unemployment rate an independent goal rather than using its changes as an indicator variable for whether the economy is growing unsustainably fast or slow. Section 4 draws out the parallels between FAIT and the monetary policy followed in the 1970s. It makes the argument that unless the FOMC reinstates the policy of preemptive increases in the funds rate guided by the necessity of unwinding the 2020 bulge in M2, it will inaugurate an undesirably high period of inflation. Section 5 argues that in many ways with its dismissal of money FAIT resembles modern monetary theory (MMT) adapted to exploitation of the trade-offs promised by a Phillips curve. Section 6 contends that money remains at the heart of any serious conceptual framework for discussing the powers of a central bank. An appendix provides a more formal quantity theoretic framework using the New Keynesian model.Keywords. Pandemic bulge, Money cause, High inflation.JEL. C71, H56, D74, J51, J52, D39
A study on incentives and behaviors of each age group in transition countries: Case for Mongolia
Full text linkAbstract. This section is examined statistically whether the importance of the motives for act and the acceptances for lower wage and labor incentives is different between each age group. Above results shows young age group is “self-actualization” as important motive, old age group is “moral” as it. And old age group has higher labor incentives when it is suggested higher wage than the wage according to my ability, and when it is the lifetime employment system. Older age group think “moral” as important motive. They think that want to rewarded with the lifetime employment system and higher wage. It checked that action motives differed according to a generation.Moreover, Prospect Theory, the efficiency wage hypothesis, and the relative wage hypothesis were satisfied, and it was checked that the influences differ in his twenties as compared with other generations. Moreover, the rate of desiring lifelong employment system as a senior was large, and his twenties had many people who do not desire lifelong employment system strongly. This shows that consciousness change and a behavioral change may have arisen in that time in 1990 which shifted to the market economy bordering on people who were his teens, i.e., his present twenties, and his 30's. It is shown that there is no big difference the results of transition country, the results of advanced nations, especially the result of Japan.Keywords. The efficiency wage hypothesis; The relative wage hypothesis; Lifelong employment system; Mongolia.JEL. P20; P22; P25
A comprehensive monetary analysis of the U.S. during COVID-19
Full text linkAbstract. As a response to the economic crisis caused by the COVID-19 pandemic, the Federal Reserve implemented one of the most expansionary monetary policies in its history, renewing asset purchases under quantitative easing and supporting the economy using a wide range of other tools. In this paper, the authors provide an overview of the changes in the balance sheet of the Federal Reserve from February 26th, 2020 to April 7th, 2021 as well as an overview of the main actions taken by the Federal Reserve over the same period. The authors then analyze the impact of the activity of the Federal Reserve on the economy from the monetary perspective. In particular, the authors examine the expansion of the balance sheet of U.S. commercial banks, analyze credit counterparts of broad money, and conduct the golden growth rate analysis for broad money supply growth. The authors conclude the paper by analyzing changes in inflation expectations and Treasury yields.Keywords. Money supply; Credit; Money multipliers; Monetary policy.JEL. E50; E51; E52
A balance sheet analysis of the Banque de l’Afrique Occidentale
Full text linkAbstract. The Banque de l’Afrique Occidentale was a Paris-based bank that operated in French colonies in West Africa and Equatorial Africa. From 1901 to 1955 it was a monopoly note issuer and so had one characteristic of a central bank alongside its commercial banking functions. This paper briefly reviews its history during that period, which apparently has not previously been done in English; collects the main legal enactments related to the bank, never done before for the whole period of its existence as a note issuer; and analyzes its balance sheet, which has never been digitized before and is available in an accompanying spreadsheet workbook. Through the balance sheet, the paper examines the composition of the bank’s assets and liabilities and how they evolved over time. It concludes with some observations about the bank’s role in French colonial Africa.Keywords. Banking; Colonialism; French Equatorial Africa; French West Africa.JEL. E59, N17, N27
Reconciling the Nash and Kalai-Smorodinsky cooperative solutions: Generalized maximands of CES form
Full text linkAbstract. This paper suggests variations to the baseline Nash cooperative solution that take into account the Kalai-Smorodinsky critique. One the one hand, a CES form of the maximand is proven to accommodate both the generalized two-person Nash and the Kalai-Smorodinsky - as other proportional - solutions as special cases. As an alternative, a Stone-Geary formulation is forwarded, weighing both the distances to the threat and to the ideal point, along with the corresponding CES generalization. Interpretations of the implied equilibrium solutions – generalizable to n-person cooperative games – are provided, arising as equations balancing geometric averages of measures of attitude towards (large) risk(s) of the players.Keywords. Two-person cooperative games, Cooperative games maximands, Opportunism, Pessimism.JEL. C71, H56, D74, J51, J52, D39
A study on consumption behaviors of each generation in Mongolia in transition countries: Behavioral economics approach about money illusion and consumption smoothing
Full text linkAbstract. In this research, the money illusion not only has arisen, but it was checked that a time preference rate is not constant. If it is consumed as the younger age group and a rate of time preference changes with generations, it will be thought that 1-dollar value changes with generations. That is, even if the loss of the same amount produces the younger age group and an old age layer, if it is the younger age group, a loss may also feel the loss by a money illusion small. That is, the time preference rate which affects consumption smoothing also affects a money illusion. The difference for every generation of a time preference rate becomes larger than the influence which only consumption smoothing has on people’s economical action. It has a possibility of bringing a big difference to the economical action for every generation. If the preference of a between at the different time changes with generations, the consumer behaviors at a certain time not only differ for every generation, but it will be thought that the reactions to a loss also differ.Keywords. Money illusion; Consumption smoothing; Mongolia.JEL. P20; P22; P24
The UK prudential regulation authority’s valuation principles for equity release
Full text linkIn recent years the UK Prudential Regulation Authority has been involved in an ongoing discussion with equity release firms over the principles to be used in the valuation of equity release mortgages. The UK regulator proposed a set of such principles in its Supervisory Statement SS 3/17. These principles mark a major step forward in equity release valuation methodology. They are based on elementary pricing economics, their validity is easily established and they are easy to apply. They can be used to provide a cross-check on any proposed set of valuations and so test the reliability of the underlying valuation model or its calibration.Keywords. Actuarial science; Black ’76 model; Equity release mortgage; No negative equity guarantee; Prudential regulation.JEL. G20; G30
