internationale Arbeitsteilung Die Rolle der Währungspolitik

VOLKSWIRTSCHAFTlICHE TAGUNG 1994

DER OiisTEIu&EIcHI5CHFN

NATIONALBANK

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internationale Arbeitsteilung Die Rolle der Währungspolitik

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Einleitung 4 lirii& R. KI-NI N

Is Monctarv Policv the Onl' Instrument Left to lnfluencc Our Economies? Lession fir the Ninctics 10

The Implicaticins of the EU and the EEA for the l3anking and Payrncnt Systems 20

\Vi ii i.i R. \VFII ii

Fhe Monetary and Banking Implications of NAFTA and GATT 30

)I 1ING

1)ie währungspolitischen Aspekte der Wiedervereinigung 48

1 l<i

Aktuelle Fragen der EU-Intcgration Österrcicks (Kamingespräch) l'c)15R'1 Ry\loN1

European Monetarv Integration the End of National Economic Policies? 62 MARi: ( 11 \1l.\1 \YFR

Offnung der Märkte stabilc Währungen (ErJJ?iung (ler Podiumsdiskussion) 68 FRANZ CIKA

E\v-\u) NowolNy MA1u1

FRIF:rnucil VI.RZ1-TN1'1SCH 1-1 t i ri UI K R . -i i i (Diskussionskiter)

Ofihung der Märkte und ihre Konscquenien (Podiumsdiskussion) 74 cii- \\i

Resümee und Schlußwort 88

Die Vortragenden 94

Vot KSWIRTSCI-IAI-TLICIiI TAiuNG 1994 3

AIOLF WALA

GENERALDIREKTOR DIR

OEsTFrRIJcuIscHEN

NATIONALBANK

£ -

Tagungs - eröffnung

und

Einleitimg

Das Thema der diesjährigen volkswirtsdiaftl ichen Tagung Neue intcrnationak A i-heitstei- lung - I)ic Rolle der Währungs- politik" ist deshalb besonders rele- vant, eil der mit vielschichtigen Ursachen verbundene \Vandel er- kennbare Spuren hinterläßt. Wir erleben im mikroökonomischen Bereich die Folgen einer stürmi- schen technologischen Ent - wicklung, den Wandel in den Un- ternehmcnsphilosophien unter

cm S. hlagwort Lean h-oduc- tion" in Richtung flexibler, iiberschaubarer und damit besser steuerbarer Einhei - ten sowie die stark gewach- senc, grenzüberschreitenk

Arbeitsteilung. Die betrieb- liche Restrukturierung bei verschärften internationalen Wetthewerhsbed ingungcn crlordert den Zugang zu 1 iiianzierungsprojekten unter Bedingungen.

Auf Makrochene sind vor allem die lntcgrationsbemuhungcn zu nen - neu, die in Europa in Form einer Erweiterung und Vertiefung der Europäischen Union mit starker, Zciitri petaikraft für die öst 1 icheii Relrnistaaten zum Ausdruck kommen. Nach Aufhisung des RGVv' kam es aber auch in unserer unm ittdbaren Nachbarschaft im Rahmen der Viscgradgruppe rasch zu neuen, nach EFEA-\rbild ent- wickelten Initiativen zur Nutzung der internationalen Zusammenar- beit. In Amerika haben vor allem die erfolgreichen Bestrebungen (1er USA zum Auf- und Ausbau von Freihandelszoicn geftihrt So etwa zum Einschlul3 Mexikos in die nordamerikanische Frei - hande Iszone NA FTA oder zum sogenanntcll Rosengartenabkom.

men, tIer Regelung von Handels- und lnvestitionsfragen zwischen den liSA und den südamerika-

nischen Uindcrn, Unter Einschluf des asiatischen Raums steht zwei- fellos die ATEC im Mittelpunkt des Interesses, vor allem aus ihrem Eigenverständnis als asiatisch- pazifisc}e OFCI). Europa ist im Rahmen dieser Entwicklung inso- fern besonders gefordert, als wachsende Handelsbeziehungen

SO" ie Kapitalverflechtungen mit den Refwmländern des Ostens vor dem 1 -untergrund stark diver- gierensier Produktionskosten zu GUnsten der Ostländer stattf'rn - den. l)ie Ostuffnung hat gleichsam zu einer schlagartigen Verände- rung der I'roduktions- und Wettbewerhsbed ingungen geführt.

I)as hat einerseits l)ircktinvesti- tionen ausgelöst, andererseits haben die Hoch lohn länder zum Schutz ihrer Standorte gegenüber Anbietern vor der eigenen 1-laustür auch zu protektionistischen l--lan- deispraktiken Zu fluc:ht gesucht.

1)ieses Szenario verdeutlicht, claB Europa zur Zeit, ökonomisch ge- sehen, mit der Bewältigung einer neuen internationalen Arbeits- teilung konfrontiert ist, die für alle Beteiligten zunächst Anpas - sungspn blemc bedeutet, länger- lritig aber einen Wohlfahrts- gewinn erbringen sollte.

Meine Damen und Herren, rund zwei Milliarden Menschen aus ehemals geschlossenen Syste- men wollen und sollen sich in die

\NleltN%irts(-liat't integrieren und den Wohlfahrtsabstand zu den Industrieländern Europas zuniin - dest teilweise aufheben. L)as

\Vescn der ökonomischen Anpas- sung kommt hei Iiheralisic'rten Märkten in folgender Frage zum Ausdruck: Welche Konsequenzen sollen aus veränderten relativen Preisen für bestimmte Produk- tionsfaktoren gezogen verdcn?

Konsequenzen etwa in der lnclu- stric- und Verkehrspolitik, aber

Vcu.KswIItIscHAFTLIdui T\d;UNG T994

auch hinsichtlich der Flexibilität von Arhcitsrnä,-kten und ganz ge- nerell in der Aushildungspolitik.

Mit der beispielhalten Auf'zäh In ng von Vorgängen im Weltbam Icis- gefüge möchte ich vor allem den Hinweis darauf'verhinden, daß der Trend in eine Richtung geht, die offenbar zur Schaffung großer lnteresscnscinheiten führt, denen aber letztlich das übergeordnete Ganze khlt. Globale Interessens- gegensätze wirkten also in Rich- tung Rlockbildung. Diese Ent- wicklung wie auch die Ver- zugerungen im Bereich der Uruguay- Runde haben das G AYF und dessen Prinzipien tendenziell geschwächt. Gleichzeitig ist aber festzuhalten, (laß die Ergebnisse der Uruguay- Runde versprechen, die weltwirtschaftliche Entwick- lung positiv zu beeinflussen.

Aol' hinnenwirtschaftl jeher Ebene flgte dem Prozeß der Libe- ralisierung und der 1 linwendung zu ^flCUCfl 1-landelsblocken nun- mehr stärker die Restrukturierung der ordnungspolitischcn Rahmen- bedingungen mit eiern Ziel der Sicherung der eigenen \Virt- schaftsstandorte. Neben zahl rei- chen nationalen Wirtschat'tspro- grammen ist hier l'ür Europa vor allem auch die Wachstumsinitiative im Raum der [uropaischen Union zu flennen.

