Book Description
Monetary Theory and Policy presents an advanced treatment of critical topics in monetary economics and the models economists use to investigate the interactions between real and monetary factors. It provides extensive coverage of general equilibrium models of money, models of the short-run real effects of monetary policy, and game-theoretic approaches to monetary policy. Among the topics covered are money-in-the-utility-function models, cash-in-advance models, money and public finance, the credit channel of money, models of time consistency, monetary policy operating procedures, and interest rates and monetary policy.
The book uses dynamic simulations to evaluate quantitatively the significance of the channels through which monetary policy and inflation affect the economy. It extensively examines modern approaches to monetary policy that stress the incentives facing central banks and the strategic interactions between central banks and the private sector. Where most treatments of monetary policy emphasize money supply control and money demand, this book focuses on the implications of interest rate control for monetary policy. The book is designed for advanced graduate students in monetary economics, economic researchers, and economists working in policy institutions and central banks.
This second edition includes new discussions of empirical evidence on the interest elasticity of money demand, the fiscal theory of the price level, the new Keynesian model, optimal policies in forward-looking models, stability and the Taylor principle, and open economy new Keynesian models. It also expands its coverage of multiple equilibria, the role of timing assumptions in cash-in-advance models, and the Ramsey approach to optimal monetary taxation. A new chapter treats policy analysis in new Keynesisan models; the discussion includes the derivation of the policy objective function, optimal commitment and discretionary outcome, targeting rules,and instrument rules.
Customer Reviews:
A not so enchanted point of view.......2007-08-19
If this book were a car, its selling would long have been forbidden! The "typos and corrections" offered by Carl E. Walsh's homepage have by now reached 10 pages. Chapter 6.5 "A Basic Open-Economy Model" has this way been completely revised by the maître. So, in case you are determined to read this book, start with a download of those typos and corrections! The publisher does not give the slightest hint of this problem within the book (Maybe, because the standard "errata-note" would have become an "errata-booklet"). This is really annoying, since you may lose a lot of time by trying to understand mathematical derivations, which are simply wrong. Weak consolation: the "typos and corrections" of Michael Woodford's supposed to be classic "Interest and Prices" sum up by now of 8 pages (Or should we say 38 pages, since "certain equations" of Woodford's chapter 5 are corrected in a separate paper? Unfortunately, I'm not kidding). However, Walsh's book does also suffer from contents-related problems: Throughout the book he derives all results based on the social planner solution of his models. He never even discusses the problem of this approach in the presence of the "wedge of inefficiency" that the usage of money can introduce in such models (Lucas, 1987, Models of Business Cycles). So after having yourself worked through Walsh's book and his typos and corrections, you cannot be sure that the conclusions and policy recommendations he draws will also hold for the market solution of his models.
One of the best books about Monetary Theory and Policy. .......2005-12-05
One of the best books about Monetary Theory and Policy.
Superb book, detailed and thorough.......2005-12-01
This great book helped me to get a better understanding of modern monetary theory, and so I thought I'd make a few comments on that, perhaps couched in easier to understand language and more mundane examples than in this much more sophisticated and technical book.
Basically, the question is what really is the value of money in a country's economy, and how do fluctuations in the value of the currency and the amount of the currency in circulation affect the overall economy? That might seem simple at first, but consider the following.
You may know the story of the hyperinflation that occurred in Germany in the post-WWII years. Germany was saddled with some serious war debts and reparations, and so the government started printing money in order to pay them off. There's even some suspicion that they did this deliberately in order to pay them off faster with inflated dollars, which royally annoyed the French, who were basically getting stiffed. Very sneaky, if true. And clever--if you can make it work. However, it's also very risky, because there are few things more ruinously inflationary than the government printing money, and eventually those pigeons usually come home to roost, which they did in the case of the German economy with a vengeance. So the situation got out of control, and soon it almost took wheelbarrows full of money to buy a loaf of bread.
However, the most interesting thing is how the German monetary authorities stopped the hyperinflation and got things back to normal. What they did was start buying back the worthless paper Deutschemarks with gold. This reduced the supply of Marks, and when people saw that they could get real gold for the paper money, they cashed in in droves. Eventually, the German Deutsche Bank, basically their Federal Reserve, pulled enough money out of circulation to get the inflation under control.
This brings up the interesting question of whether one needs gold backing for your currency. Well, in the modern world, it's no longer necessary, since countries like Japan have very little gold backing for their currency, and yet the Yen is one of the so-called "hard currencies." Contrast that with the former Soviet Union, which at least in the past had a lot of gold backing for their currency, and yet it wasn't worth much. What really determines the value of your currency in the modern international economy is it's value on the international monetary exchanges, which is basically what people will pay to buy it in order to buy your goods and exports and so on, and to do business with you, not how much gold backing it has.
