Economic Letter

Since the early 1990s, rising unemployment, price deflation, sluggish growth, and even recession have beleaguered Japan. The country’s central bank, the Bank of Japan (BOJ), has responded by lowering interest rates to stimulate demand.

Although currency crises may not be predictable, what is predictable is that after each one there will be calls to reform the “international financial architecture.” One proposal currently making the rounds is to stabilize capital flows with policies that either encourage “long-term” capital flows or discourage “short-term” capital flows.

This Economic Letter is adapted from a keynote address delivered by Robert T. Parry, President and CEO of the Federal Reserve Bank of San Francisco, to the 28th Annual Northern California Financial Planning Conference in San Francisco on May 9, 2000.

The debate over dollarization has arisen in several countries, but it is often at its most fervent in Argentina. In that country, a decade of currency board experience with dollar-peso convertibility has brought the economy as close to being dollarized as one can be without going all the way.

From January 1995 through the third week of April 2000, the Dow Jones Industrial Average (DJIA) advanced a respectable 184%. Even though this venerable index has included tech firms over the last few years–most recently Intel and Microsoft in 1999–it still is taken by many to represent the industrial heavyweights of the so-called old economy.

A cursory look at the data on bank profitability suggests that, since the end of 1995, small banks headquartered in California have been significantly less profitable than medium-sized banks in the state. In addition, it appears that small bank performance in California lags that of small banks in the rest of the country.

This Economic Letter summarizes the papers presented at the conference “Structural Change and Monetary Policy” held in San Francisco on March 3-4, 2000, under the joint sponsorship of the Federal Reserve Bank of San Francisco and Stanford University’s Stanford Institute for Economic Policy Research.

This Economic Letter is adapted from a speech delivered by Robert T. Parry, President and Chief Executive Officer of the Federal Reserve Bank of San Francisco at the European Banking and Financial Forum in Prague, the Czech Republic, on March 29, 2000, in a panel discussing financial globalization, international financial institutions, and developments in the financial sectors of post-communist countries.

The Japanese government and the Bank of Japan (BOJ) are both considering the merits of conducting that nation’s monetary policy by pursuing an explicit inflation target. However, they seem to view inflation targeting as a means to quite different ends, which leads them to different conclusions about the proper timetable for a move towards such a regime.

After more than two decades of debate, full affiliation of commercial banking with other financial services became a reality in March 2000. The Gramm-Leach-Bliley Act (GLBA), signed into law last November, authorized the certification of financial holding companies, the structure that looks to be the main vehicle for linking commercial banks with securities firms, insurance firms, and merchant banking.