Meine Damen und Herren, wir befinden uns zur Zeit in einer Phase wcltwirtschaftlicher Erho- hing. Zum hcreits deudichen Kon- junkturaulchrung in Ubcrsee kommen nun vermehrt Anzeichen eines Aufschwungs in Kontinental- europa. Eine hohe Preisstabilität, niedrige Zinsen sowie insgesamt positive Erwartungen lassen die globale Entwicklung in einem durchaus günstigen Licht erschei- nen. [)ie zahlreichen strukturpoli_

tischen Mal.nahmen, aber auch

Schritte zur Verbesserung der EllI- zienz der Arbeitsmärkte sprechen für einen möglichen Erfolg im Abbau der zuletzt recht (kutlk'h gestiegenen Arbeitslosigkeit. Die hinter uns liegenden Ereignisse standen auch im Zeichen einer Welthandelsentwicklung, die für Europa im Jahr 199 angesichts noch deutlich rezessi s'er Tenden- zen vergleichsweise schlecht aus- gefallen ist. Das GATT veröffent- lichte jüngst vorläufige Daten, wonach Europa, und hier meine ich die Europäische Union und die EFTA-Länder, im Jahr 1993 wertmäßig ¹⁰⁰ seines Außenhandels ein - bußte. Insgesamt sank der Welthandel im Vorjahr wertmäßig um 29, o hei einer volumensmäßigen Erhöhung um ^2, %. Für das laufende Jahr erwartet das GAYF zu- mindest ein gleichwertiges globa- les Ergebnis. \Vill nun Europa seine Position verbessern, so be- darf' es zweifelsohne weiterer ge- meinsamer Anstrengungen, die auch das Vörfcld einer erweiterten Europäischen Union, nämlich vor allem den östlichen Raum, mitein- schließen. Dies kann unter ande- rem nur einen möglichst raschen Abbau von ökonomischen Barrie- ren, aber auch von ungleichen ordnungspolitischen Rahmen- bedingungen bedeuten.

Der zweitägige In formations - und Gedankenaustausch sollte aber insbesondere dazu dienen, die Rolle (ler Währungspolitik in die- sem Szenario zu beleuchten, und zwar nicht nur die Währungs- politik im engeren Sinn als instru- ment der Forderung wirtschaft- licher Dynamik und Stabilität, sondern vor allem auch deren integrative Funktion Angespro- chen sind hier die stärkere und schnellere multilaterale Verfleeh-

WLKSWIWrSCI-IAFrLIcHI. TÄc;UNG 1994 7

tung der Finanzmarkte. Das Ziel einer stabilisierenden monctren Wirkung dieser Integration und die Vermeidung erheblicher Destabilisierung, wie sie in den vergangenen Jahren, sehr zum Leidwesen der Integrations- bei urworter, auf den internatio- nalen Devisenmärkten auIetrcten ist, erscheint nur realistisch, wenn die stahilitatsorientierte Kon- vergenz der Volkswirtschaften, erfüllt ist. Nur in diesem Fall.

meine Damen und Herren, dürfte es auch möglich sein, Skepsis ui-id Unsicherheit der Bevölkerung bezüglich der Zweckmäßigkeit und li-t,tlich auch des Erfolges dLr \Vährungsintcgration

ibzubauen.

Ein erster Schwerpunkt unserer Tagung wird es sein, die Aspekte der währungs- )Iitlschen Effizienz im Rahmen der Wirtschaftspolitik zu vertiefen und auszuloten. Es geht dabei unter anderem uni ^die Funktiona- lität der Strategien bei Existenz globaler Märkte. Daß die Welt- politik in den letzten Jahren stärker in das Rampenlicht gerückt ist, lesullicrt ja nicht nur aus den Ereignissen rund um das Europäi- sche \Vährungssystcm, aus der Rezession in Europa 0(1er aus dem potentiellen Beitrag der Wäh- rungspolitik zu deren Bewältigung, sondern auch aus dem partiellen Paradigmcnwechsel einzelner füh- render westlicher Notenbanken.

1 läulig auftretende Neuerungen im Bereich der Finanzierungs- techniken führten neben einem neuen Erscheinungsbild der Finanzniärkte auch dazu, daß die Stabilität des Zusammenhangs zwi- schen Fx definierten Geldrncn- gengrötien und dem gesamtwirt- schaftl icheri Transaktionsvolumen teils empfindlich gestört worden

ist. Daraus ergibt sich wieder ein verinehrter Erklärungshedarf für die Währungspolitik. Es sind aber auch nach wie vor Uberlegungen legitim, die auf alternativen stra- tegischen Konzeptionen beruhen.

Ein 1-landl ungsbedarf resultiert schließlich auch daher, daß die Notenbanken zunehmend für all- fällige Unsicherheiten der Märkte verantwortlich gemacht werden.

Zweifc Isohne war die G lauhviir- digkeit der Geldpolitik einigen harten Prüfungen au sgeset'.t, die letztlich im Bereich der Devisen- markttLlrbulcnzen mit der Er-

\vciterung der Bandbreiten im Europäischen Währungssvstem im vorigen Sommer und der damit verbundenen Dämpfung des spekulativen Klimas durchaus crfdgreich bewältigt worden ist.

Der Ausweg aus dieser Situation wurde in einigen Ländern auch darin gesehen, die Instabilität im Transni issionsmcchanisnius durch direkt bestimmte lntlationszicle zu uberbrucken. Es bleibt abzuwar- teil, inwieweit (Liese Politik von

Erklg gekrönt sein wird. Für mich als \Vährungspol it iker steht aber fest, (-laß die Notenbanken ein für die Otfentlichkeit nachvollzieh- hares Konzept brauchen, das mit der gesamten Wirtschaftspolitik im Einklang steht.

Ein weiterer Aspekt betrifft die Einbettung des Banken- und Zahlungsvei-kehrssvstems in multi- laterale Wirtschaftsräume mit hohem ökonomischen Verflcch- tungsgrad. Dabei geht es auf dem Gebiet der Finanzmarktsteucr ung um die Harmonisierung von Rah- nienhedingungen. Es geht um (len Informationsaustausch und uni die Vermeidung von Prakti- ken, die zu lneffizicnzen Anlaß geben könnten.

Die Abwicklung des grenz- ül)erschrciten(kn Zahlungsvcr-

8 e2\J,' V)LKS\ViITscIiAiTL1dni TÄGUNG 1994

kchrs ist eine der wesentlichen Fragen zur Nutzung der interna- tionakn Arl)citstcilung bzw. der Erfolge in der Umsetzung des Binnenrnarktkonzeptcs. Damit im Zusammenhang stehen als Spezial- fall auch die Erfahrungen Deutsch- lands im Rahmen der Integration z eier völlig unterschiedlicher

\Virtschaftssvstemc. Ich darf bei dieser Gelegenheit daran erinnern, daR die Nachkriegsgeschichte der österreichischen Wirtschaftspolitik ja faktisch als koordinierte Integra- tionspol itik umschrieben wcrkn kann und im Bereich eIer Wäh- rungspolitik lällt sich und ließe sich eine lange Kette an Ereignis- sen anführen, die gleichsam eine schrittweise Europisierung dar- stellt. Das hetrifh die Formulie- rung der politischen Konzeption ebenso wie die Flexihilisierung der Instrumente und die Liberali- sierung des Kapital verkehrs.

Im Gegensatz zu einzelnen kritischen Stimmen haben wir diese Vorgangsweisc nie als Weg in die Abhängigkeit, sondern eher als Weg in die Mitbestimmung entsprechender internationaler Beschlüsse gesehen, die in jedem Fall, und zwar unabhangig davon, welche Integrationsform gewählt wird, nachvollzogcn werden niüs- sen. Die Tatsache, daß gerade die österreichische Währungs- und Wirtschaftspolitik heute interna- tional einen so hohen Grad an G Iauhwüi-chigkeit genießen, ist, wie ich meine, der Beweis daftir, daB wir (len richtigen Weg gc ihlt haben.