But getting back to the German situation, something very similar happened here back in the early 80s when the prime interest rate hit 21%, because the government was printing money due to the Vietnam war and the deficit spending of the late 60's and 70's. With that level of inflation per year, funny things start happening. For example, it's in the interest of capital-intensive industries or businesses requiring large on-hand inventories-- such as retail stores or firms selling big-ticket equipment items and so on--to buy as much inventory as possible on credit, and then to pay the debt off with increasingly inflated dollars, which reduces your overall cost-- essentially, not so different from what the Germans were doing.
This might sound strange since you're talking about the "price" or cost of money and how inflation affects it, but inflation has the interesting effect of making future money payments less expensive to the borrower, so they have a vested interest in loading up on goods on credit and then paying it off over time. The longer the horizon or loan term the better they make out as long as inflation continues.
In other words, with inflation running at 21%, in two years, the business paying back the loan gets a 42% discount on their cost of capital, assuming the interest rate is fixed, which is usually the case in business loans or at least businesses with good credit. Of course, lenders such as banks and savings and loans know about these tricks but surprisingly, there's very little they can do to hedge and protect themselves. This is one reason so many savings and loans went out of business back in the 80's.
Now all of this might make inflation sound like the ultimate economic evil, but actually, and here's another odd fact about monetary economics--the reverse situation is actually worse--which is known as deflation. Recessions usually don't go into serious deflation, but a real bona fide depression will. This is what is really happening in a depression.
In the case of a serious depression or deflationary spiral, the money supply contracts to the point where the total amount of money circulating isn't enough to keep the economic wheels of the country greased and operating smoothly thru what is known as the bank reserve ratio and negative multiplier effect. In other words, there is a systemic shortage of liquidity. Unfortunately, this situation is extremely difficult to correct, much more so than the inflationary situation.
That's because with interest rates falling and/or very low, no-one has any incentive to lend dollars since, as in the case during the Great Depression, banks get their money from private depositors, and with banks failing, and interest rates at almost zero, no one has any incentive to put the money in the bank if the bank might fail, or if the business that took out the loan could go bankrupt and fail, as many do during depressions. So people stuff it in the proverbial mattress. Hence, there's no money to lend, and so businesses which depend on loans and outside financing (which is about 99% of big and medium size businesses in the U.S.) can't get the money to operate and the economy grinds to a standstill. The government can even print all the money it wants, but nothing happens, since the prime lenders don't want to borrow the money at the so-called Federal Reserve Discount Window and pass it on to borrowers and risk losing it for some measly return and interest rate. In other words, the risk/reward ratio just isn't worth it.
To give you a better perspective on this, I can give you a fascinating fact. The average person tends to think of the stock market as synonymous with the overall economy, because it gets all the press and publicity, and that's true to some extent, but the truth is the bond markets operating behind the scenes which get much less press and attention (well, bonds are pretty boring compared to stocks) are actually ten times the size of the stock market and have a much greater impact than even the stock market on the overall economy. With no money to lend for loans and bonds, the economy grinds to a stop, until someone like the government "primes the pump" to restart it, the policy mechanism that the great economist, John Maynard Keynes, became famous for explaining, among other things. That's what happened back in the 1930's, but we really had to wait for the huge government spending of WWII to turn the situation around.
So during deflation, money is tight and scarce, but the value of the currency keeps going up--just the reverse of inflation. So those who have money have more than they had before. But since deflation causes serious unemployment and underemployment and poverty, most people don't have excess dollars, so they're still poor. So you just can't win. That's why economics is sometimes called "the dismal science." :-)
If this all sounds strange, just think of what happens with a resource or a commodity when there's a shortage of supply--such as with oil right now--it goes up in price, right? That's just normal supply and demand. Same thing in deflation. With a shortage in the supply of greenbacks, the value goes up just like in the case of any material good, except it's confusing to think of lots of money causing a lack of purchasing power as in the case of inflation, and a lack of money creating more purchasing power as in the case of deflation. In practical terms, the dollar's worth more--but no-one is spending them! Hence, paradoxically, money is worth more in a stagnant economy where no one has any incentive to spend it. You might wonder how something can be worth more when no one wants it, since, in most cases, what determines the value of something is the demand for it, but this is where monetary theory parts with normal intuition and common sense about how supply and demand should work, and that's just the way it is.
Anyway, that's not a bad little summary of monetary economics. If you understand that you actually have most of the important points. As you can see, it's strange stuff in some ways, but fun once you get the hang of it since it is powerful and explains some puzzling issues.
