Richard K. Abrams

Issues in the Unification of Financial Sector Supervision

The paper considers the generic arguments for and against the creation of a unified regulatory agency, covering each of the main types of financial institutions (banks, insurers and securities firms). The strongest arguments for unification are the enhanced oversight of financial conglomerates and the economies of scale they can potentially deliver. However, there are also a number of potentially serious disadvantages to unification, especially the risk that the change process will be mismanaged and will result in a reduction in regulatory capacity. The issue requires careful deliberation and ultimately depends on a matrix of factors which vary in importance from country to country.

Monetary Policy Reaction Functions, Consistent Expectations, and the Burns Era

THIS PAPER ESTIMATES monetary policy reaction functions for the 197W77 period using monthly data. These estimates shed light on several questions regarding monetary policy during the Burns era. During this period the Federal Reserve expressed an increased interest in the behavior of monetary aggregates that led to the articulation of specific growth targets for these aggregates. However, a number of analysts have questioned the degree to which the Federal Reserve has systematically responded to deviations from such targets and its willingness to allow the variability of interest rates required for effective control of the money stock. Critics have also charged that during the Burns era the Federal Reserve failed to take syetematic and sustained action in response to price instability, and that attempts to curb inflation consisted of short periods of monetary stringency interspersed with periods of relative ease dictated by concerns over rising unemployment. In the international sphere, the move to a floating exchange rate for the dollar (March 1973) has raised the question of whether and to what extent Federal Reserve policy has responded to changes in the strength of the dollar. More broadly, critics have charged that the Federal Reserve has not responded in a balanced systematic way to stabilization targets, that instead it has responded erratically, attempting to achieve one goal and then another, some say in part due to

Introduction of a New National Currency: Policy, Institutional, and Technical Issues

In the last few years, a number of countries in the Former Soviet Union and Eastern Europe have become independent or regained their independence. Many have chosen to issue their own currencies and more are likely to do so. This paper draws on these and earlier experiences in order to summarize the main policy and institutional arrangements necessary for the introduction of a new currency and to discuss the key features of, and procedures for, the conversion. The paper is designed as a working document for those involved with currency reforms to help ensure that all the necessary steps are taken prior to, during, and immediately after the introduction of a new currency. The body of the paper is in four parts. First, the main macroeconomic and operational measures required to prepare for the orderly transition to the new currency are discussed, including decisions regarding the choice of exchange regime, the issuance of coupons and the costs and benefits of currency reforms. The next section covers issues relating to the production of the new currency bank notes. Next, the main features and terms of the conversion are discussed, as well as certain special issues such as speculative inflows and the treatment of banks` customers and old currency contracts. The last section covers the operation of the foreign exchange market and maintenance of exchange rate stability in the period immediately following the introduction of the new currency. The appendix covers the technical aspects of currency handling, accounting and management.

The Prudential Regulation and Management of Foreign Exchange Risk

This paper examines issues in the prudential management and regulation of foreign exchange risk. It begins with measurement issues, notably converting foreign currency items into domestic currency terms, and calculating foreign exchange positions. The focus then shifts to managing foreign exchange risks. Although the key to effective management lies in the bank’s reporting and internal control systems, regulators frequently seek to limit such risks directly. This usually involves limiting the overall open position in terms of bank capital or requiring that capital be set aside against such risks.

The variability of output-inflation tradeoffs

Abstract This paper examines the nature of the variability of the output-inflation tradeoff in the United States, Canada, and the United Kingdom. A stochastic coefficient regression specification is used to allow for the possibility that the tradeoff varies continuously over time. Where our estimates show evidence of variability in the terms of the output-inflation tradeoff we examine the extent to which such variability might be associated with period-by-period variation in the variance of inflation and aggregate demand along lines suggested by the new classical models of Robert Lucas.

The Design and Printing of Bank Notes; Considerations When Introducing a New Currency

Many newly independent or systemically transforming countries feel a pressing need to--or must--introduce their own national currency. Other countries simply wish to enhance the attractiveness, usefulness, durability, and/or security of their currencies. However, it is difficult to find consistent published information on the various aspects of this process. This paper attempts to ameliorate this problem by discussing the main issues in designing, producing, and printing a new currency, in order to help those charged with these tasks to proceed in an orderly and informed manner. Attention is also given to examining the options that may be available when this exercise must be undertaken on an emergency basis, with little or no warning.

Random coefficient regression and the long-run phillips curve for the U.S

Abstract This research suggests that a random coefficient regression model is well-suited for analyzing long-run versus short-run movements in wages and unemployment and is an improvement over some empirical techniques typically used.