As you cern seefrom the pro- qrain, the eniphasis of this jears confere'nce is on international rnarters. This is infact a logical consequence of the topic chosen and / am pleased ihat u'e hare heen ahle to attract disringuished gucsts who enjoy an outsranding reputnion in ihe norld o[ocademia and international jinance .Mav 1 use this occasion to warmlv thank our g uestsjrom ahroadjor hann8 acceptcd our invitarion. / would

nov like to introduce Prof Peter Kenen oJ' Princeton Uni- iersitv. Professor Kenen is renowned e.perz in the fiel!

of international economics.

Ilis late'sr publication dCciI

11-ith ihe perspeceives of th Furopean J-fonetary Union.

Prof Kenen /ias also aczed as a consultant for numerou institutions includinq the Council of Econon,ic .idvisor,, iii, international Jionetari Fund and the Federal Reserve. Today Prof Kenen will present his thoughts on economic policy instrumenis and thcir cJjcienci- -ith the particular emphasis on ihe inlportance of monetarv po!icr.

Vol.I.svIwrscH.u-Tl icw I1GUNG 1994 t''1.\Z-? 9

1

PETER B. KENEN

PIoFIsso1&, PIuNci:roN

UNI vi-: R 1. 1

Is Monetary Policy the Only Instrument Left to Influence Our Economies?

Lessons for the Nineties

Iii the first undcrgraduate course 1 took at Columbia Univer- sity, more than forty vears ago, 1 was taught that we should not i-ch heav liv on monctarv p()hcv

^to

sta- hilize the econonv. We could and should reh on flscal

^polkv.

As a graduate student at Harvard, a fcw years Jater, i was taught the same lesson cvcn morc cmphati- caflv, even though son)e ot m teachers werc not Kevnesians.

One ol' them sas John Henry

\Villianis, who bad heen for manv

vears an advisor tu the Federal

Reserve Bank of Ne York and

was (IOSC to the actual con(luct of

monctarv polky. These davs, how-

evt'r, 1 teIl mv own students that

We cari and should rchr on m()ne-

tary policv hut not on fiscal policv.

Before asking wbethcr that view is right, k't inc first ask whv econimists' vicws have been tur ned

Uj)SIdC-dOWfl

during the last fortv vcar. To that end, 1 want to examitw t'ss'o (liStit1Ct (]UC.StiOflS.

The lrst pertains to the efl'ective- ness of rnonctarv ancl I'isal poli.

cies. ihr secon(l pertains t() the availahilitv uI the two poliev instrunwnts, Changes in vicws about both, effectivencss and availahilitv, jointiv explain the overall change in our views about the comparativc mcrits ol monc- tar anti Fiscal policies. 1 will ckal first with cffcctivcness, then turn to availahilitv.

The Effectiveness of Mo- netary and FiscaI Policies

l4v own tcachcrs in the

^{19 OS dicl}

not distingukh betwern cffec- tiveness and availahiiitv. The ques- tion of availaliilitv is, after all, a practical matter, and aca(kmic ccOflomiStS Icaching grat luate stu - dents don't talk about such mat- ters. Mv teachers wcre concerned

‚ihout clft'ctivrncss, and they Nvere c.1uit e convinc ccl that monetary

pOlIc c

annol lw verv eficetive.

Tvo rclatcd rea.'ons conic to mmd.

First, thev dcfined ctTectivc- ness in terms of the particular econoni

^it

challenge that thev thought wc vouId facc over the long run, and it was then the corn- mon belief in the linited Statcs, and indecd in other countries, that the eventual recurrence of reces- sion, perhaps depression, not the persistcnce ol inflation, would 1w the main macroeconomic problem in the post-war era. This view was still widelv held after i o i, Ihr vears ui the first inflationarv shock that could not 1w hlamed on Ihr af

-

terniath of this >ccond \Vorld War.

Second, their vicvs ahorn die economic outlook were reinfor'ccl

hy their recollections of the

_{19 30s,}

when die world economv as a whok and, especially, mv own countrv's cconomv, bad been verv sIov to grov out ol the through of die depression, even thotigh short- term and lung-term inlcrest rates were very bw in nominal and real terms.

Thev vcrc, h'v contrast, com- parativeiv conhdent ahout die effettiveness of fiscal policv as a stahili,.ation toc)1. This conh(knce was not hasrd on autual experi- ence. John Mavnard Kcvncs has excrtcd a poverful influence on economists in thc late os, hut Kcvnesian views ahorn stabilization polv did not have much impact ori die actual conduct uI econoinic polkies, not even in die

¹⁹⁴⁰⁵

and

1 9os.

lt is, indecd, hard tu kirn- tifv cases hetore the

¹⁹⁶⁰⁵

in which fiscal policv was uscd dcli- berateR tu affect aggregate dc- mand in die rnanner suggcsted by Kc',nes. Bot die simple arithmetic of national. income accounting was hard to rcfute. We all teach our stwk'nts, een now, that aggregate detiiand is the sum ofcunsumption hv households, investmcnt bv

m s, spen(ling by governmcnt, and spending by fkrcigncrs on a countrvs exports. Therefore, it is arithnwticallv obvious that an in- erease of govcrnmcnt spending will raisc aggregate demand and output direct.ly, vhilc a dec-reasc of taxes will raisc them indiretiv bv alluwing liouschokls aml firms to rctain aiicl then spen(l more of their carnings.

Whv do we think differentiv torlay? Again, we must start by looking at die nature ol the

^CCoflO-

mic problem. We are concerned todav

^ahorn

high and rising unem- 1)lOVflieI)t in Europe, anti we mav underestimate the strength o! die dcilationarv forces at vork in tur

1 2 (:'J\j? VOLKSWIRTStIIAITIIcfll- T«;uNG 1994

economies. But our prindpal (011- cern für manv vears has heen the control ol inflation the nce(l Für i-estraining aggregate demand, not sustaining it, Amt no onc, not CVefl 111V ITIOSt orthodox Kevncsian teachers, has ever (Ienied that mo- netary poticy can restrain aggre- gate demand efketiveiv. \Vc all knew that it coukl do that. Hence, the (hange lfl our poliev conccrns,

from sustaining demand to re- straining it, led to a reassessment of' the mies that rnonetar and liseal policies might plav iii stabihzation of our econom

The ellcct ofthc change policy (oneerns ^vas reinl or(e(l

a major change in analvtk'aI thinking l)\ e(OflOflhiStS. Lt mc he the academic lor a moment, to talk about intellectual trends rather than real.world trends.

There was, as VOU knov, a renascence of neu-ciassical think- Ing in the 19605 and 1 9705, whic'h revived die distinction het- Ween nominal amt real magnitu- des. Thc distinction was familiar to niv teachers, hut it did not greativ influence their thinking, hecausc thev believcd that prices are stick.

\"hen this is true, of course, real an 1 nominal magnitudes will move togtthcr in ihr short run. Vhcn prices are flexible, by contrast, the two need not move togcthcr, an(l lt l)ecüities iniportant t() i(lefl- tilv ('learlv the forees alkuting each one. In their attcrnpt tu do that, Ccl )nonlists canic tu regard flioflC- tarv policv, vhich operates on a nominal variable, die m()nev sup ph', as the wav tu control another nominal variable, the price level, antI thus tu control die inflation rate. Conversel', we canle to rc- gard fiscal 1)0 IICV, w hieb operates on variablcs, demands for goods an.l services bv government and taxpavers, as die war to control

other real variahies, output and rrnplovnient. This diclioturniscd a.ssignment led us most naturaih tu stress the use ol the policv instru- ment that could have die largest in- Iluence on what we saw t() be tEe policv major problem - to stress the USC of monctarv 1iulicv because wc wcrc greativ e( )neerne(I aI)()tlt inflation.