Great Book.......2004-06-14
This book deals with most of the modern monetary theory issues. Eventhough it clearly says it is written for graduate students, undergraduate ones with good algebra and calculus levels could accomplish the basic acknowledgement of the book. The second edition has been improved a lot as I see it. Bonds have been added to the agent's budget constraint. This is very helpful for the interpretation of the first order conditions. Chapter 4, mainly the first part was rewritten in a most comprehensible way. There are a few things to highlight about the dark sides: In chapter 3, Professor Walsh did not include bonds in the budget constraint which would have been really useful. Besides there are a few mistakes in the appendix regarding the expected values. Chapter 7, "Macroeconomic Implications" is not very clear which assumptions have been made to approximate around the steady state. Despite there are still a few little mistakes, the book is excellent, I guess the best in Monetary Theory and Policy. Totally recommendable!!!
The best text on advanced macroeconomics there is........1999-12-08
This is the best book length treatment of the state of the art in academic thinking about inflation and central banking, a lot of what economics is about to lay people and politicians. While this is a graduate text in macroeconomics, in no way is it unnecessarily abtruse. You'll need to be comfortable with little more than algebra, linear difference equations, and the sort of elementary statistics practical economists do. Amazingly, this book has no obvious competitors because first rate economists wrongly disdain writing books.
Book Description
Allan H. Meltzer's monumental history of the Federal Reserve System tells the story of one of America's most influential but least understood public institutions. This first volume covers the period from the Federal Reserve's founding in 1913 through the Treasury-Federal Reserve Accord of 1951, which marked the beginning of a larger and greatly changed institution.
To understand why the Federal Reserve acted as it did at key points in its history, Meltzer draws on meeting minutes, correspondence, and other internal documents (many made public only during the 1970s) to trace the reasoning behind its policy decisions. He explains, for instance, why the Federal Reserve remained passive throughout most of the economic decline that led to the Great Depression, and how the Board's actions helped to produce the deep recession of 1937 and 1938. He also highlights the impact on the institution of individuals such as Benjamin Strong, governor of the Federal Reserve Bank of New York in the 1920s, who played a key role in the adoption of a more active monetary policy by the Federal Reserve. Meltzer also examines the influence the Federal Reserve has had on international affairs, from attempts to build a new international financial system in the 1920s to the Bretton Woods Agreement of 1944 that established the International Monetary Fund and the World Bank, and the failure of the London Economic Conference of 1933.
Written by one of the world's leading economists, this magisterial biography of the Federal Reserve and the people who helped shape it will interest economists, central bankers, historians, political scientists, policymakers, and anyone seeking a deep understanding of the institution that controls America's purse strings.
"It was 'an unprecedented orgy of extravagance, a mania for speculation, overextended business in nearly all lines and in every section of the country.' An Alan Greenspan rumination about the irrational exuberance of the late 1990s? Try the 1920 annual report of the board of governors of the Federal Reserve. . . . To understand why the Fed acted as it did—at these critical moments and many others—would require years of study, poring over letters, the minutes of meetings and internal Fed documents. Such a task would naturally deter most scholars of economic history but not, thank goodness, Allan Meltzer."—Wall Street Journal
"A seminal work that anyone interested in the inner workings of the U. S. central bank should read. A work that scholars will mine for years to come."—John M. Berry, Washington Post
"An exceptionally clear story about why, as the ideas that actually informed policy evolved, things sometimes went well and sometimes went badly. . . . One can only hope that we do not have to wait too long for the second installment."—David Laidler, Journal of Economic Literature
"A thorough narrative history of a high order. Meltzer's analysis is persuasive and acute. His work will stand for a generation as the benchmark history of the world's most powerful economic institution. It is an impressive, even awe-inspiring achievement."—Sir Howard Davies, Times Higher Education Supplement
Customer Reviews:
Not for the layman.......2003-12-12
This much heralded account of the Federal Reserve is justly lauded in academic circles because Meltzer brings forth many Fed documents which have long been buried away and unavailable to scholars. He is able to pursue step-by-step Fed actions and relate what happened in all those many meetings behind closed doors. Through the mass of information he has uncovered and his own in-depth knowledge of monetary policy and the Fed, he is able to bring new facts to light and correct previous interpretations that are more often than not those of Friedman and Schwartz's A Monetary History of the United States.
The weaknesses of Meltzer's book stem from his massive archive of information and the strength of his predecessors. The sheer volume of information he is trying to convey prompts the narrative to drift and the reader sometimes loses the point. And, as a good academic historian, he is engaged in a dialogue with other historians of the Fed and monetary policy that can push the layman to the sidelines. Meltzer's history assumes the reader has a rather advanced knowledge of economics and finance such as an understanding of the real bills doctrine and the operation of an international gold standard. Also, the charts and tables are often not very helpful in understanding the text or at least could have been presented in a better manner.
