Abstract
This essay begins with a brief summary of the economic costs and benefits of Euro-currency markets which provide the rationale for proposals to control them. Several of these proposals are then discussed and shown to be deficient on several grounds. There follows a description of how Euro-currency market growth can be curtailed through the payment of interest on required reserves and a discussion of the added benefits of the policy for domestic monetary management. The money and real economic costs of the proposed policy are analysed in the perspective of Federal Reserve profits and United States government spending. The final section contains a summary of the analysis and conclusions for policy.1
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Notes and References
The basic source for information on Euro-currency banking is provided by the Bank for International Settlements Annual Reports (Bank for International Settlements, Basle, various issues). For some data on United States conditions and their relative importance, see Hearings before the Subcommittee on Domestic Monetary Policy and the Subcommittee on International Trade, Investment and Monetary Policy, Eurocurrency Market Control Act of 1979, Serial No. 96–23 (Washington: US Government Printing Office, for the Committee on Banking, Finance and Urban Affairs, United States House of Representatives, 1979).
For institutional and analytical backgrounds relevant to the discussion in this section, see Paul Einzig and Brian S. Quinn, The Euro-Dollar System, 6th ed. (New York: St Martin’s Press, 1977);
Jane S. Little, Euro-Dollars: The Money Market Gypsies (New York: Harper and Row, 1979); Adrian Throop, ‘Eurobanking and World Inflation’, Voice of the Federal Reserve Bank of Dallas, August 1979;
and John R. Karlik, ‘Some Questions and Brief Answers about the Euro-dollar Market’, in John Adams (ed.), The Contemporary International Economy: a Reader (New York: St Martin’s Press, 1979), pp. 310–29.
This is the view taken and backed by persuasive reasoning by Helmut W. Mayer, Credit and Liquidity Creation in the International Banking Sector, BIS Economic Paper No. 1 (Basel: Bank for International Settlements, 1979).
For an analysis of the facts and speculation about causes, see John R. Artus and John H. Young, ‘Fixed and Flexible Exchange Rates: A Renewal of the Debate’, International Monetary Fund Staff Papers, Washington, December 1979; and Jacob A. Frenkel, ‘Flexible Exchange Rates in the 1970s’, in Murray Weidenbaum (ed.), Stabilization Policy: Lessons from the 1970s and Implications for the 1980s (St Louis: Center for the Study of American Business at Washington University, 1980).
For analysis of these issues, see Federal Reserve Bank of Boston, Key Issues in International Banking, Conference Series No. 18 (Boston: Federal Reserve Bank, 1977).
Xenophon Zolotas, An International Loan Insurance Scheme: a Proposal, Bank of Greece Papers and Lectures No. 39 (Athens: Bank of Greece, 1978).
Grubel, A Proposal for the Establishment of an International Deposit Insurance Corporation, Princeton Essays in International Finance No. 133 (Princeton: International Finance Section of Princeton University, 1979).
Franklin Edwards (ed.), Issues in Financial Regulation (New York: McGraw-Hill, 1979). This book is based on a series of faculty seminars held during the 1976–77 academic year by Columbia University’s Center for Law and Economic Studies.
The approach used here is based on the theory of effective protection, which is presented most authoritatively in W. M. Corden, The Theory of Protection (London: Oxford University Press, 1971).
Editor information
Editors and Affiliations
Copyright information
© 1983 Trade Policy Research Centre
About this chapter
Cite this chapter
Grubel, H. (1983). Interest Payments on Commercial Bank Reserves to Curb Euro-money Markets. In: Machlup, F., Fels, G., Müller-Groeling, H. (eds) Reflections on a Troubled World Economy. Trade Policy Research Centre. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-06892-0_6
Download citation
DOI: https://doi.org/10.1007/978-1-349-06892-0_6
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-06894-4
Online ISBN: 978-1-349-06892-0
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)