The sti-(,.ngth of the case für this dichoiomizcd assignment was reinforced liv Further theoretical

)l'k ^{l),1'v "l1 '(}

iü iu 1 ‚L[ R' tu bu l)erleci'tl flexible and economic agents flrms, workers an(l con- sumers are assumell to have für vard-looking expeetations. In a world viih pe ri cet 1v flexible priees and wages, monctarv poliev can- not have ans' apprec'iahlc efh.'ct uii

real variables. lt can aflect onlv pri- ces and wages. E en when priees and vages are some\vhat stic'kv, hut expectations are lormed in a k)rward-Iooking way, lt was shown that monetarv policv can afket real variahles unlv insolar as die nionetarN auth ri t jes c'an SOnle - lio' "surpl-ise" firnis anti Nvorkers.

The ' -called l3arro-Gordon nu,del provides thc cicarest state- flient of' tJ'iis propo.sition. Firms and wurkers are assume(l to make vage hai-gains, setting die nominal vage rate für, sav, die next war, ⁰¹¹ tlw basis of' their expeetations about the price levei during that vear am 1, therefbre, thcir expecta- tions about die near-tcrm inflation

Vot KSWIRTSCI-IAFfIICHF TACUN(. 1994 1

rate. lfthose expectations prove to be right, the real vage will turn out to bc vhat firrns and workers cxpected it to he, and die real vage cletermines the level ot cm- plovmcnt. Thc monetary authori - ties, however, can reduce thc real

\age and t}itis raise eniplovmcnt liv springing a 'surprisc-" on the private sec-tor - produdng rnore Inflation and thus raising die price kvel bv inore thim w as expectc(I vhcn wage hargains wcre made.

But thev cannot plav this garne re- peatediv. Firnis aml vorkers will catch on. Thc intluence of mone- tarv policv on die real econornv is thus bound tu (lecline when the rnonetarv authorities trv to

^USC

lt frequentir. In die end, thev will vind

^U[)

producirig rnore inflation vithout atiecting emplovrncnt atall,

Note that die wording of die pruposition, that the monctary authorities can affeet die real ecu- nomv oniv when thev can 'sur- prise" the private sec-tor, conveys not oniv a \varriing l)ut also a judgeirient. Such tactics are not only doomed to Fall in the kng run hut

^VOUl(l

be deceitlul and thus moraliv reprehcnsihlc. 1 flrinlv be - lieve, moreovcr, diat the wording was chosen deliherateiv to conve- that nwssagc - to teil politicians that thev invite condenination vhenever thev trv tu intlucncc die real economv. The proposition is mdccd die theoretical foundation of the modern case tor insulating central banks frorn politicians, so that thev may pursue price stabi- litv, rio matter hat happens to output or employrnent. Econo- rnists %'erc also starting tu revise their views about the effcctivcncss of flscal policv. Thev hegan tu wunder whudicr lt would have die strong cffccts on aggregate dc- mand predicted bNI simple Kcync-

sian models. At die start ot tlw

19605,

the Kennetiv administration sought to pull the American eco- flomv out ota recession bv cutting corporate anI personal taxes - die first stich experiment in the Unitcd States,

^lt

produccd a debate among acaciemic econom

¹

sts, hut also within die administration, on die need tu distinguish between the ternporarv tax cut and a per - manent cut 'heii trving tu Force- cast die eflccts on aggregate dc- niand and die real economv.

The (lebate in die earlv

^{i 96os}

was actuallv inspired liv die lind-

ings 01

Milton Friednian, a vers' non-Kevnt-sian ec-onomist, that households respond to transitorv changes in their aftcr-tax incomes bv changing the amounts thev save, not hv changing die amounts iliev spend. Spending decisions, he showed, depend niainly on perma- nent income and would thcrefre bc unresponsive to a temporarv change in taxes. And that, oF course, was the basic supposition that taxes shouki be cut when aggregate demand was deficient and raiscd whcn aggregate dc- man'I was

^t'

xcessie -

As in die C3St ol monetarv policv, moreover, innovatiofls

^1fl

econumic theorv rein lorccd die conirnonsensical rc-val uat ion that -as gomg on. Those vho stressed the impact of forward-looking ex- pectations on private-SCCtor l)e- haviour warned that the eflec-ts of budget (lehcits on debt could can- ccl die effccts 0f flscal-policv chan ges. Households, ii was argued, must surdv realize that lower taxes now niust lead tu higher taxes in the fiture, hecause die budget dc-

!icits resuiting From a tax cut will add to the size ol' the govern- ment's debt and thus raise die cost ofservicing die dcbt in die future.

Accordingly, households told that

14 WnKSwIKTsCtIAIrLrcIlF lÄGusu 1994

1

1 1 1 i'

1, 1'\J

\ 1 \

thev Nvill have a tax cut now are likelv to savc more and thus spend kss in order to anticipate the higher taxes thev will face in the future. In elict, die vil1

"sniooth" their spending as tax rates fluctuatc,

This insight has produccd a stronger doctrine, the notinn of Ricar lian cquivakncc, al though 1 def 's.ou to f'ind it in the works ol l)avid Ricardo. lt ascrts that a governrnent can afhct aggregate deniand bv changing its own spen- ding hut cannot. (10 much, ifany- thing, hv changing taxes. lt also iniplies that the size of the budget ckficit clocs not matter, because rational households will not be akctcd hv the timing of their taxes. A budget deficit now, pro- duccd hv f'ailing to raisc tax\

when therc ^is an increasc in gocrnincnt spend ing. must k'ad t() a tax in'rcasc later, and the pre- sent expectation ol that luture tax incrcase will have much the same cfhct as an adual tax increase now irnposecl ta olfsct the increase in spcnding and thus prevent die emergence of die (kficit.

Thus f'ar, 1 have ckalt iniplicitiv with die workings ofa closed cco-

flOflTV. We in the LLnited Stated still do that from timc to tinie, al- though it is wrong, even in our context, and iio Ofle \vOUld (10 that in Austria. Yet the change in our thinking about die elfective- ness ol monctarv and fiscal policies has also been alkctecl bv changes in the world economv, esiwciallv di..' increase of capital mobilitv. We arc, of course, verv avarc of the increa.sc that .xcurred in die 1980S an(l of the role plavcd by capital fiows in the EMS crises of 1992- 93. Yet capital mohilitv began to grow in the i 9605, and its growth vas viclelv noticed. Richard Cooper's brilliant book, The

Econoni ics of lnterdcpendcnce, published in 1968, warned that international capital mohilitv would soon undermine rnonctarv independence. In mv own recent ork, moreover, 1 have bcen rnack' much aware ei die role that private capital niovernents plaved in the international monetarv (TiSCS ol' 1971-73, \Vhi(h l)rought down the I3retton \'oods system.

Lt is now wi(lel\' un(krstood that a countrv cannot pursuc an indepc'ndent ni .1iirv

\ ithout cl! t 1 r,jts iluat, ihat lesson vas learned in Europ(- during the late i 98os. But we in the United States learned another lesson during die earlv 198os. Whcn vou Iloat die exchange rate in order to make rnore use ol' monetarv pr)licy, VOU will discovcr very quicklv that vou have rcduced the etlectiveness of' fiscal policv.

Recall the experience of die

Llnited States when die Reagan ad- ministration adopted a Kcvncsian flscal policv for verv non-Keyne- sian reasons, lt cut taxes massivelv,

)rocluciflg big budget (leficits, and thc govcrnrnent's necl to borro, conibined with die striet monetarv l)olicv pursued by the Federal Re- serve System, put upward pressure cm U. S. interest rates. 'l'here was thus a verv large capital intlow, vhich cause(l the dollar to appre- ciate, and die appreciation 01 the dollar reducc'd the dcniancl für U. S. goods in home and

Vor KSWIRTS(H prr i(i-iF TAGUNG 1994. (7\B 1

,"r

e - i

Iorcign markets alike - a reduetion reflected in the encrgence ot' a very largc trade dcficit. Although they raisccl aggregate dcmand, then, thc Reagan tax cuts hal less cflk'ct on U. S. output and cm- ptoyreiit. The appredation of die dollar "crow(k'd out" die stiniulus aflorkd l)V the tax cuts.

