Money Prices Research Articles

General economic equilibrium with financial markets and retainability

A theory of economic equilibrium for incomplete financial markets in general real assets is developed in a new formulation with currency-denominated prices. The “goods” are not only commodities, and they can influence utility through retention as an alternative to consumption. Perfect foresight is relinquished in a rolling horizon approach to markets which lets agents pursue long-term interests without being sure of future prices. The framework is that of an economy operating in a fiat currency that agents find attractive to retain, in balance with other needs. The attractiveness comes from Keynesian considerations about uncertainty which until now have not been brought in. The existence of equilibrium is established directly—not just generically—and moreover under weaker assumptions on endowments than before, except that utility functions are taken to be concave. Agents do not need to start out with, or end up with, positive amounts of everything. With a single currency denominating the units of account in all states, price indeterminacy is avoided and all contracts issued in the financial markets can be interpreted as “real contracts.” Derivative instruments and collateralized contracts based on money prices are thereby encompassed for the first time. Transaction costs on sales of contracts, generated endogenously, lead to bid–ask spreads and in particular to a gap between interest rates for lending and borrowing money.

Why Gold Has a Real Return—and How to Value It

Gold is shown to obtain a real return in terms of global purchasing power per troy ounce. Whereas fiat money obtains a negative return equal to the inflation rate (loss of purchasing power), which is directly related to the excess of money stock growth to real GDP, gold obtains a real yield due to inherent above-ground stock growth below the rate of world real GDP growth. This effect has historically been masked by measuring the price of gold in currencies that have appreciated and not in global purchasing power. A novel solution to the gold standard Gibson’s paradox proves that gold is valued according to its yield. Because gold obtains a real yield, its fiat money price is also a function of real interest rates, expected fiat inflation rate, and locally, the real global purchasing power of the domestic exchange rate.

Analysis of Customer Satisfaction: Bank of Bhutan Limited

Druk Holding and Investments (DHI) that holds and manages twenty State Owned Enterprises (SOEs) in Bhutan assesses customer satisfaction annually for five service oriented companies through the independent survey to measure customer service related performances of the companies. This paper uses the data collected by the consulting team in 2013 that covers twenty districts of Bhutan. The team collected the data using structured questionnaire covering different aspects of customer satisfaction. Data was collected from 2123 respondents representing various demographic characters. Besides looking into the descriptive aspects of the statistics, this paper analyses the relational between customer satisfaction level and gender, income groups and educational levels so that each group can be targeted with different strategies. Findings suggest that all types of customers consider service reliability and value for money (price) as the most important factors that attributes to their satisfaction. It was found out that generally females are more satisfied than male respondents at the same level of service quality indicators. Study further establishes the inverse relationships between customer satisfaction level and income and with educational levels of the customers.

Do Capital Flows Matter to Stock and House Prices? Evidence from China

ABSTRACTThis article analyzes the impacts of foreign direct investment (FDI) and short-term capital flows, otherwise known as hot money, on stock and house prices in China. Empirical results, estimated using the local projections approach, reveal that a positive hot money net inflow shock significantly increases stock and house prices and the impacts persist for up to 1–2 months, while a positive FDI net inflow shock contributes significantly to lagged house price appreciation but has no effect on stock prices. This study also identifies negative pass-through effects of FDI net inflows on hot money net inflows and positive pass-through effects of stock prices on house prices.

The Risks of Commercial Banks on Interest Rate Marketization

The interest rate of market reform and deepening of our country commercial bank stability and sustainable development of the important and far-reaching impact. Is the core of modern economy and financial interest rates, as the price of money, interest rate plays an important role in the allocation of resources. As the interest rate market advance, domestic commercial bank's overall risk level is lower than the optimal risk. In this paper, in combination with the practical situation of the market, on how the commercial Banks under the background of market-oriented interest rate risk prevention, risk aversion caused by excessive systemic risks are expounded.

