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May/June 1994

Posted 1994-05-01

On the Way to a New Monetary Union: The European Monetary Union (The Eighth Annual Homer Jones Memorial Lecture)

by Helmut Schlesinger

In the past two centuries, only a handful of monetary unions have been created successfully. Now, Europe has embarked on the creation of one of the most ambitious to date: the European Monetary Union, which will encompass nearly 400 million people and have the highest gross domestic product in the world.

Posted 1994-05-01

The P-Star Model in Five Small Economies

by Clemens J.M. Kool and John A. Tatom

A nation’s exchange rate regime affects the link between its monetary aggregates and its general level of prices, according to Clemens J.M. Kool and John A. Tatom. They explain an empirical specification of a quantity theory of money called the P-star model, which indicates that a country's price level depends principally on its own money stock.

Posted 1994-05-01

Is the Discount Window Necessary? A Penn-Central Perspective

by Charles W. Calomiris

Policymakers generally regard the discount window as an essential tool for preventing the spread of financial crises, but some critics have argued that it is an unnecessary—and costly—policy instrument. The arguments against the discount window emphasize that it may unwisely postpone bank failures or undermine the Fed’s control over the supply of reserves.

Posted 1994-05-01

Can Deposit Insurance Increase the Risk of Bank Failure? Some Historical Evidence

by David C. Wheelock and Paul Wilson

Many economists have argued that unless premiums are risk-based, deposit insurance will encourage banks to take greater risks than they otherwise would, thereby increasing the likelihood of failure. Because virtually all banks today are insured, isolating the effects of deposit insurance from other regulatory and economic conditions that affect bank performance is problematic.