\Vhere are we nos, rcgarding our views on the cfkctiveness ot' monctarv and Fiscal policics 1 think it fair to sav that, economists

1' n

ki

ii e, c lost (H11. tiwir ciithusiasm tor die fiexilik- pric(, rational _expectations viev of die world to which thev vere so strongIr attached a few ears ago.

A "New Kevnesian" vicw has emcrged, at least in the neigh- buurhood 01 mv universitv. lt savs that prices and wages are stickv, more so perhaps in some couiitrics than others, so monetarr poli-v can aflct the real ccoflomV. Fur- thermore, private -seutor expec- tations tend to change less rapidiv than in our krrnal n-iodels, so die real efkets last longer thcn thev do in our models. Henuc, niunetarv I" c'an play a major lole in stabiliiation poliev. lt has in(leed plavcd that role in the United Statcs whcrc, in mv view, die Federal Reserve System movcd corrcctiv, although a bit tardily, tu contain and combat die reces- sion Irorn vhich thc American economv is flOW rccove ring rapidlv.

This finding, howevcr, has a dark sick. lt provides validation tor die fnding of much recent re- scarch that the costs uI flghting in- flation with rnonetarv policv are not appreciahlv lower in countrics wjth a eredilile commitment tu prkc stahilitv than in those with- out it. Luoking across Europe, tor exaniple, it is hard tu liiicl much ditkrencc from countrv to countrv in the sie or persistence ol die output or job k)ss reflccting die eflbrt tu comhat inflation in die

19805. The Austrian record stands oLlt, huvever, as being hetter than average tor Lurope, a re.sult that is largcly duc to Austria's unic1ue wage-setting arrangements.

lt is eqiiallv fair tu sav that fls- cal pnlicv lias kw f'riends in the major industrial countries. The (lt'(-lines in thc popularitv ot' fle- xihlc-price, forvard- looking mo- dels has perhaps allavcd econo- niists' (loubts about its efkctive- ness. Nevertheless, strong douhts remain about its availahilitv. Let mc turn, then, to that matter.

The Availabiuity of Monetary and Fiscal Policies

Concerns about th' size ancl rna- nagement of the iuI)lic deht have al\vavs a.flectecl our views about the availahilitv ot monetarv and flscal policics. But therc is an 0(1(1 para- dox here, 'lodav, we say that large government (lcbts constrain die use of fiscal policv. After the Second World War, however, and into the earlv 19 0S, lt was mone- tarv policv, not ßscal policv, that was constraincd hv die size ot the (lebt. In die Unitcd Statcs and Great Britain, in particular, die central hanks Nvere committed to keeping long-term interest rates as bw as possibk, becausc it was feared that rising rates vould cause

V o KSVJRTSU1AETL1CHE 1\GUNG 1994

huge debt-managernent problems.

Thev were not allowcd to let long- term rates risc until the earlv

19 OS, whcn thev had t() COifll)at the inflationarv shock to which 1 rckrrcd at the start aU mv taik - the shock produced bv the Korcan 'ar and the resulting coinrnuditv hooni. The so-tallcd Accord of

19 1, which lrced rnonctarv poliuN, from debt-managernent constraints in the United States, as rcachcd whcn 1 was taking mv frst undergraduate coursc. Thc revival of Bri tish nlc)nctarv policv took piace at thc same timc and, incidentaih, gave mc the subjcct for mv ovn doctoral dissertation.

The constraint lastecl much langer in the countrv to thc south aU us, hecausc much aU italv's debt is short terni, CV(fl now, and thcre has thus been a perpetual scmi- crisis in debt management.

Tcjdav, bv contrast, the size of the public deht is seen to constrain f'iscal policv, not monetarv policv, especiallv in high-debt European countrics. Same EU tountrics, in- eluding itaiv, are dccnied to be dose ta vinlating the so-cailcd sol- vene' constraint. iheir dcl)ts are so large that their governments must run budget defkits i-nereIN, to niake their intcrcst payments, and those budget dcflcits add to the stocks of (lebt outstanding. Such situations are potentialiv explo- sive, and they are causc Ikr real concern.

Yet (lebt levcls have not heen the only constraints an fiscal polic, even in thc high-deht caun- trics, anti another constraint has been marc important. Polities get in thc wav. Govcrnnients learned long aga that thev cannot talk about cutting or raising taxes wit}l- out having ta ask whosc taxes get cut anti vhose taxes get raised.

Nor can govcrnnicnts talk about

cutting or raising cxpcnditure vithout having to ask VhoSe benei'its get cut or whosc bcneiits get raiscd, and the problem be- comes particularlv pai nliil when govcrnments con tcmplatc chan - ges in programs that definc the

%'elfarc state.

1i'iis l)riflgS n'e to a propo_

sition suggestcd 1w reading l3arrv Eichengreen's remarkahk hook, Golden Fetters, which reexamines the cconomjcs anti politics of the interwar period. Eichcngrccn argucs convindingiv that several countrics, most notabiy France, were unabk t() deal with their econornit- problems hccause conlli t about the income distri bution kept thcm froin changing their fsca1 poli cies, and! am coming to b lieve that VC Face the sam.

l)roI)1em todav.

For the ffrst twa dccadcs after the Second World War, hcfore die First oil shock, the industrial caun- tries enjoved verv rapid economic growth, hv contrast with earlier periods, aixd bad rising real vagcs.

Thcsc achievemenis had twa major consequences. First, thev helpu(l to rninimize social and political conllict over the distribution ofthc national income. Second, they encouraged and permittcd govcrn- ments to undertake anihitious social - wellare programs, in the expectatinn that the rising rcvcnucs pru( luCe(l I)V econonhic growth wou!d flnancc thosc pro- grams. In the ncxt twa decades, Ii owe ve r, econ o iiuie grow th sIovcd down in most of'the indus- trial countries. Therebirc, d istri - butional confliuts bave rc_emergcd (inciuding, as in italv, regional conflicts), and it has beconic incrcasinglv (lilicult For govern- ments to iinancc expensive social-

VoI.KswIRrscH,I-iI Ichs IACUN( 1994 ()\/1 17

wellare prograrns. For l)oth of these rca.sons, it is vcrv hard todav to change liscal policies and even harder tu reverse the changes that are made. There was thus a rat- cheting up ot hudget <lelicits in the

1 97os,

after growth rates fll, and it was tollnwcd hv painful cflrts at 1'iscal consoli(lation in the

^1980s

cl'krts that have heen partial lv rcvcrsc(l

^I)V

tlu nem shucks of the carlv

^{1 9905.}

Let mc note in passing that

II! trk'

IITR

au cXtIt.flltI\

^ChuR Ull (11Iv111111d lt

sas vukI agi-t'&t iii 1 .urupe t

^s

lav that taxes on cm})Iuvcrs, uscd tu fiiance social-wtIlarv programs, disouragc them (rom hiring addi- tional workers and thus prevent u ncrn)l( )vmcnt trum tal ling vhcn rknian<l and <nit1nit risc. To

^Ic(IUCC

the IiscaI burden on cinployers, howcver, it mav also he nec cssarv tu reduce the lcvcl of social-wel- fare bcnefhs, i1erckre, European govcrnrncnts face an unarlswcral)Ic qUeStiOfl: Can an casing nt the t'is- cal hurden rcduce unemplovment fast enough tu prevent the in<Tcasc in social tensions t.hat is likelv

^tu

re- sult trum cutting the correspon- ding sodal-wdtare henefits? 1 dont knov the answcr. No oric docs, lt dues seem tu mc, huwes er, that Europe shoukl take steps tu raisc aggregate (lcmafl(l am] thus crcatc job opp< rtunincs, in order tu rein - torcc the incentives pruvk

^IC( 1

lw reducing t'iscal burdens on cm- plovers. Even thosc who believc

that such measures vv iii not bv thernselves reduce unemplovmcnt

t}iat it is largeiv structural shoukl agrce tu this rccommenda- tl()fl. lt is econuniicallv sound and politicaliv prudcnt.