Money Supply and Prices Relation in Albanian Economy

Paper aims to examine the relationship between money, represented by M1, and prices, represented by Consumer Price Index (CPI) in Albania. Monthly data are used from 2000:M1 to 2015:M1. Particularly, paper represents the relation of these variables in different economies similar to Albanian economy. The main part includes an econometric model, implementation of Johansen Co-integration Test which will correctly disclose the relationship of M1 and Inflation. In the last part of the paper, as it was forecasted the empirical results reveal positive relation between the variables, indicating that increase in money supply would consequently lead to an increase in inflation. DOI: 10.5901/ajis.2015.v4n3s1p577

Government policy under price uncertainty: A source of volatility in illegal immigration

AbstractThis paper provides an alternative explanation for why illegal immigration can exhibit substantial volatility. We develop a model economy where migrants make decisions in the face of uncertain border enforcement and transfers from the host country. The uncertainty is extrinsic, a sunspot, and arises due to ambiguity regarding government policy; the sunspot manifests itself as uncertainty in the commodity price of money. Immigration volatility stems from both the trade‐off between the marginal benefits and costs (transfers and enforcement) to migrating and the existence of a sunspot. Finally, we examine the impact of changes in government policies on migration levels.

Ramsey’s Belief and the Plausibility of Keynesian Economics

Using Ramsey’s formulation of the probability theory, this study considers the plausibility of alternative monetary theories—Keynesian and monetarism, which is defined by the people’s confidence in such theories. It is naturally assumed that the more complicated theory entails a dearer cost to understand. Keynesian equilibrium is supported only through belief in the stable intrinsic value of money. Conversely, monetarism requires that laypeople have special and difficult knowledge so as to be confident about its assertion; namely, the linear relationship between nominal money supply and price; the actual value of Marshallian k and the volume of nominal money supply. As such, the Keynesian belief is far more prevalent in the actual economy.

Money Supply, Income and Prices in Sudan

Economic disorder in developing countries became a way of life with reasons of economic mismanagement, corruption and favoritism and political crisis can manipulate economic decisions. Sudan is not different where some researchers described what is happening there as economic chaos. Though economic deterioration is part of everyday’s happening in many countries, Sudan is unique in its abnormal policies and economic mismanagement. The document reviews impacts of money supply on income in of Sudan. In 1990 a package of policies was implemented to solve the shortage of foreign exchange problem. Free market economy was adopted through liberalizing trade and exerting efforts to promote and boost exports, besides adopting encouraging policies for the benefit of increasing productivity. Whenever exchange rate is determined by the market forces with weak economic productive base the impacts fall on income. Implementing floating exchange rates were implemented to increase exports. Commercial banks were encouraged to extend finance to the export sectors, which was considered as a priority sector in all government policies. Trade started to flourish and bilateral agreements between Sudan and other countries started to thrive. With these radical changes the Bank of Sudan issued the circular in which the free and the official markets were abandoned and the exchange rate determined through a committee affiliated to the Sudan banking association. Dealing in foreign exchange was allowed through the official channels. Restrictions on the flow of foreign currencies were abolished and opening free accounts was allowed. This unified free market-rate that dominated all dealings. Policies aimed at filling the gap in the trade balance through encouraging exports and restricting imports. The latter objective, reducing imports, was pursued through banning the importations of ten commodities. That reflected on the real exchange rate, the experiment of the parallel exchange rate policy contributed in accelerating the economy growth of country. However, authorities canceled the official and the commercial bank exchange rate and reintroduced a unified official regime under which the rate of exchange was freely determined in the interbank market by the independent actions of the commercial banks. That had impacts on market exchange rates for foreign currencies and a set back to income per capita. Official foreign exchange requirements were met through the compulsory sale to the Bank of Sudan by the commercial banks of 50% of proceeds at the commercial banks selling rate. The imports policy remained unchanged, where all imports were allowed except wine and strong drinks. The result was an environment of economic uncertainty that leads to gradual downfall of the productive activity.

Economic analysis of participation in physical activity in England: implications for health policy.

