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What Can We Learn from the Real Bills Doctrine?

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  2. Economics, Finance, Business & Management
  3. Credit and Capital Markets – Kredit und Kapital
  4. Vol. 52, Issue 1
  5. pp. 89–113

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Tarkka, J. What Can We Learn from the Real Bills Doctrine?. Credit and Capital Markets – Kredit und Kapital, 52(1), 89-113. https://doi.org/10.3790/ccm.52.1.89
Tarkka, Juha "What Can We Learn from the Real Bills Doctrine?" Credit and Capital Markets – Kredit und Kapital 52.1, 2019, 89-113. https://doi.org/10.3790/ccm.52.1.89
Tarkka, Juha (2019): What Can We Learn from the Real Bills Doctrine?, in: Credit and Capital Markets – Kredit und Kapital, vol. 52, iss. 1, 89-113, [online] https://doi.org/10.3790/ccm.52.1.89
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What Can We Learn from the Real Bills Doctrine?

Tarkka, Juha

Credit and Capital Markets – Kredit und Kapital, Vol. 52 (2019), Iss. 1 : pp. 89–113

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.52.1.89
Language
English
Pages
25
Keywords

Author Details

Juha Tarkka, Dr. Soc. Sc. (econ) Bank of Finland, PO Box 160, 00101 Helsinki, Finland