Conclusion

l-low, then,

⁽¹⁰

1 answer thc c1ucs- tiofl in the title ot mv taik? Is mo- nctarv puIicv tue or'ilv instruinent vvc have heft tu inllutncc our ecu- nomiesf Mv answer has two parts:

Ycs, for now, bccausc no major (ountrv, exctpt

t)erIlal)s

Japan, is frec tu make hold use of tscal J)(-)licv. Deficits and dehts are too large. But no, l hope, in the longer tun, hecause monctarv policv can- not

^l)C

aolequatc tu the nceds ot

.tahilii.ation pohcv.

1onetarv

^pOlicV

cannot possi- hie be ade1uatc tu the nccds of

malI open conomies, like Austnia r the Netherhands. Their ccono- mis are lar tu<) open tor them to tuItrate frec fluating exchange rates over the long rtui, hut

^fl()

countr can pg its cxchange rate wit tu mut renounci ng an iiukpcn dent monetar) policv. Vhen tEe du that, moreover, thev art, as vou 'seit knos,

^CX1)OSC(l

tu div

l)OiiCiCS

ancl policv rnistakc' of the large neighbours tu vvhich thcv must tie their currencies and their econunues.

lt is, 1 know, the comrno vicw in Austria and other Euro- pean countrics that thcv have gaimwd, not lost, un balance trum cxcrcising the strong-currencv 01)ti( mn (i. e., pegging tu tEe deut - scht mark). But let mc ask a heret- ical qutstion. Might some otthosc countrics - and sorne larger coun- tries too - have fared better in the last fcw vears iI'thev had heen ahle to 1tmrqme more active counter cy- elical fiscal policies? This queStion is rareiv (kbated in Europe, hut it

VLKsWtRTcI1AI-TLR mir iÄcuc 1994

shouid be confronted. Let nie re- cast it COflcrctclv. Suppose that Austria's budget had l)eCfl lialan- ccd, on average, korn 1980 tlirough 1989, flut in COfltifiUOUs (ICfCit, and that we cuuid count on die Austrian govcrnrncnt to balance the budget, on avcrage, during die 19905. Voukl Austria be hetter or worse nil todav ii' its deAcit were larger teniporarliv tlian it is t(xla\, at a tirne ot high aml nsng unemplo'vmcnt?

1 can he mure controversial.

As sonic of you kni >w, 1 am morc svrnpathetic to EMU than manv of niN Amerkan (olleagues. lt is, 1 hclievc, die sensible outcomc for die EU, whatevcr onc mav think ahnut curtain provi SJ( )FIS ol the Maastricht Treat, especiallv those pertain ing tu the tranition, which look inereasingiv unvorkabk. l3ut die lirnits in die Treatv on flscai autonuniv make linie sense. Thev art rigid aml uttcriv arl)itrar.

In die absence ot a sizeal)ie and flexible budget lor die Comrnunitv as a whuie, which is not prospeet, individual [Ii countries viIl nccd niore not less lee' av tu cnn- (iLICt in(Icpen(lcnt liS(1l poliCieS

after thev have joifle(l die nione- tary union.

The tiscal limits might make sense ii they wcre intcndcd as transitional requirernents, aiined at forcing die Nec ol die fiscal consol idation rccjuired tu rebabi - litate i'iscal polkv in the bug run.

Until the high-deficit, high-cicht countrics bring their Iscal situati- ons tinder firm control, it would hc irnprudcnt For thern and unhealthv tor their neighbours to tolerate bigger budget delicits, even tcmporarilv. But after bud- get delicits are hrought under control, individual EU govern- nients should he Frec tu tolerate and even promote counter cycli-

cal l)udgctar% swings larger than thosc perniitted hv die perma- nent fiscal limits in die Maastricht Treat.

When we turn to large coun- trics with iloating cx. hang(! rates, like my own (or, for that matter, die EMS countries as a group), mv rea.soning leads mc in die opposite dircution. \Vith finating exchange rates and high CaI)ital mobilitv, hscal flexihilitv inav not be verv valuable. The changes in real exchangc rates produccd 1w coun- (er cvclicai hudgctary swings tcnd not oniv tu otiset the desired cfT'cts oii output an(l emplovrncnt hut also tu cause irreversible damage to export and import- compcting industrie.s. Which makes nie wunder, in turn, whether the Clinton acl ministra- tion is right t() insist that Japan cut taxes and run budget dcfkits in order tu stimulate its economv.

1 laving now chal lenged the conventional wisdorn hoth in Washington and in \"icnna, it i Linie tor mc to sit clown.

VÖ1KswlRTscnu.TI IC111 TAGuNr; 1994 )N/? 19

-w -

we

‚Z; ;:

ge

(')i\P

/?]

The Implications ofthe EU and the EEA

for the Banking and Payment Systems

In discussing tile topks that havc been suggested tor this pre- sentation, 1 \\ill depart from mv textl)ook economics in at least two wavs. First, 1 tend to regard the closcd econoiny case as the gencral case. Texthooks in mv timc vere mainlv on thc closcd cconomv, l)ut treated it as a special case to be then extenckd to the general case ot the opefl economy, Another issue in vhich l will tak-v an ap- proach that is not the one 1 learned at universitv is the role that pay- ment systems have in die monctar.

Sstem. Monctarv economics was mainly based on looking at the lun:tions 01 nionev as a numeraire an(l as an asset. Oniv in recnt vears payrnent systems ha t taken a great attention bv cemral banks and increasinglv also by monetarv economists.

The title o1 mv presentation,

"The liiiplications of die EU and the EEA for the Banking and Pay.

nient Systems", requires two re- marks, One iteni has been almost completeiv droppcd from that title in die prcsefltatiofl 1 vill give, nameiv the EEA-part, and one iteni was missing frorn the hegin- ning, namclv die monetary Union part of die tide. As vou will hear, 1 consi(ler that banking supervision and pavmcnt systems krm a sort uf triptvch with monetary policv.

Two items of die triptvch are in die titk, one is nhissing. Let mc briefiv sav what the plan ol mv remark is going tu bc. 1 vill lirst hriefh' dcscribe the war a typically du mc st i c

^{Tfl 0}

n et a rv

^S\'

Stern should he luoked. Sccondlv, 1 will descrihe in what wav the road towards the Euiopean Union is a process of transforrning die European system in a "domestic"

system, for all die thrce aspccts that form a monctarv system. 1 will thcn spend some Urne on die two main parts of die system that are die ohject of this presenta- tion, narneiv hanldng and die pav.

nient system. And linaliv, 1 will brieliv coninicnt firstiv on die EEA and secondiv on the 1)rospect for nionctarv union.