BackgroundChanging the relative price of (in) activity is an important tool for health policies. Nonetheless, to date, analyses of correlates of physical activity (PA) have excluded the notion of price. Using the first nationwide dataset on prices of PA for England, we explore for the first time how money and time prices are associated with PA (in general) and specific activities.MethodsA nationally representative telephone follow-up survey to Health Survey for England (HSE) 2008 was undertaken in 2010. The sample covered individuals who reported to have undertaken some PA in the HSE 2008. Questions focussed on: ex-post money and time prices; type and quantity of PA; perceived benefits of PA and socio-economic details. Count regression models (all activities together, and swimming, workout, walking separately) were fitted to investigate the variation in quantity of PA.ResultsOf 1683 respondents, 83% participated in PA (one or more activities), and spent an average of £2.40 per occasion of participation in PA and 23 minutes travelling. Participation in PA was negatively associated with money prices per occasion (i.e. family member/child care fees, parking fees, and facility charges) and travel time price. Participation in PA was more sensitive to travel time price than money price. Among the specific activities, the money price effect was highest for swimming with a 10% higher price associated with 29% fewer occasions of swimming; followed by workout (3% fewer occasions) and walking (2% fewer occasions). Only swimming and workout were sensitive to travel time price. People who felt doing PA could help them ‘get outdoors’, ‘have fun’, or ‘lose weight’ were likely to do more PA.ConclusionsTwo main policy implications emerge from the findings. First, the results support the notion that positive financial incentives, e.g. subsidising price of participation, could generally lead to an increase in quantity of PA among those already exercising. Second, such policies could lead to desired policy goals if implemented at an individual activity level (e.g. 50% subsidy on swimming entrance charges) rather than a blanket implementation (e.g. subsidising average entrance charges across all activities by 50%).

Forecasting the intraday market price of money

Central banks' operations and efficiency arguments would suggest that the intraday interest rate should be set to zero. However, a liquidity crisis introduces frictions related to news, which can cause an upward jump of the intraday rate. This paper documents that these dynamics can be partially predicted during turbulent times. Long memory approaches alone or in combination to account for model uncertainty outperform random walk, autoregressive and moving average benchmarks in terms of point and density forecasting. The relative accuracy is higher when the full distribution is predicted. We also document that such statistical accuracy can provide economic gains in investment strategies based on lending in the intraday market.

“The Price of Money”: Stanley Elkin’s The Franchiser and the Economic Crisis of the 1970s

“The Price of Money”: Stanley Elkin’s The Franchiser and the Economic Crisis of the 1970s

China's Long-Term Economic Reform: Perspectives and Implications

China has recognized sustainable economic growth and harmonious social development as long-term national development strategies and has concentrated economic policies on changing the ways of economic development, economic restructuring, improvement of people's lives. In particular, at the 3rd plenary session of the 18th-term Central Committee of the Communist Party of China (CCCPC), held last November 2013, China's new leadership expressed that they would carry out extensive economic reforms in the future.This study analyzes the content and forecasts of the directions of China's economic reform implementation in the eight categories of money market, marketization, public finance, tax system, prices, state-owned enterprises, labor, hukou system (household registration system), and international economy; presentation of implications for Korea and countermeasures that should be taken.