References

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  3. Anderson, G./Tollison, R. (1984): Sir James Steuart as the Apotheosis of Mercantilism and His Relation to Adam Smith. Southern Economic Journal, Vol. 51 No. 2.  Google Scholar
  4. Bagehot, W. (1910): Lombard Street: A Description of the Money Market. London: Smith, Elder & Co. (First edition 1873).  Google Scholar
  5. Berrospide, J. (2013): Bank Liquidity Hoarding and the Financial Crisis: An Empirical Evaluation. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C.  Google Scholar
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  42. Morton, W. A. (1939): Liquidity and Solvency. American Economic Review, Vol 29, No. 2.  Google Scholar
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  52. Williamson, J. (1995): What Role for Currency Boards. Washington: Institute for International Economics.  Google Scholar
  53. Akerlof, G. A. (1970): The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics Vol. 84, No. 3.  Google Scholar
  54. Aldcroft, D. H. (1987): From Versailles to Wall Street. Aylesbury: Pelican Books.  Google Scholar
  55. Anderson, G./Tollison, R. (1984): Sir James Steuart as the Apotheosis of Mercantilism and His Relation to Adam Smith. Southern Economic Journal, Vol. 51 No. 2.  Google Scholar
  56. Bagehot, W. (1910): Lombard Street: A Description of the Money Market. London: Smith, Elder & Co. (First edition 1873).  Google Scholar
  57. Berrospide, J. (2013): Bank Liquidity Hoarding and the Financial Crisis: An Empirical Evaluation. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C.  Google Scholar
  58. BIS (2008): Principles for Sound Liquidity Risk Management and Supervision. Basel Committee on Banking Supervision. Basel: Bank for international Settlements.  Google Scholar
  59. BIS (2013): Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools. Basel Committee on Banking Supervision. Basel: Bank for International Settlements.  Google Scholar
  60. BIS (2014): Basel III: The Net Stable Funding Ratio. Basel Committee on Banking Super­vision. Basel: Bank for International Settlements.  Google Scholar
  61. Blaug, M. (1968): Economic Theory in Retrospect. Cambridge: Cambridge University Press.  Google Scholar
  62. Born, K. E. (1983): International Banking in the 19th and 20th Centuries. Leamington Spa: Berg.  Google Scholar
  63. Brunner, K./Meltzer, A. H. (1988): Money and Credit in the Monetary Transmission Process. The American Economic Review, Vol. 78, No. 2.  Google Scholar
  64. Brunnermeier, M. K./Pedersen, L. H. (2009): Market Liquidity and Funding Liquidity. The Review of Financial Studies Vol. 22, No. 6.  Google Scholar
  65. Checkland, S. G. (1975): Scottish Banking. A History, 1695–1973. Glasgow: Collins.  Google Scholar
  66. Claassen, E.-M. (1985): The Lender-of-Last-Resort Function in the Context of National and International Financial Crises. Weltwirtschaftliches Archiv, Vol 121, No. 2.  Google Scholar
  67. Daugherty, M. (1942): The Currency-Banking Controversy. Southern Economic Journal, Vol. 9, No. 2.  Google Scholar
  68. Diamond, D. (1984): Financial Intermediation and Delegated Monitoring. Review of Economic Studies Vol. 51, No. 3.  Google Scholar
  69. Diamond, D. (1997): Liquidity, Banks, and Markets. Journal of Political Economy, Vol. 105, No. 5.  Google Scholar
  70. Diamond, D. W./Dybvig, P. H. (1983): Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy Vol. 91, No. 3.  Google Scholar
  71. Fama, E. (1970): Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance Vol. 25, No. 2.  Google Scholar
  72. Friedman, M. (1960): A Program for Monetary Stability. New York: Fordham University Press.  Google Scholar
  73. Friedman, M./Schwartz, A. (1963): A monetary history of the United States. Princeton University Press.  Google Scholar
  74. Gilbart, J. W. (1911): The History, Principles and Practice of Banking. London: G. Bell and Sons.  Google Scholar
  75. Goodhart, C. (1988): The Evolution of Central Banks. Cambridge, Mass.: MIT Press.  Google Scholar
  76. Goodhart, C. (2008): Liquidity Risk Management. Banque de France Financial Stability Review No. 11, February 2008.  Google Scholar
  77. Goodhart, C. (2011): The Basel Committee on Banking Supervision. A History of the Early Years 1974–1997. Cambridge: Cambridge University Press.  Google Scholar
  78. Hamilton, H. (1956): The Failure of the Ayr Bank, 1772. The Economic History Review, New Series, Vol. 8, No. 3.  Google Scholar
  79. Hetzel, R./Leach, R. (2001): The Treasury-Fed Accord: A New Narrative Account. The Federal Reserve Bank of Richmond Economic Quarterly, Vol. 87, No. 1.  Google Scholar
  80. Holland, R. C. (1974): Statement before the Subcommittee on Bank Supervision and Insurance of the Committee on Banking and Currency, U.S. House of Representatives, December 12, 1974. Federal Reserve Bulletin, Vol. 60, No. 12.  Google Scholar
