Under mild assumptions, the data indicate that fluctuations in nominal interest rate differentials across currencies are primarily fluctuations in time-varying risk. This finding is an immediate implication of the fact that exchange rates are roughly random walks. If most fluctuations in interest differentials are thought to be driven by monetary policy, then the data call for a theory which explains how changes in monetary policy change risk. Here we propose such a theory based on a general equilibrium monetary model with an endogenous source of risk variation—a variable degree of asset market segmentation.

This paper was published with no issue number.

This paper was published with no issue number.

No abstract available.

This paper was published with no issue number.

Simultaneously published as part of the Ninth District Economic Information Series.

This paper was published with no issue number.

No abstract available.

A speech delivered to the Marketing Research Seminar for Gas Utilities, sponsored by the American Gas Association, October 2, 1969.

This study attempts to determine whether entry regulation is more restrictive in unit or branch banking states.

A model is developed in which entry, defined as the formation of a new bank or branch, is explained as being a response to the general economic climate plus regulation. Using time series data and dating the onset of effective entry regulation with the passage of the banking Act of 1935, it is ascertained that effective entry regulation has caused the aggregate rate of entry into commercial banking to fall by about sixty percent. This analysis included adjustments for changes in economic conditions. The effect of entry regulation, however, has not been uniform. Entry rates in unit banking states is estimated to be seventy percent lower than it would have been in the absence of regulation, while limited branching and statewide branching states have experienced fifty and forty percent declines, respectively.

This analysis suggests that entry in unit banking states has been more restricted than in branch banking states. Two reasons are cited that may account for this differential impact of regulation. First, regulators may tend to be more pessimistic than potential entrants regarding the profitability of a new banking office. This pessimism may not have a significant effect upon entry when other factors indicate a high probability of success, but may be important in marginal cases. Thus, because branch banking states tend to be more prevalent in the west, and because this has been the area of greatest economic growth in the past forty years, the pessimism of regulators would tend to be less apparent in branch banking areas. Second, regulators apparently prefer to issue charters for new branches rather than for new banks because they have more information on which to base their decisions. In addition, if the market demand is misjudged, a branch bank has retained earnings and other branches from which to carry short-term losses.

This study attempts to determine whether entry regulation is more restrictive in unit or branch banking states.

A model is developed in which entry, defined as the formation of a new bank or branch, is explained as being a response to the general economic climate plus regulation. Using time series data and dating the onset of effective entry regulation with the passage of the banking Act of 1935, it is ascertained that effective entry regulation has caused the aggregate rate of entry into commercial banking to fall by about sixty percent. This analysis included adjustments for changes in economic conditions. The effect of entry regulation, however, has not been uniform. Entry rates in unit banking states is estimated to be seventy percent lower than it would have been in the absence of regulation, while limited branching and statewide branching states have experienced fifty and forty percent declines, respectively.

This analysis suggests that entry in unit banking states has been more restricted than in branch banking states. Two reasons are cited that may account for this differential impact of regulation. First, regulators may tend to be more pessimistic than potential entrants regarding the profitability of a new banking office. This pessimism may not have a significant effect upon entry when other factors indicate a high probability of success, but may be important in marginal cases. Thus, because branch banking states tend to be more prevalent in the west, and because this has been the area of greatest economic growth in the past forty years, the pessimism of regulators would tend to be less apparent in branch banking areas. Second, regulators apparently prefer to issue charters for new branches rather than for new banks because they have more information on which to base their decisions. In addition, if the market demand is misjudged, a branch bank has retained earnings and other branches from which to carry short-term losses.

No abstract available.

The 1972 version of WP9 was published as part of the Ninth District Economic Series.

This paper was published with no issue number.

This paper was published with no issue number.

No abstract available.

This paper was published with no issue number.

The 1972 version of WP9 was published as part of the Ninth District Economic Series.

No abstract available.

Paper presented at the meeting of the System Committee on Financial Analysis, Minneapolis, October, 1971.

Prediction interval tests are applied to the reduced forms of two quarterly models of the U.S. (the "old" FRB-MIT model and the Michigan model). The results illustrate the range of tests one can perform on an estimated simultaneous equation model. In particular, the tests determine whether ex post forecast errors can be attributed to structural deficiencies of the models. The paper examines confidence regions and other aspects of forecast distributions-comparisons between mean forecasts and nonstochastic forecasts, comparisons between, forecast variances from multiperiod endogenous simulations and those from one period simulations, and comparisons between forecast variances and residual variances.

This paper was published with no issue number.

This paper was published with no issue number.

No abstract available.

This paper was published with no issue number.