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Analysis and insight into trends
in money and banking, and their impact
on the world's leading economies

Staff Research

Money in the Great Recession

Edited by Professor Tim Congdon

© 2017 - Edward Elgar Publishing

In the book's introduction and first chapter Tim Congdon proposes that the Great Recession can be explained by a large fall in the rate of growth of the quantity of money, broadly-defined, which reflected developments in the banking system. In particular, he suggests that the regulatory demand for higher capital/asset ratios from September 2008 caused banks to shrink their risk assets and so led to the destruction of money balances. While banks undoubtedly had problems of their own making, officialdom's tightening of regulation was mistimed and inappropriate, and had "vicious deflationary consequences at just the wrong point in the business cycle". The Great Recession could have been avoided if quantitative easing (to boost the quantity of money), rather than the increase in capital ratios, had been pursued earlier.

The book features contributions from nine authors in total, taking different perspectives on the Great Recession

For more details see the publisher's website or click on the image of the book's cover.

Index of European monetary integration

This project has been co-ordinated by Juan Castaneda and Pedro Schwartz

The Project is sponsored by: The Institute of International Monetary Research, the Institute of Economic Affairs and the University of Buckingham's Beloff Centre. The use of a single currency markedly reduces transaction costs and thus benefit trading partners; however, there are also economic costs to using a single currency that explain why dealing in a number of currencies separated by flexible exchange rates may be a second best solution. In addition, the use of a single currency may be subject to political constraints that make it too costly for Governments to adopt. We shall test whether persistent differences in levels of output, unemployment, inflation, real rates of exchange, and the relative size of the bail-out funds needed to avoid the lapse of a member-state explain when single monetary zones are unstable and tend to split. In particular we use the variance of these economic indicators across the Eurozone member states to produce several indexes on the optimality of the euro as a currency union.

You can access a summary of our project here

For the 'Euro-map' dataset (with data on the 7 indicators used per country, 1999-2015), see here

For the dispersion charts, see here.

  • For Inflation (HICP) - Real Exchange Rate, see here
  • For Public Debt - Public Deficit (% GDP), see here
  • For Inflation (HICP) - Unit Labour Costs, see here
  • For GDP growth - Inflation, see here
  • For GDP growth - Unemployment rate, see here
  • For Real Exchange Rate - Unit Labour Cost, see here

For the indices of dispersion, see here

Central Bank independence in small open economies

By Juan Castaneda, Forrest Capie and Geoffrey Wood

This article forms Chapter 5 of Central Banks at a crossroads - What can we learn from history? edited by Michael D. Bordo, Øyvind Eitrheim, Marc Flandreau and Jan F. Qvigstad

© 2016 - Cambridge University Press

We conduct an empirical analysis of eight economies covering more than a century and find that independent central banks tend to be more durable in their independence in small open economies than in large economies. This is because the former have the option of being, and often are high trust societies, which allows the writing of simple, and therefore less affected by shocks, central bank contracts, and as Milton Friedman argued many years ago in his pioneering discussion of central bank independence, central banks need a set of instructions and that takes the form of a contract.

You can listen to Dr Castaneda discussing it in the video below:-

European Banking Union- Prospects and challenges

Edited by Juan E. Castañeda, David G. Mayes, Geoffrey Wood

© 2016 - Routledge

Recent failures and rescues of large banks have resulted in colossal costs to society. In wake of such turmoil a new banking union must enable better supervision, pre-emptive coordinated action and taxpayer protection. While these aims are meritorious they will be difficult to achieve. This book explores the potential of a new banking union in Europe.

This book brings together leading experts to analyse the challenges of banking in the European Union. While not all contributors agree, the constructive criticism provided in this book will help ensure that a new banking union will mature into a stable yet vibrant financial system that encourages the growth of economic activity and the efficient allocation of resources.

This book will be of use to researchers interested in Banking, Monetary Economics and the European Union. You can listen to Dr Castaneda discussing it in the video below:-

Banking and finance in the early years of the United States of America were chaotic. Two of the founding fathers - Thomas Jefferson and James Madison - were hostile to banking, since the issue of paper money led to inflation and default. According to Jefferson,

"...banking establishments are more dangerous than standing armies"

The Great Recession of 2008 - 09 renewed concern about the potential role of the banking system in social and financial instability, and argued for more research and analysis about this critical topic.

Mission Statement

The purpose of the Institute of International Monetary Research is to demonstrate and bring to public attention the strong relationship between the quantity of money on the one hand, and the levels of national income and expenditure on the other.

The Institute is heavily involved in the analysis of banking systems, particularly their role in the creation of new money balances. The relationships between money and national income/expenditure hold in all countries over long periods, and the Institute's research covers many countries. The "quantity theory of money" could be characterized as an "always-and-everywhere theory".

The Institute - which is associated with the University of Buckingham in England - was set up in 2014, in the aftermath of the Great Financial Crisis (a.k.a., "the Great Recession") of 2007 - 2009. It is an educational charity.

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