  81. Hollander, S. (1992): Classical Economics. Toronto: University of Toronto Press.  Google Scholar
  82. Holmström, B./Tirole, J. (2011): Inside and Outside Liquidity. Cambridge, Mass.: MIT Press.  Google Scholar
  83. Horsefield, J. K. (1944): The Origins of the Bank Charter Act, 1844. Economica (New Series) Vol. 11, No. 44.  Google Scholar
  84. Humphrey, T. (1982): The Real Bills Doctrine. The Federal Reserve Bank of Richmond Economic Quarterly, Vol. 68, No. 3.  Google Scholar
  85. IMF (2010): “Reserve accumulation and international monetary stability”, paper prepared by the Strategy, Policy and Review Department. Accessed 16 February 2018, https://www.imf.org/external/np/pp/eng/2010/04130.pdf.  Google Scholar
  86. Johnson-Calari, J./Grava, R./Kobor, A. (2007): Trends in Reserve Management by Central banks. In Bakker, A. F. P and van Herpt, I. R. Y. (eds.) Central Bank Reserve Management. New Trends from Liquidity to Return. Cheltenham: Edward Elgar.  Google Scholar
  87. Laidler, D. (1984): Misconceptions about the Real-Bills Doctrine: A Comment on Sargent and Wallace. Journal of Political Economy, Vol. 92, No. 1. 149–155.  Google Scholar
  88. Luckett, D. G./Steib, S. B. (1978): Bank Soundness and Liability Management. Nebraska Journal of Economics and Business, 17:3, 37–47.  Google Scholar
  89. MacLaury, B. K. (1973): Liability Management. Speech December 7, 1973. Statements and Speeches of Bruce K. MacLaury. 1971–1976, https://fraser.stlouisfed.org/title/1114, accessed on December 9, 2016.  Google Scholar
  90. Meltzer, A. (2003): A History of the Federal Reserve. Volume I: 1913–1951. Chicago: The University of Chicago Press.  Google Scholar
  91. Mints, L. (1945): A History of Banking Theory in Great Britain and the United States. Chicago: University of Chicago Press.  Google Scholar
  92. Mitchell, W. F. (1923): The Institutional Basis for the Shiftability Theory of Bank Liquidity. The University Journal of Business, Vol. 1, No. 3.  Google Scholar
  93. Modigliani, F./Miller, M. H. (1958): The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review Vol. 48, No. 3.  Google Scholar
  94. Morton, W. A. (1939): Liquidity and Solvency. American Economic Review, Vol 29, No. 2.  Google Scholar
  95. Moulton, H. G. (1918): Commercial Banking and Capital Formation III. Journal of Political Economy, Vol. 26, No. 7.  Google Scholar
  96. OECD (1985): Trends in Banking in OECD Countries. Paris: OECD.  Google Scholar
  97. Phillips, R. (1996): The Chicago Plan and New Deal banking reform. In D. Papadimi­triou, ed.: Stability in the Financial System. New York: Macmillan.  Google Scholar
  98. Prochnow, H. (1949): Bank Liquidity and the New Doctrine of Anticipated Income. The Journal of Finance, Vol. 4, No. 4.  Google Scholar
  99. Rajan, R. (2005): Has finance made the world riskier? in The Greenspan Era: Lessons for the Future, Federal Reserve Bank of Kansas City.  Google Scholar
  100. Smith, A. (1991): The Wealth of Nations. Everyman edition (original 1776).  Google Scholar
  101. Stein, J. (1998): An Adverse-Selection Model of Bank Asset Management with Implications for the Transmission of Monetary Policy. The RAND Journal of Economics, Vol. 29, No. 3.  Google Scholar
  102. Steuart, S. J. (1966): An Inquiry into the Principles of Political Oeconomy. Volume Two (original 1765). Chicago: The University of Chicago Press.  Google Scholar
  103. Van Dillen, J. G. (1964): History of the Principal Public Banks (original 1934). London: Frank Cass.  Google Scholar
  104. Williamson, J. (1995): What Role for Currency Boards. Washington: Institute for International Economics.  Google Scholar

Abstract

The historical development of bank liquidity doctrines is surveyed from the real bills doctrine and its antecedents to the present day. The underlying ideas of the succession of several dominant liquidity doctrines are analysed and compared, with attention to their historical contexts and respective weaknesses as exposed by experience. While the real bills doctrine is obsolete as such, its central idea that the liquidity of banks requires their credit to be linked to real income generation in the economy is unique among the different liquidity doctrines and can be useful as the liquidity regulation of banks is now subject to renewed interest.

Table of Contents

Section Title Page Action Price
Juha Tarkka: What Can We Learn from the Real Bills Doctrine? 1
Abstract 1
Zusammenfassung 1
I. Introduction 2
II. The Real Bills Doctrine as a Liquidity Rule 3
III. The Antecedents of the Real Bills Doctrine 6
IV. Remarks on Narrow Banking 7
V. The Shiftability Doctrine 8
VI. After the Great Depression and the War: The Anticipated Income Theory 1
VII. Liability Management 1
VIII. The Great Deregulation 1
IX. The Financial Crisis and its Aftermath 1
X. Discussion 2
References 2

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