Overall, Meltzer does not produce any stunning revelations but a great many correctives to previous accounts and much added detail. The novice to the history of US monetary policy would do better to read Richard Timberlake's book (though taken with a grain of salt because of its conservative leanings) or the classic work by Milton Friedman and Anna Schwartz.
Book Description
Successful methodology for identifying earnings-related reporting indiscretions
Creative Cash Flow Reporting and Analysis capitalizes on current concerns with misleading financial reporting on misleading financial reporting. It identifies the common steps used to yield misleading cash flow amounts, demonstrates how to adjust the cash flow statement for more effective analysis, and how to use adjusted operating cash flow to uncover earnings that have been misreported using aggressive or fraudulent accounting practices.
Charles W. Mulford, PhD, CPA (Atlanta, GA), is the coauthor of three books, including the bestselling The Financial Numbers Game: Identifying Creative Accounting Practices. Eugene E. Comiskey, PhD, CPA, CMA (Atlanta, GA), is the coauthor of the bestselling The Financial Numbers Game: Identifying Creative Accounting Practices.
Download Description
"Successful methodology for identifying earnings-related reporting indiscretions
Creative Cash Flow Reporting and Analysis capitalizes on current concerns with misleading financial reporting on misleading financial reporting. It identifies the common steps used to yield misleading cash flow amounts, demonstrates how to adjust the cash flow statement for more effective analysis, and how to use adjusted operating cash flow to uncover earnings that have been misreported using aggressive or fraudulent accounting practices.
Charles W. Mulford, PhD, CPA (Atlanta, GA), is the coauthor of three books, including the bestselling The Financial Numbers Game: Identifying Creative Accounting Practices. Eugene E. Comiskey, PhD, CPA, CMA (Atlanta, GA), is the coauthor of the bestselling The Financial Numbers Game: Identifying Creative Accounting Practices."
Customer Reviews:
The best book on the subject.......2007-10-01
I was a student of Dr. Mulford during my MBA, and I can say that the book is as great as his class. He definitvely was one of the best professors I ever had.
We are used to see in many valuation books to take Free Cash Flow as a given; therefore not understanding the real implication of FCF manipulation in enterprise value.
This book explains how the FCF can be calculated and what are the usual "tricks" that companies do in order to show better (or worse?) results. And that is what is all about: building financial criteria for managers in order to make the best decisions.
The best: meaty, well-written and thorough.......2007-08-23
This is not your typical accounting/finance book (i.e., unclear, unfocused and boring). Creative Cash Flow Reporting is the best and most important accounting/finance book I've read in many years. The authors are certainly focused on the right area (determining sustainable cash flow from operations). The interesting nuances of cash flow reporting are laid out in simple terms (e.g., debt funding and repayments are reported with Financing cash flows, but the related interest expense is reported with Operating cash flows). The authors also go beyond the numbers to provide good background re: a number of strategic alternatives (e.g., why one might enter into a sale/leaseback transaction). There are many other reasons to recommend the book.
In summary, this book is a "must have" for accountants and financial analysts, and I would strongly recommend for CEOs, COOs, corporate and securities attorneys, and corporate middle managers.
Nothing new in here.......2006-12-13
this book serves more as a dictionary of cash flow related items rather than offering any prescription for active monitoring of cash flow related mischief.
save your time and money.
Groundbreaking book.......2006-03-18
Mulford and Comiskey have delivered a tour de force for the financial and accounting community in this book. Whether you are a financial analyst, corporate accountant, auditor or an executive with a small or large firm, you absolutely will benefit from this book. It is one of the most important books of the last 20 years, and in my opinion, it is the finest book ever written on the concepts and methods of deciphering Operating Cash Flow, it's relationship to earnings, calibrating and measuring free cash flow, as well as the mechanics and drivers (and sometimes deliberate manipulation by unscrupulous management) within the business system that can lead to distortions in the Cash Flow statement.
What about earnings supported by artificial means? What are the core drivers of cash flows? What should our view be, vis a vis the Operating Cash flows, regarding non recurring charges and depreciation? Are capital expenditures really as cut and dry as we like to think they are, under GAAP? How does it impact our cash flows, in the real world? How is it sometimes manipulated, to distort the underlying cash flow realities?
If you are a financial or accounting professional, read this book. Read it twice. Read it three times. An absolutely extraordinary book. Well written, insightfull, never boring, always intriguing with unique content. The authors have such an extraordinary grasp of accounting and financial flows, and bring such groundbreaking concepts and ideas to the field, that you won't put this book down, and there are not many accounting or finance books we can say that about !! "Creative Cash Flow" by Mulford and Comiskey is absolutely a virtuoso performance. Amongst, and compared to, the entire literature that exists in the field of accounting and financial analysis, this book is an extraordinary achievement.