The Simple Analytics of Helicopter Money: Why It Works — Always

Abstract The paper offers a rigorous analysis of Milton Friedman’s parable of the ‘helicopter’ drop of money – a temporary fiscal stimulus funded through an increase in the stock of fiat base money that is never completely reversed in present discounted value (PDV) terms. A monetized fiscal stimulus is more expansionary than a debt-financed one because a monetized expansion of the Central Bank balance sheet is profitable: it relaxes the intertemporal budget constraint of the State – it creates fiscal space. It is up to the fiscal authority to make appropriate use of this fiscal space. Four conditions must be satisfied for a helicopter money drop to boost aggregate demand. First, it must not be reversed fully in PDV terms. Second, there must be benefits from holding fiat base money other than its pecuniary rate of return: that is, the interest rate on any additional base money issued is below the rate of return on the Central Bank’s assets. Third, fiat base money is irredeemable – an asset to the holder but not a liability to the issuer. Fourth, the price of money is positive. Given these conditions, there always exists – even in a permanent liquidity trap – a combination of monetary and fiscal policy actions that boosts private and/or public demand demand) – in principle without limit. Deflation, ‘lowflation’ and secular stagnation are therefore policy choices. Other conclusions are: (1) the increase in the monetary base need not be permanent for helicopter money to be effective; (2) Treasury debt cancellation by the Central Bank or the purchase by the Central Bank of perpetuities (with zero, negative or positive coupons) rather than finite maturity debt are fundamentally irrelevant policy actions. At most they have signaling value; (3) dropping perishable helicopter money will make it more effective if households are liquidity-constrained.

Wpływ polityki banków komercyjnych na stabilność rynków finansowych

The aim of this article is to analyze the impact of commercial banks` policy on the financial mar- kets stability in Poland. This analysis leads to the conclusion that, despite the well-being of the Polish banking sector, lending and deposit banks policy should be conducted with caution. This is mainly due to the economic downturn and the ensuing increase in non-performing loans in bank portfolios. Moreover, the high share of foreign currency loans significantly reduces the impact of monetary policy instruments NBP on price of money in the economy, which is also worrying in the context of financial stability. The deterioration of the economic outlook and the continuing debt crisis in several European countries, poses a threat to the stability of the financial system in Poland.

The price of money with no value (earned without work)

The article highlights the characteristics of a phenomenon that tends to directly attack the wellbeing of large amounts of the population in a manner that jeopardizes the development of the individuals, diffuses the leisure and damages the social equilibrium of a nation. This phenomenon also pairs well with other phenomena common these days such as corruption and underground economy. We are living in hard times when the shameless triumph or the abusers are admired, a society without guiding principles, and the opportunism wins, the insolents set the tone while the population tolerates it, everything becomes corruptible while the majority remains silent. This picture of today’s world is very often complemented by the indifference taking the form of lack of action, ultimately giving birth to thoughts on whether it is high time to hide, to back down, analyze our activity to take a firm grip on oneself and reevaluate those around us. When the abuse of power for personal gains manifests from post to pillar, the corruption is systemic, the harmful perception that impunity exists should be destroyed. Unless we do it by uniting our forces in fighting this critical issue, the idea that money can be earned without effort or work will be disseminated and ultimately their value cannot be other but zero.It would be very helpful to look back in history while reconsidering out attitude towards work, moral and ethical values, well promoted by religion. There is an attractive link between religion and economy, but without understanding it in broad sense, as if religion should be linked to the evolution of an economic indicator. Beyond the attribute of being an economic performer the believer possesses, this attribute can be outwardly disseminated only through work, as it is the only that adds value. Isn’t the economic growth measured precisely by the value added? Where does this new value comes from which has its roots exclusively in lively work carried out by the people – creation of the Divinity – with and on the materiality? To better understand this, I suggest we should imagine a peasant in spring going with a basket full of corn seeds to seed a plot of land that he had previously ploughed and cared so as to be ready for a new crop. If he carefully seeds the corn from his basket on the plot formerly looked after and through his effort, his work, attends for the shoots coming out from the ground to be irrigated on time and the pests to be removed, there is no doubt that the results will not be late in coming. Following the faithful effort and work put into the cultivation of the corn, the harvesting will bring out ten folds more corn seeds. Isn’t this added value? Is this peasant respect-worthy? Are his effort and work true and clean?

