Comment on Savona, Maccario, and Oldani’s “On Monetary Analysis of Derivatives”
Commentators and discussants tend either to focus on disagreements with principal authors or else to pursue their own unrelated thoughts. So let me stress at the outset that I strongly endorse the authors’ central conclusion concerning tension between the findings of microeconomic research on derivatives and their possible macroeconomic impact. Microeconomic research, as reported by Paolo Savona, Aurelio Maccario, and Chiara Oldani (henceforth SMO), appears to show that derivatives reduce volatility and enhance efficiency of financial markets, but macroeconomically derivatives create a potential for more severe financial-market disruption. I return to this contrast in my concluding paragraphs.
KeywordsMonetary Policy Central Bank Hedge Fund European Central Bank Monetary Aggregate
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