So let nie start bv recalling what die morphologv ofa dornestic monctarv system is. In die ciassic prcscntation

⁰¹

nionctarv

^CCOflO-

inics bv John Hiks, the notion ol two triads was introcluced to underiine die thrcc functions of nionev mcans of pavnieflt, unit of acCOUiit and store of va!ue) and die threc niotivcs for holding monev (transaction, precautionarr and speculative motives). One ol the main 1)oints of Hicks was that die functions anti die motives ofthese two triads were relatcd. Now 1 think that also central banking has a

sort of triadic nature. The threc elements of die triad are die i'unc- tions that the central bank per.

lorms in die threc felds ofpavrnent SyStems, monetarv policv and bank- ing supervision. And die three funetions are rclated in some vay tu the Flicksian triad. In a very sini- plificd wav one could sav that pav- ment System functions are rclatcd to thc function of monev as a nicans of pavment. that die mone- tarv poliev functions, tu die cxtent tu vvhich thev are relateil tu pricc stahiiit, arc rclatcd tu the function ot monev as a unit ot account antI die banking supervision futiction is related to the ability of monev tu act as an em.ctivc store

⁰¹

valuc.

hie threc 1unctions ol central banks are also very strongly linked one to die other. Thc prirnarv function olmonev is tu ad as a me- dium ofexchange. Anti tEe rnonc- tary systems that we hase bad for about a ccnwrv wcre die result ofa revolution in pavment technology which was lirst die movement from a commoditv tu a fiat cur- rencv, je. frorn a currcncv that bad an intrinsic vaIue to a currcncv that bad no intrinsic valuc, antI, in a suIiseqtient phase, die transiti n Ui-um ceritral bank monev to com- mercial bank nionev, nameiv the movenient wherebv an incrcasing share of« pavmcnts ceascd to be made in banknotcs antI started to be made by transkrring bank tic1iosits.

lt is fair tu sav that all the three itinetions of central hanking today were bascd on this rcvolu- tion in pavnient technologv. The role plavcd hv tEe central bank in the parment system is related to die issuance of banknotes. Mone- tarv policv, as wc conccive it todav, is foundecl on die posSiI)ilitV of having discretion in determining the

^nu)flCV

stock, which

^{was not}

22 ( Nfl VÜiKS 1W1RTSCliAITLICHE TAGUN(; 1994

43

possihk vhen the total stock of monev was detcrmined by the arnount of phvsical gold in exis- tence. Thc l)anking supervision function is rdatcd to the ntove- mcm fron) banknotcs to bank dc- posits and to the nced to prcserve stabic and creclihlc all thc tinic the rclationship between, say, one (en- tral bank Schilling and one com- mercial bank Schilling. The process that best ckscribcs the interrelation between these three funetions cii' central hanking and thc three aspects of the rnonctarv system is the cicaring and settkment pro- cess, that is the process whcrehv obhgations hctwceri banks are net- ted anti cventually settled in their nct arnounts bv moving central bank nionev ironi

^(>flC

bank to another. i'hat I)OCCSS is the core of the rnonctarv sstcm, thc point whcrc the pvn1ent sstcni 1 unc- tion, the monetarv policv tunction anti the banking supervision func- tiofl intcract ver)' cioseh. lt is also die process in which commercial bank monev an.l central bank monev intec-act and develop a dose reiationship.

Now, the irnportant fact is that in die last teil or fWtccn vears this monetarv system inherited trom the last centurv has heen

^CxposC(I

to lour main challunges. Onc is fl- nancial innovation afl(i die explo- sive growth of financial transac- tions. The second chalkngc is a change in technology which has tieen hrought about by the comhi- nation of data processing and telc- communication. This chang(

,

in tedcnologv is cornparable vith the advent of paper currenuv. A third challenge was die inflation of the

705

anti die com1)lcte abandon- nient of any linkage hetween the amount of monev and die real an- chor. The weakening of this anchor which cxisted until

^{197 1,}

when the

last link to gold was broken, has rnadc it possibk to make mistakes in exaggerating the active role of monetarv policv anti has in sonw was explaincd and dctermined the inflationarv period of the late

^6os

and

^705.

ihe fourth challenge is die process ot' intcrnationali-iation whci-elyv the territorial coind - deflCe l)etwecn markets and natio- nal legislation has been broken.

The E1J process k not siniplv a process ol' pulling together several countries hut instcad a pruccs..

^ol

joining forces to flWCt thi nCW challeriges that molle tarv sstems are facing mcl oniv the internationalizaticcc process. The European arci is graduallv evolving intc)

¹

"dornestic" svste

^1)).

Iii prOCCSS started in the ‚os. l can he seen as the gradu.

-

ii transformation of an original program inc ol' developi ng

ii it ( - ella

tional rclationsliips into a projt

-ct

of organizing a domestic System.

The l'irst trcatics wcre internatio- nal treatics. ihe last treat, die Maastricht trcatv, was a constitu- tional change. This procss of transtorming Europe into what 1 have called a domestic system ap- I)lieS to the triadic naturc of central lianking functions.

Ten vears ago there was still complete segmentation in hanking systems, there were no rnore rela- tions between, sav, Italian hanks and banking activitv in lrarice than there could have l)ccfl between ltalian hanks and hanking activities in die Unitcd States or in Japan.

Four vears latcr, in

^1988,

die icgis- lative process

⁰¹

ereating the singk market was well untier war. Capi- tal movements were (-omplctclv lihcraiizcd and foreign exchange restrictions were lilted, The idca

or a monetarr union had heen re- vived in

¹⁹⁸⁸

when die Dclors

Vo1gswIwrscIAITitcHF T«;tix; 1994 ( 9NB ²³

Committec was created, vhiIc the pavnient system was still dormant.

Five vears later, in r 99 ^3, the pic- ture was conipletelv dillerent. The Maastricht trcatv was ratilicd, vhich means tliat die programme ofa monetarv union was huilt into die FLI constitution . After the start olthc single market, the pro-

CCSS ot crcating a rloincstic set-u1) lor die banking system came loscr to ils l)l)jCCtIVC. 13v die same vear, a lot aU work has been done an riicnt systems. Finaliv, also in I99, dIe EMS-LRM was vi rtuallv suspended. (1 et nie

sav, in passing, that tiiis sus- p&'rIsi( n did not COEI](' to !'flV

'%Ilprise, becausc 1 alwavs

c nsidcrcd the ERNI heing tragik and unmaintable.

\ monetarv ^Ufliofl sas ne- Lussarv, in mv view, just to (liminate this fragilitv. Rut l liave tu sav that l JicJ not ix1,ct thc ERI\1 c:casing ti) operate as a binding nieuhauisrn hctoie die final stagt- of monctarv Uniofl would he reache(I.) Thus, in a period alten vears a lot olgrounl has licen ^cO\C1c(l in the proces ol translui-iniiig die 1C/ [:1.1 into a

"(lOm(fStiC" System.

Returrting to the pa aligm that 1 havu j)rcscntcd lur a rIonwstic ninri*'tarv system, what are die fcatures ol' die modcl adapteri liv die EIJ The European tlnion con- sists ofa singk n-iarkct plus a single currencv and a singk central bank plus same elements of macro-eco- flomic and, in particular, fscal diseipline. Cornparcd tu die US die EU gocs, in same respects, kirther dran die American system in having a unilicd ecom)inic and nionctarv constitution. For exaniple, in the United States thcre are rio l'edcral, i.e, c()nstitutional, pruvisions kr the tiscal stance ot the states of die union as there are in die Maastricht

treatv tor the nieinber states of die FU. Or, ta take a smaller issuc, therc is also na l7cderal legislation für insurance coinpanies in die United States, whil in die EU therc cxists a Coinniwiitv legisla- tion für insurance companies.