Buchanan as Subjectivist

[Author Affiliation]Karen I Vaughn, * George Mason University, 11609 Forest Hill Court, Fairfax, VA 22030, USA; E-mail: kvaughn@gmu.edu1. IntroductionIn many respects, I am an unlikely contributor to this session. I was never James Buchanan's student, I was not a member of the Public Choice Center, and, more to the point, I contributed very little to the public choice literature.1 I am known best as a historian of economic thought and a sympathizer with the modern Austrian school of economics, neither of which are characteristics of a typical public choice economist. Yet I can say with full confidence that Jim Buchanan was one of the two most important influences on my academic life. That the other was Friedrich Hayek should make it clear that it was the subjectivist side of Buchanan's work that most intrigued and challenged me. My tribute to James Buchanan will be an account of two areas in which Buchanan's subjectivism had a profound influence on my understanding of economic theory and political economy. It is no exaggeration to say that had I not encountered James Buchanan's view of the subjective foundations of economic theory at an early stage of my intellectual development, my career would have taken a very different and much less interesting course.I suspect that Buchanan, the subjectivist, is less well known to most readers than Buchanan, the public choice theorist. Yet the tension between the subjective nature of human experience and the requirements of predictive science was an undercurrent in much of his work and the focus of a number of articles on economic methodology. Collected Works of James M. Buchanan comprise 20 volumes, and while most of them deal with issues such as public finance and constitutional economics, a significant subset of his work concerns methodology. In addition to his iconic Presidential Address to the Southern Economic Association, What Should Economists Do?, articles such as Is Economics the Science of Choice?, The Domain of Subjective Economics: Between Predictive Science and Moral Philosophy, and Natural and Artifactual Man demonstrate clearly his dissatisfaction with the methods and claims of conventional theory. And despite the fact that he was probably best known as one of the originators of the field of public choice, in answer to his own question, he argued time and again that economics was not a science of choice. In What Should Economists Do?, he argued that the subject matter of economic theory was exchange rather than choice. While in that essay his focus was on the need to understand the institutions of exchange in a market economy, complementary to that claim was his growing understanding of the subjective nature of human choice and its implications for economic analysis. His most complete treatment of the subject is, of course, his volume Cost and Choice (Buchanan 1969).2. Subjective CostCost and Choice is a short but important book that is undeservedly overlooked even by Buchanan's admirers. This is not surprising because it is also a subversive book. It questions the very foundations of neoclassical economics in ways that even Buchanan was reluctant to acknowledge.Cost and Choice was Buchanan's attempt to revive a theory of cost prevalent at the London School of Economics during the 1930s and 1940s.2 With roots in the work of Carl Menger, Phillip Wicksteed, and H. J. Davenport, the cost tradition he described flourished in the writings of Lionel Robbins, Friedrich Hayek, Ronald Coase, G. F. Thirlby, and later G. L. S. Shackle and Jack Wiseman. Buchanan's aim was to show how their subjectivist understanding of cost pointed to an important confusion in the neoclassical theory. Economists agree that costs are the value of forgone alternatives, but they measure those costs in terms of observable resource prices. But are money prices really a good proxy for the costs of forgone alternatives? …

La question de l'interdiction de l'intérêt dans l'histoire européenne

Dans cet article, nous nous interrogeons sur les raisons de l’interdiction ou de la stricte réglementation du prêt à intérêt dans l’histoire européenne, aussi bien par les trois monothéismes que par la tradition aristotélicienne, les droits romain, canonique et civil médiéval. L’hypothèse qui gouverne notre argumentation est que toute économie de marché quelque peu développée fait nécessairement intervenir des opérations de prêt et donc un prix pour la monnaie ; une telle évidence ne pouvait être ignorée par l’esprit qui tente de l’interdire. Par conséquent, l’interdiction vise, au-delà du simple phénomène d’intérêt, un phénomène bien plus complexe dont l’intelligence exige, à notre sens, une analyse institutionnelle.

DRUGS AND MONEY Prices, Affordability and Cost Containment

DRUGS AND MONEY Prices, Affordability and Cost Containment

A Note on Price Asymmetry Using a Monetary Model

In this paper we present a macroeconomic foundation of downward money price inflexibility based on classical Monetary Economics. We show that under the principle of risk aversion and the neutral money axiom, our model derives an endogenous asymmetric price response as prices adjust more rapidly when they go upward than downward. This asymmetry does not disappear; on the contrary, it is increasing in time.