Simply the best book on the subject........2005-09-04
Messers Mulford and Comiskey have released a primer on what has lately become a messy subject. Unlike other books with a focus on cash--Hackel's book, for example--this one delves a little bit deeper into the subject of financial misreporting. The reader is given a synopsis of how companies say that their cash is operating, whereas it ought to be put under financing or investing cash flow. There is a multitude of similarly constructed arguments. The examples are lucid, apropos, and contemporary. The book also has a deterministic model for calculating CFFO. Read it.
Book Description
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
Customer Reviews:
Best introductory book on behavioral finance.......2007-01-05
As has been admitted by even the staunchest former proponents of financial economics (such as Burton Malkiel), the multi-decades old dominant intellectual field in academic finance has piled up against itself persistent anomalous data. Thus, it is no surprise, as the science of economics advanced, that a new intellectual field would develop to challenge and replace the old. Behavioral finance, which relaxes some of the key assumptions in financial economics, utilizes survey data, and integrates knowledge from psychology to better understand financial markets, is that new intellectual field.
Although still controversial, young economists and financial professionals should become versed in this new field as early as possible: 1) because there is huge room for new research where creative economists can flex their muscle and 2) financial professionals that drop the old adherence to financial economics will have an edge over those that don't. Andrei Shleifer's work is the best introductory work on behavioral finance that I've come across, and I thus strongly recommend it to those who want a quick and easy to understand introduction to this field which is the wave of the future of academic finance (well, I hope).
Robert Stephenson-Padron
MSc student (economics & finance)
University of Navarra, Spain
Arguments Against the Efficient Market Hypothesis.......2005-01-15
Inefficient Markets by Harvard economist Andrei Shleifer provides a strong argument against the Efficient Market Hypothesis (EMH) in its various forms and an introduction to Behavioral Finance. Shleifer's main points are summarized below.
1. The EMH comes in three forms. The Weak Form states that an investor can not achieve returns above the market averages based on the analysis of historical stock price patterns (Technical Analysis). The Semi-Strong Form states that all publicly available news is reflected in stock prices almost instantaneously and that an investor can not beat the market averages by diligently tracking company earnings and other events (Fundamental Analysis). Finally, the Strong Form says that an investor can not beat the market even by using information that is not available to the public (Insider Trading). The Strong Form can be dismissed by considering the number of corporate executives currently under indictment or serving time for insider trading. Evidence against the Semi-Strong and Weak Forms can be found in the Small Stock Effect (small stocks outperform the market) and January Effect (the market does best in January) which seemed to hold until they were widely publicized but have presumably been negated since then by arbitrage. Additional evidence against the EMH can be found in the less than perfect correlation between the price movements of Royal Dutch and Shell Transport and Trading shares which jointly own the Royal Dutch Shell enterprise in a fixed 60%/40% ratio. Furthermore, the prevalence of a 10% to 20% discount in the share price of closed end funds relative to their net asset values suggests that the market is less than efficient.
2. In Chapters 2-4, Shleifer demonstrates the limits of arbitrage in maintaining efficient markets. He develops a mathematical model for predicting the returns of arbitrageurs (who accurately perceive the values of stocks) and noise traders (who incorrectly perceive the same values). His Noise Trader Model explains how noise traders can sometimes achieve higher returns than arbitrageurs based on the "hold more" and "create space" effects. The "hold more" effect is based on the community of noise traders egging each other on as was seen in the technology bubble that burst in 2000. The "create space" effect says that the wider the range of incorrect perceptions held by noise traders, the less effective arbitrageurs will be in bring stock prices back to their correct values. Shleifer uses the Noise Trader Model to make additional predictions about the market behavior of closed end funds and shows that, unlike the EMH, it accurately models such phenomena as the rise in share price to the underlying net asset value upon liquidation or reorganization as an open end fund. Finally, he shows that professional arbitrageurs, such as hedge fund operators, are forced to adopt more conservative tactics than individual arbitrageurs by their need to retain clients and funding.
3. In Chapters 5 and 6, Shleifer develops a model of Investor Sentiment based on investors' patterns of psychological underreaction and overreaction. Investors tend to underreact to new information (such as reported earnings) by modifying their perception of a stock's value by less that the new information would suggest and continuing to extrapolate the old stock price trend. If confronted with repeated inputs of new information that consistently points in the same direction, investors tend to overreact by discarding the old model, accepting the recent trend as the new model, and extrapolating it into the future. Finally, he shows how investor sentiments can form a positive feedback trading environment in which arbitrage can actually destabilize the market.
