Skip to main content
SpringerLink
Log in

Theoretical and empirical foundations of the Deutsche Bundesbank’s monetary targeting

  • Report
  • Published:
Intereconomics

Abstract

Criticism of the course followed by the Deutsche Bundesbank has been increasing recently. Professor Dr. Otmar Issing explains the theoretical concept of German monetary policy and the basic principles of the Bundesbank’s monetary targeting.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. This definition (our translation) is given in R. Richter: Geld-theorie, 2nd ed., Berlin 1990, p. VII.

  2. Frank Hahn: Money and Inflation, Oxford 1982, p. 1.

  3. R. Richter, op. cit. Geld-theorie, 2nd ed., Berlin 1990, p. 3. our translation.

  4. See B. Hansen: A Survey of General Equilibrium, New York 1970, pp. 128–134.

  5. See I. Fisher: The Purchasing Power of Money, New York 1911. On the origins of the quantity theory of money, see D. Hume: Writings on Economics, 1752, ed. E. Rothwein, Madison 1955.

  6. See J. M. Keynes: The General Theory of Employment, Interest, and Money, London 1936.

  7. See M. Friedman (ed.): Studies in the Quantity Theory of Money, Chicago 1956.

  8. See H. G. Johnson: The Keynesian Revolution and the Monetary Counter-Revolution, in: American Economic Review, Papers and Proceedings, Vol. LXI, 1971, pp. 1–14.

  9. See R. E. Lucas: Studies in Business Cycle Theory, Cambridge (Mass.) 1981.

  10. See F. Kydland und E. C. Prescott: Rules Rather than Discretion: The Inconsistency of Optimal Plans, in: Journal of Political Economy, Vol. 85, 1977, pp. 473–492.

  11. F. Hahn, op. cit. Money and Inflation, Oxford 1982, p. 34.

  12. See H. Schlesinger: Zehn Jahre Geldpolitik mit einem Geldmengenziel, in: W. Gebauer (ed.): Öffentliche Finanzen und monetäre Ökonomie, Frankfurt 1985, pp. 123–147.

  13. See O. Emminger: D-Mark, Dollar, Währungskrisen, Stuttgart 1986.

  14. H. Schlesinger: Die Geldpolitik der Deutschen Bundesbank 1967–1977, in: Kredit und Kapital, Vol. 11, p. 11.

  15. See Deutsche Bundesbank: Methodological Notes on the Monetary Target Variable ‘M3’, in: Monthly Reports of the Deutsche Bundesbank, Vol. 40 (3), 1988, pp. 18–21.

  16. See W. Poole: Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model, in: Quarterly Journal of Economics, Vol. 84, 1970, pp. 197–216.

  17. See Deutsche Bundesbank: The longer-term Trend and Control of the Money Stock, Monthly Report, Vol. 37 (1), 1985, pp. 13–26 and the bibliography provided there.

    Google Scholar 

  18. See Deutsche Bundesbank: The Correlation between Monetary Growth and Price Movements in the Federal Republic of Germany, Monthly Report, Vol. 44 (1), 1992, pp. 20–29; as well as K.-H. Tödter and H.-E. Reimers: Das Konzept der Preislücke für die Bundesrepublik Deutschland, discussion paper, June 1992, Deutsche Bundesbank.

    Google Scholar 

  19. There is not the space here to discuss the numerous investigations of this question; there is a survey of them in S. M. Goldfeld and D. E. Sichel: The Demand for Money, in: B. M. Friedman and F. Hahn (eds.): Handbook of Monetary Economics, Amsterdam 1990, Vol. 1, pp. 299–356.

  20. See J. M. Boughton: Long-Run Money Demand in Large Industrial Countries, in: IMF Staff Papers, Vol. 38, 1991, p. 1–32; H. Schlesinger and W. Jahnke: Geldmenge, Preise und Sozialprodukt: Interdependenzzusammenhänge im Lichte ökonometrischer Forschungsergebnisse für die Bundesrepublik Deutschland, in: Jahrbücher für Nationalökonomie und Statistik, Vol. 203 (5–6), 1987, pp. 576–590.

  21. cf. K.-H. Tödter and M. C. Wewel: Ein ökonometrisches Portfoliomodell für den privaten Sektor in der Bundesrepublik Deutschland, in: Kredit und Kapital, Vol. 24 (2), 1991, pp. 235–253.

  22. See J. J. Rotemberg, J. C. Driscoll and J. M. Poterba: Money, Output and Prices: Evidence from a New Monetary Aggregate, National Bureau of Economic Research, Working Paper No. 3824, 1991; A. Serletis: The Demand for Divisia M1, M2, and M3 in the United States, in: Journal of Macroeconomics, Vol. 9 (4), 1987, pp. 567–591.

  23. See Deutsche Bundesbank: Review of the 1992 Monetary Target and the Raising of the Discount Rate, Monthly Report, Vol. 44 (8), 1992, pp. 15–20.

    Google Scholar 

  24. See A. Lamfalussy: The Restructuring of the Financial Industry: A Central Banking Perspective, in: Deutsche Bundesbank, Auszüge aus Presseartikeln, No. 18, March 6, 1992, pp. 11–15.

  25. See G. Laske: Eine Untersuchung über Innovationen im internationalen Bankgeschäft durch die Notenbanken der Zehnergruppe, in: A. Gutowski (ed.): Neue Instrumente an den Finanzmärkten: Geldpolitische und bankenaufsichtliche Aspekte, Berlin 1988, pp. 43–63.

  26. See J. J. Hallman, R. D. Porter and D. H. Small: M2 per Unit of Potential GNP as an Anchor for the Price Level, Board of Governors of the Federal Reserve System, Staff Study No. 157, 1989; as well as by the same authors: Is the Price Level Tied to the M2 Monetary Aggregates in the Long Run, in: American Economic Review, Vol. 81, 1991, pp. 841–858.

  27. For further details of the P-Star concept cf. also Deutsche Bundesbank The Correlation between Monetary Growth and Price Movements in the Federal Republic of Germany, op. cit..

    Google Scholar 

  28. J. A. Schumpeter: Das Sozialprodukt und die Rechenpfennige, Glossen und Beiträge zur Geldtheorie von heute, p. 116; reprinted in: J. A. Schumpeter: Aufsätze zur ökonomischen Theorie, Tübingen 1952 (our translation).

Download references

Author information

Authors and Affiliations

  1. Deutsche Bundesbank, Frankfurt/Main, Germany

    Otmar Issing

Authors
  1. Otmar Issing
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

I would like to thank Dr Tödter and Dr Reimers for their invaluable assistance.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Issing, O. Theoretical and empirical foundations of the Deutsche Bundesbank’s monetary targeting. Intereconomics 27, 289–300 (1992). https://doi.org/10.1007/BF02928062

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02928062

Keywords

Search

Navigation