Domestic Liquidity Research Articles

INTERNATIONAL CURRENCY SUBSTITUTION AND SEIGNIORAGE IN A SIMPLE MODEL OF MONEY

This paper investigates the economic signcance of currency substitution using a small, open economy model of money. The main result is that in a low‐inflation economy the seigniorage‐maximizing inflation rate can be quite large despite a very high elasticity of currency substitution when the share of foreign real balances in producing domestic liquidity services is small (as some recent econometric estimates indicate in the case of Canada). This suggests that currency substitution is likely to be of second‐order importance to policymakers in a low‐inflation economy where foreign real balances provide economically small domestic liquidity services.

Recent capital flows to Asia Pacific countries: Trade‐offs and dilemmas

Abstract The 1990s has seen a resumption of voluntary private capital flows to developing countries, notably to Latin America and to the Asia Pacific. Their sustainability was called into question by the Mexican crisis and exchange rate collapse of 1994–5. This paper suggests that sustainability may, somewhat paradoxically, be related to restrainability, in the sense that, with a fixed or managed exchange rate, short‐term surges in both inflows and outflows must be regulated, taxed or at least sterilized, if they are not to create destabilizing surges in domestic liquidity. After reviewing the composition of recent capital inflows to various Asia Pacific countries, the paper reviews their sterilization dilemmas. It concludes that, whereas the short‐term need to restrain inflows has diminished, long‐term prospects for sustained inflows are good. Relatedly, Asia Pacific countries might be well advised to allow more short‐term volatility of their exchange rates, within the long‐term context of their present managed regimes, in order to discourage surges of capital flows that would otherwise have to be sterilized and possibly regulated.

The Use of Foreign Exchange Swaps by Central Banks

The paper discusses the use of foreign exchange swaps by central banks. Such use has aimed at affecting domestic liquidity, managing foreign exchange reserves, and stimulating domestic financial markets. The discussion is illustrated using selected countries. The paper cautions about the use of foreign exchange swaps to defend a particular exchange rate at a time when foreign exchange reserves are under pressure. It notes, finally, that use of foreign exchange swaps by central banks has been losing importance.

The Use of Foreign Exchange Swaps by Central Banks: A Survey

The paper discussed the use of foreign exchange swaps by central banks. Such use has aimed at affecting domestic liquidity, managing foreign exchange reserves, and stimulating domestic financial markets. It discusses these different uses and present evidence for a selected group of countries. The paper cautions about the use of foreign exchange swaps to defend a particular exchange rate at a time when foreign exchange reserves are under pressure. It notes, finally, that use of foreign exchange swaps by central banks has been losing importance.

The Use of Foreign Exchange Swaps by Central Banks: A Survey

The paper discussed the use of foreign exchange swaps by central banks. Such use has aimed at affecting domestic liquidity, managing foreign exchange reserves, and stimulating domestic financial markets. It discusses these different uses and present evidence for a selected group of countries. The paper cautions about the use of foreign exchange swaps to defend a particular exchange rate at a time when foreign exchange reserves are under pressure. It notes, finally, that use of foreign exchange swaps by central banks has been losing importance.

Influences of international factors on US Prices: a theoretical and empirical analysis

Employing an open-economy framework, the present article argues that international forces would have important implications for US price behaviour even prior to the 1970s when the US international sector was relatively small. A distributed-lag price equation that declineates between domestic and foreign impulses is derived. The model is estimated using quarterly data over the 1959–1979 period when international reserves as a measure of world liquidty were subject to relatively little noise. The study finds that growths of US import prices and exports positively affected US price inflation over the entire sample period but not during pre- 1971 period. On the other hand, while world liquidity, measured by worldwide international reserves, did not appear to influence US price for the whole period examined, its effect is found to be positive over the fixed-exchange-rate era. The mean lag of this foreign impulse is estimated at 6 quarters, 2 quarters larger than that of domestic liquidity as measured by M1. Th...

Analysis of glycosides of the dammarane series in natural and synthetic methods by high-performance liquid chromatography

The possibility has been shown of using the Milikhrom domestic microcolumn liquid chromatograph for the quantitative determination of glycosides of the dammarane series in commercial forms of ginseng and synthetic mixtures. To calculate the amounts of individual ginsenosides by the internal-standard method it is proposed to use dammar-24-ene-3α,12β,17α,20(S)-tetraol 3,20-di-O-β-D-glucopyranoside as the internal standard.