This is a book for serious students of finance. It's not a "Behavioral Finance for Dummies". However, the math does not require more than a year of calculus and a good understanding of calculus-based probability and statistics. Shleifer's writing style is remarkably clear for an academic economist (many of whom I find able to obfuscate the simplest concepts). Overall, Inefficient Markets is a long-overdue reexamination of the theoretical underpinnings of modern finance theory.
Some of Roseblatt's comments are wrong.......2004-12-25
Beneath my comments, writes Roseblatt:
=====================
In chapter 4, he is concerned with the 'limits of arbitrage' (the original title of this paper, published in the JOF in 1997). This paper is definitely worth reading to understand the problems with hedge funds and other arbitrageurs. However, linking the limits of arbitrageurs to 'inefficiency of the market' is erroneous. The very fact that arbitrageurs can not take advantage of what they think are mispriced assets, due to collateral constraints (Schleifer's hypothesis), shows that the market is efficient, since no free money is floating around.
=============================
No, with the 'limits of arbitrage', the mispricing cannot be corrected quickly. The logic lies like this: suppose A sees the arbitrage opportunity, but due to the "limit", he can only trade certain shares, and makes $10 FREE MONEY. He knows there is still another $10 "on the table", but he cannot take action anymore. At this point, if no one else sees this arbitrage opportunity, the market remains inefficient until another arbitrageir B jumps in and remove that "remaining $10 on the table". Of course A and B made "free money". Shleifer's treatment is perfectly Okay. Roseblatt's rebuttal is illogic and obviously wrong.
However, EMH itself is a hoax. It is not scientific at all. I believe in the early days, financial economics was dominated by people who had little quantitative or science training, therefore, they could only do something like EMH sort of soft libral arts type of research. To me, it is not EMH, it is how quickly the information gets reflected in stock prices; and how big is the limit of arbitrage. Nothing else. I suggest the new generation of high-level finance researchers should totally discard this spurious EMH topic. Period.
A good intro to Behavioral Finance.......2003-05-29
Markets are not efficient in part because Investor Sentiment is a strong factor creating momentum (either upward or downward trend, whether sentiment is positive or negative). Also, arbitrage is very weak, as there are no proper securities substitutes, shorting the indexes is too risky. The "Noise Trader Risk" is too great. Meaning equity values may continue to diverge long enough for the arbitrageurs to loose their shirt betting on convergence. The investor type is a very important characteristic to factor. This explains the close end fund puzzle. The discount on closed end fund tracks the fate of small cap stocks. When small cap stocks do poorly, the discount on closed end funds deepens. This is because both investments are dominated by the same type of investors: individuals - small investors. Thus, both investment types are subject to small investors' sentiments.
Too much maths but interesting interpretation.......2002-09-11
There is too much maths in the book. However, the comments and interpretation on various models are very interesting. The authour distinguish between arbitrageurs and noise traders. He also give us a theory of substituability which is interesting but inapplicable in reality. Too much theory also with a lot of hypothesis that are not respected in real markets.
I was looking more for a book on investment psychology and I was disappointed.
Book Description
A groundbreaking collection on currency derivatives, including pricing theory and hedging applications.
"David DeRosa has assembled an outstanding collection of works on foreign exchange derivatives. It surely will become required reading for both students and option traders."-Mark B. Garman President, Financial Engineering Associates, Inc. Emeritus Professor, University of California, Berkeley.
"A comprehensive selection of the major references in currency option pricing."-Nassim Taleb. Senior trading advisor, Paribas Author, Dynamic Hedging: Managing Vanilla and Exotic Options.
"A useful compilation of articles on currency derivatives, going from the essential to the esoteric."-Philippe Jorion Professor of Finance, University of California, Irvine Author, Value at Risk: The New Benchmark for Controlling Market Risk.
Every investment practitioner knows of the enormous impact that the Black-Scholes option pricing model has had on investment and derivatives markets. The success of the theory in understanding options on equity, equity index, and fixed- income markets is common knowledge. Yet, comparatively few professionals are aware that the theory's greatest successes may have been in the derivatives market for foreign exchange. Perhaps this is not surprising because the foreign exchange market is a professional trading arena that is closed virtually to all but institutional participants. Nevertheless, the world's currency markets have proven to be an almost ideal testing and development ground for new derivative instruments.
This book contains many of the most important scientific papers that collectively constitute the core of modern currency derivatives theory. What is remarkable is that each and every one of these papers has found its place in the real world of currency derivatives trading. As such, the contributing authors to this volume can properly claim to have been codevelopers of this new derivatives market, having worked in de facto partnership with the professional traders in the dealing rooms of London, New York, Tokyo, and Singapore.