There are three relevant aspe(ts that. ^IICC(l tU he cunsnlercd to dcscribe the EU model ota nio- nctarv system. ()nc concerns die conipctcnccs aU the central banks comparctl to the competences aU tithcr bodi5, die second concerns die union's compctc'nccs conipa - rcd tu the national t-umpctences, the thircl relates tu die degrec ol' centralisation aU the European system ot central banks. The Eh- model iii a nic)nctary system m'oii- sists ol a highls independent ecu- tral bank. The degrec olindepen-

leiiee cvhich is given hv die

!'vlaastricht treatv tu die central bank goes luither than anvthing t'xpericncetl before, incliiding the Ftderal Repuhlic of (iernlanv. Tliis is so not cmlv because aU the provi- sions ot die trcatv, hut also partiv hecause ol die institutionaliv and politically looscr system that sur- rounds the central bank at the EU level, compa re 1 to v hat surn 'u nds the central bank at die national The second kature relates to t.hc competences ol die European Central Rank, that has lull compe- tence an monctarv policv and pa)- ment systems, but littk or na competence in banking supervi- sion. The third feature is a verv high degree ot dcc entral i/ati( in.

The European system of central banks is an Institution of die Union, i . e. a supranatir)nal i nstitu - tion, hut ii is very deceiitraliicd witjiin itsell Dccentralized does not mean that the national central banks will art as national authori- ties, thev will art as deccntralii.ed entities ola supranational system.

24 (')\7' Viii KsvIIrsc1l.-I-rlrcIIh 1Ä,us.c; 1994

i()M1.) l'l).\ L!IIU1.•

The EU model centrali-ies to a large cxtent die lcgislativc fiinction on banking but kaves die executive function, nameh on the -ground - supervision, in national hands. So the kgislator is European, die cxc- cutor, so to speak, is national. In this rcspect, national central hanks, or at least thosc which have bank- ing supervision authorit will act as nicmhers of a federal system as Far as paymcnt systems and mo- nctarv policv functions are ^COii- ccrned, lut will colitinuc to act as national authoritics applving a kderal legislation as lir as banking supervision is concerncd.

Let mc now move from this static, niainlv institutional dcscrip.

tion to a presentation of how things are moving and how thev dcvelop froni a functional, as dis- tinguished from an institutional, point of view. 1 will concentrate on what has been done ancl what is bcing donc in die two main lields mcntioned in mv title, naniely in die flcld of banking and pavmcnt systems, whilc 1 will not considc.r die third coniponent of die trip- tych which is monetary policy.

Recent Developments in the Banking System A complete bodv of hanking kgis- lation has heen dralted at the Euro- pean Llnion level within a vcrv short perio(l of tinic. Thc first im- portant ncw (lirective in the ban- king flcld was thc Second Banking Coordination I)irectivc ol 1989.

Before that there wcre thrce (lirec- tives. The first, adoptcd in _''iri, conccrned the definition of credit institution and the conditions under which new hanks coukl bc created. The two others, which did not change much in die shape

01 our banking systems, where on consolidated supervision and on banking accounts. Since 1986 die

EC has been extrcmeh fast in tue acioption a fle'V EC wide banking kgislation. Now, it is conimonlv accepted that in hanking die kgis_

lator is the European Union. Itaiv, for example, had a banking law that was adoptcd in 16. lt has been conipletelv suhstituted liv a new law that canle int() force cariv this vear. lt is die Italian transla- tion, so to spcak, of thc Second Banking Directive and thc process lias 4OflC vcrv smoothlv and very e$flcientiv.

What are the main elements of t}iis EU banking kgislation? In mv opinion die first main point is that anv banking license granted by die national authoritv of onc 01 the nieml)er states is a liccnsc to SUp-

piv banking services in the vhole tcrritory of the Union and not oniv in die countrv vhose author- ity lias issued die ticensc. Everv national authoritv has die right to give a liceosc to ofFer banking ser- vices throughout die EU territorv, just as ii die authoritv of Rhode Island coukl issuc a license where- bv hanking Services can be o!kred throughout the Uriitcd States. The second element is the so-called minimum harmonization: All hanking legislations have to compiv with sorne minimum rules ofpru- dent and sound banking. The third element is that each bank will act under die control and supervision of its home country authority, naniely the countrv that has Ii- censcd that bank tor example, die London hranch of die 1)eutschc Rank will he treatcd just as the Hamburg branch ofthe Deutsche Bank and not as a foreign branch, hoth bv die German supervisor and bv die British supervisor; for die lauer that hranch is not an enti- tv to be supervised for prudential reasons. The fourth iniportant ele- ment is that for nionetary policv

VOLKswIRT5CIIAFTCtcHt T;uNG 1994 2

anl liquiditv purposes the compe- tenec is kft tu the host authorit',, so that ihe London hranch ui the Deutsche Bank is d1ecivelv sub- iect tu the Rank ut England as tir as monetarv policv ancl lU1tIliuit\ pro- VtSiOfls are coflccrIlCd "1 iquidi Lv puliev" is a rather vaguc nuUon that is leading hack tu the triptvch of banking supervision, monetarv polivy and paVmeflt svtcin luuc- tiofls. lt is diflicult tu spilt it, hut the ruk- is drafleil as ii die splitting

can own shares of banks and bariks can own hares of inclustrial coin- panies While this is, in esscnee, tue model ot hanking lcgislatcd in the FC direetive, providcd die national kgislation is not discriiiii- natory and clocs not contradiet the EU inodel, less dcregulated nUxiels can 1w adoptcd i)v national k'gislators. In 1)raetiec, ho',','ever, this possibilitv is lirnited liv a pro- cess ol competit ion 1)etween national regulations wherebv everY unTr' tends tu reirain korn im-

iin)ortaut kiint ol thIs 'truetiun is, as we have seen, that the legi siative iuncti 1)11 ol banking is European hut the aetual supcl-

ision is national.

Vliat is the model ul banking a t( )pted liv the Cuininunitv legis- lator? lt is a model of universal hanking vith no sc)aration 1w- t% ten (ornnlercial an(l invest mtnt banking, of frec branc hing, ol irce interstate banking and ofno sepa- ration hetween so-cal led banking and comnicrcc In other words, the vhok range of t'inancial servi- ces tau he of1rcd bv a bank. A bank vhich has a license can open branches ircely and it can operate

&ither liv opening branches or by clirectiv ofTcring services across h-ontiers, acl-oss inter EU fron- tiers. \Vith sorne lirnits and exccp- tiolis d cre is tU) proliihition k)r a bank tu have owncrship 1ink' ',vith nun banking cntities, industrial entities ur commercial cfltitie, In other wor(Is, industrial companies

posing inure restrictions than die EC legislaln iti

has cione.

'Nhat can we ex WCt ii )fli this mockI 5 \c can

Xj)CCt rnore conipcti- lion and less rc-gulaiion in hanking than 'a'e bad

niore in our nwrnhrr countrics. For instance, there t as 00 (ne branching in mv t'ountrv, until less tlian jo vears ago; dwre were restrictions ort lending outsicle tEe region whc-re a bank bad branches; there was a sharper Separation hetween bank- ing and comniercc tlian die EC legislation toresees. So we can cx- pecl less regulation, rnore compe- tition t han he irc and essent ial lv the abandonment ui tEe rnodcI of banking that was adoptcd in sume Europe in eountrics, as weil as in the ljnited States afl(l Japan, a.s a result of the hanking crisis in tEe

‚os. flic undcrlying idca ot bank reiornis of thc 3os was that if die banking industr had a certain dc-

rce ^(.)I ni(:)noj)l dv or )l igopolv, it

was making ni re corn fortabic

prthts that vould rnake hanks' stabilitv 1)reservcd heuer than in a highl ci nnpctitivc System.

Although we have tu expect these ctlects, 1 du not 1 hink that the changes in the hanking industrv at die EU kvcl will 1w drarnatic in

.de ~

26 ().xb VoIKSwIRI',CFI\trucIIri ii;(;UNG 1994