Profitability of U.S. NGL Extraction

Summary Natural gas liquids (NGL's) are a significant source of hydrocarbon production in the U.S. NGL's are extracted from produced natural gas, and their volume depends on the levels of oil and gas production. For NGL extraction to be economically viable, however, the sales price of the NGL product must exceed the cost of extraction. This paper reviews factors that affect NGL extraction economics and addresses the effects of petrochemical demand, imports of liquefied petroleum gas (LPG), and vapor-pressure limitations on motor gasoline. Introduction and History The processing business is a significant part of the U.S. hydrocarbon industry. NGL production from gas plants in 1987 was about 1.6x106 B/D [2.54X10.3M3/d], representing more than 15 % of domestic liquid production (crude oil, condensate, and NGL). The market value of NGL products was more than $6 billion in 1987 alone. The gas-processing industry has a long and storied history. The first gas-processing plant was constructed in 1903 in Sistersville, WV, to remove condensable hydrocarbons from a gas stream upstream of a 4-mile [6. 4km) pipeline. The plant's objective was to prevent "drips" from condensing in the line. The cooling medium was water and the heat exchanger an old boiler. The natural gasoline product was transported in wooden barrels to a nearby refinery for blending. Most of the early plants were compression-type. Casinghead gas was collected from oil wells and compressed and cooled. The condensed liquid was weathered, usually in an open tank, and sold as natural gasoline. Early problems included strong competition from refiners who manufactured a more stable gasoline product, market acceptance, and safety. The first absorption plant, built in 1913, used horizontal tanks as the absorber. Charcoal adsorption and refrigeration plants were also developed around this time. By 1920, natural gasoline production from gasprocessing plants was nearly 20,000 B/D [3x103 M3/d]. The gas-processing industry became increasingly important over the next 20 years. Specifications were developed for natural gasoline product. Installation of high-pressure gas transmission lines necessitated processing nonassociated gas. Ambient-temperature lean-oil plants became the most popular type of processing facility. Product stabilization and fractionation were developed and improved. By 1940, NGL production reached 150,000 B/D [23.8 × 103 m 3 /d]. During World War 11, several cycling plants were constructed to recover condensate from retrograde-gas-condensate reserhigh-quality feedstock for gasoline production needed for the war effort. After the war, the demand for natural gas increased dramatically. Gas production increased six-fold between 1940 and 1960. Markets for LPG-propanes and butaneswere developed. Deeper extraction levels were required to satisfy this new demand, and refrigerated lean-oil absorption plants became the industry standard. By 1960, NGL production in the U.S. had risen to nearly 900,000 B/D [143X103 M3/ dl-approximately 60% LPG and 40% natural gasoline. In the early 1960's, the country's rapidly growing demand for plastic products spawned the petrochemical era. The preferred feedstock for these early petrochemical plants was ethade. Existing plants were converted to ethane recovery, and new, lowtemperature, refrigerated lean-oil plants were constructed to extract ethane. Lean-oil plants operating at -40deg.F [-40deg. Cl were able to achieve ethane recovery levels of 50% and better. The 1970's brought the turboexpander process, which could achieve ethane recovery levels in excess of 80% at capital and operating costs considerably lower than the refrigerated lean-oil process. Turboexpander plants now dominate the industry. More than half of the 800 plants installed in the U.S. today use the turboexpander process. Current Issues The gas-processing industry faces many challenges today. Excess Capacity. Declining natural gas production has dramatically reduced gas-plant throughput. Estimated utilization (throughput/capacity) in 1986 was 55%. This adversely affects processing economics in two ways. First, fixed costs, such as operating and maintenance expenses, are allocated to fewer gallons of production, thus increasing unit processing costs. Second, third-party processors must compete more aggressively for gas, offering more favorable terms to the producers. P. 922^

Monnaie et finance en Allemagne Fédérale

Currency and Finance in West Germany With a new interest rate policy now taking place in France, a look at West Germany's experience can be interesting, since this kind of regulation has been in use there for decades. The german financial sector is led by big banks which deal on money markets as well as on credit market and within big compagnies, so that german monetary policy can work by acting on bank liquidity only. In using quantitative instruments the Bundesbank has complete control over interest rates, and is able to separate interest rates evolution from monetary policy when necessary. However, as can be seen in the last few years, there are some difficulties, for this kind of policy in handling domestic liquidity when strong capital movements happen.

Liquidity, credit creation and international banking: An econometric investigation

For the past 18 months the Treasury and Civil Service Select Committee of the British House of Commons has been taking evidence from expert witnesses and interested parties concerning International Monetary Arrangements. An important concern of their work has been the inter-relationship between current problems in international bank lending and macroeconomic policies. Our presentation will review the opinions expressed in the Committee's Reports in the light of the econometric evidence we have obtained in our formal paper prepared for this conference. Basically we feel that the current problems facing the international banking system are in no small part due to the increased systematic risk introduced into the system by the macroeconomic policies followed by the industrial countries over the past decade, rather than simply to reckless and imprudent bank management. Further, our econometric evidence suggests that Eurocurrency flows may have a substantial effect on domestic liquidity, in contrast to the accepted view that such flows are unimportant. An underlying major theme of our paper concerns the importance of using modern econometric methods to shed light on current important problems of international financial interdependence.

I movimenti di capitali bancari con l'estero e la politica monetaria italiana. (International movements of bank funds and monetary policy in Italy)

Since the lira was declared convertible in December 1958, the Italian monetary authorities have been making increasing use of changes in the Italian banks’ foreign position as a policy instrument. The present article analyses in detail how the Italian monetary authorities have used their powers to control banks’ foreign exchange borrowing and lending as a means to restrict or expand domestic liquidity. In general, the flows of bank money to and from abroad have been regulated by the central bank as to make the process of balance-of-payments adjustment more flexible, and hence to attenuate the effects of the liquidity gains and losses due to the surpluses and deficits generated by autonomous operations with abroad. The analysis confirms that when bank credits are used without appropriate measures designed to re-establish basic equilibrium in the balance of payments, they may give rise to speculative capital movements. The author argues that while Italian monetary policy made an effective impact on the course of the economic cycle, it could not control the cycle itself. JEL: E52, F31, F32