The articles in this book span the entire currency derivatives field: forward and futures contracts, vanilla currency puts and calls, models for American exercise currency options, options on currencies with bounded exchange rate regimes, currency futures options, the term and strike structure of implied volatility, jump and stochastic volatility option pricing models, barrier options, Asian options, and various sorts of quanto options.
Customer Reviews:
Excellent choice of papers!.......2001-08-18
DeRosa has picked excellent papers. If one reads the papers in detail, the currency derivatives literature, as well as related derivatives literature, becomes very easy to understand.
Comprehensive.......1999-06-19
This book presents highly technical papers on diverse topics from variuous academics. It would be very helpful to anyone looking to understand theoretical aspects of FX derivatives. Since most papers are written by different authors, notation is not consistent. In addition, academics do not always write like Hemingway. Nevertheless, the book covers everyhting from vanillas to exotics very well.
Customer Reviews:
The Future of Money is NOW.......2005-11-09
If you haven't read this book yet, then you are behind the curve. There's a time and a place for everything, and the good things in life take some effort. This is one of those. Hard to find, easy to read, amazingly difficult to put into action, this book outlines a set of principles and futures that no American family should be without access to.
The American family may have a future that can't be bought without the knowledge in this book. Find out for yourself whether your own conception of 'value' will allow you to prosper in a new economy and world that is dawning RIGHT NOW.
A pragmatic yet hopeful book on community currency innovations.......2005-09-12
This book allowed me to understand the system of money and money supply. I will be attempting to convince our small midwestern county to adopt a community supporting complimentary currency as a result of reading it.
Book Description
With the collapse of the Bretton Woods system, any pretense of a connection of the world's currencies to any real commodity has been abandoned. Yet since the 1980s, most central banks have abandoned money-growth targets as practical guidelines for monetary policy as well. How then can pure "fiat" currencies be managed so as to create confidence in the stability of national units of account?
Interest and Prices seeks to provide theoretical foundations for a rule-based approach to monetary policy suitable for a world of instant communications and ever more efficient financial markets. In such a world, effective monetary policy requires that central banks construct a conscious and articulate account of what they are doing. Michael Woodford reexamines the foundations of monetary economics, and shows how interest-rate policy can be used to achieve an inflation target in the absence of either commodity backing or control of a monetary aggregate.
The book further shows how the tools of modern macroeconomic theory can be used to design an optimal inflation-targeting regime--one that balances stabilization goals with the pursuit of price stability in a way that is grounded in an explicit welfare analysis, and that takes account of the "New Classical" critique of traditional policy evaluation exercises. It thus argues that rule-based policymaking need not mean adherence to a rigid framework unrelated to stabilization objectives for the sake of credibility, while at the same time showing the advantages of rule-based over purely discretionary policymaking.
Customer Reviews:
It's monetary economics, not diff eqns.......2005-03-02
It's a most compehensive and thought-provoking treatise on modern monetary economics, an excellent follow-up to Carl Walsh's Monetary Theory and Policy. I think this reviewer who gives the book 2 stars just on account of one technical error that he claims to have discovered is being extremely myopic. The book is not about solutions to stochastic difference equations and neither does the author claim to be an expert at stochastic difference equations. The book handles what it is meant to handle admirably well, i.e. MONETARY ECONOMICS
Woodford's Incomplete Model.......2004-05-04
I have been spending the last four months concentrating on Woodford's model of a cashless economy, which Woodford presents in Chapter 2, and which provides the foundation for the rest of the book. I believe his model to be incomplete, relying on a rational expectations precedent of assuming bounded solutions when solving expectational difference equations. A colleague and I have written a paper that shows that this precedent is flawed and we then propose more rigorous procedures. When we apply those revised procedures to Woodford's model of a cashless economy, we find his model is incomplete.
Furthormore, I am writting a second paper that shows that the central bank in Woodford's model is unable to affect the nominal interest rate paid on loans by other entities. If the central bank cannot affect this interest rate, then it cannot affect prices even if Woodford's model was complete.
These are just challenges to Woodford's model which need to withstand the test of refereed journals. However, the potential reader of this book needs to be aware that there are some academics who are challenging the validity of his model. For more details, search for "Woodford cashless economy" with a search engine and you should be able to find my web page that discusses this (...) David Eagle, Associate Professor of Finance
Eastern Washington University
(...)
Very good book in Monetary Policy.......2004-04-21
For sure this will become a masterpiece in modern monetary policy. It is very well detailed, and discusses what is really important in the field.
It is already a reference book, and must be read by practitioners, students and academicians interested in the subject.
However the book has the following caveats:
- It is too verbose. That means that you might have the same deepness with less words. As a consequence the reader often gets tired, bored and misses the main point;
- It does not talk about conventional monetary policy as you could find in Walsh's "Monetary Theory and Policy";
- Trying to make the exposition easier, the models are presented in separeted too far apart pieces. This makes it difficult to fully grasp the details at once.
In view of this, I must say that Walsh's book might become a necessary complements to Woodford's. Notice that the styles and goals of both books are different. Therefore, buying one or another depends on your intentions.
In additon I'd say that Woodford's overall strategy is right in terms of the sequence of subjects treated. However, shorter and more numerous chapters might improve the exposition tactics.
must read text for students in monetary economics.......2004-01-15
This book is written by one of the giants in modern macroeconomics. Although a little bit lengthy, the book contains nearly all the recent advance in monetary economics, especially in the interest rate rules and optimal monetary policy. Of course, you should be familiar with log linearization and simple matrix algebra in order to access the mathematics of the book. Woodford¡¦s Interest and prices and Walsh¡¦s Monetary Theory and Policy (2nd edition) would definitely become the required text for every graduate course in monetary economics around the world.
Average customer rating:
- Great textbook for graduate and undergraduates
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Public Finance: A Normative Theory, Second Edition
Richard W. Tresch
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Public Finance and the American Economy (2nd Edition)
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Intermediate Public Economics
ASIN: 0126990514 |
Book Description
Featuring a general equilibrium framework that is both cohesive and versatile, the Second Edition of
Public Finance: A Normative Theory brings new and updated information to this classic text. Through its concentration on the microeconomic theory of the public sector in the context of capitalist market economics it addresses the subjects traditionally at the heart of public sector economics, including public good theory, theory of taxation, welfare analysis, externalities, tax incidence, cost benefit analysis, and fiscal federalism. Its goal of providing a foundation, rather than attempting to present the most recent scholarship in detail, makes this
Second Edition both a valuable text and a resource for professionals.
* Second edition provides new and updated information
* Focuses on the heart of public sector economics, including public expenditure theory and policy, tax theory and policy, cost benefit-analysis, and fiscal federalism
* Features a cohesive and versatile general equilibrium framework
Customer Reviews:
Great textbook for graduate and undergraduates.......2006-11-06
This is a great college textbook. It treats the Public Finance issues in a very accessible way for both graduates and undergraduates. I deeply recommend it.
Book Description
Many prominent critics regard the international financial system as the dark side of globalization, threatening disadvantaged nations near and far. But in The Next Great Globalization, eminent economist Frederic Mishkin argues the opposite: that financial globalization today is essential for poor nations to become rich. Mishkin argues that an effectively managed financial globalization promises benefits on the scale of the hugely successful trade and information globalizations of the nineteenth and twentieth centuries. This financial revolution can lift developing nations out of squalor and increase the wealth and stability of emerging and industrialized nations alike. By presenting an unprecedented picture of the potential benefits of financial globalization, and by showing in clear and hard-headed terms how these gains can be realized, Mishkin provides a hopeful vision of the next phase of globalization.
Mishkin draws on historical examples to caution that mismanagement of financial globalization, often aided and abetted by rich elites, can wreak havoc in developing countries, but he uses these examples to demonstrate how better policies can help poor nations to open up their economies to the benefits of global investment. According to Mishkin, the international community must provide incentives for developing countries to establish effective property rights, banking regulations, accounting practices, and corporate governance--the institutions necessary to attract and manage global investment. And the West must be a partner in integrating the financial systems of rich and poor countries--to the benefit of both.
The Next Great Globalization makes the case that finance will be a driving force in the twenty-first-century economy, and demonstrates how this force can and should be shaped to the benefit of all, especially the disadvantaged nations most in need of growth and prosperity.
Customer Reviews:
Get down in the trenches of 21st century globalizationm.......2007-02-12
Whilst Mishkin tells it like it is, you just may want to follow on with "EXTREME COMPETITION" by Fingar, and "THE WORLD IS FLAT," by Aronica and Ramdoo to get to the "what do I do tomorrow."
Great book, Mishkin... readers, keep reading!
Book Description
The Idea of History is the best-known work of the great Oxford philosopher, historian, and archaeologist R. G. Collingwood. Published posthumously in 1946, it examines how the idea of history has evolved from the time of Herodotus to the twentieth century, and offers Collingwood's own view of what history is. This revised edition has a substantial new introduction which discusses how scholars have responded to Collingwood's classic over the last fifty years. It also makes available for the first time some of Collingwood's lectures on the philosophy of history - essential for a fuller understanding of his thought, and in particular for the interpretation of The Idea of History itself.
Customer Reviews:
Easier reads of those not well versed in historiography.......2007-05-28
This is a good book but very esoteric. "What is History?" by E.H. Carr is an easier selection for the causal reader or someone beginning to study historiography.
Yes, it is cheaper than the University Bookstore.......2006-11-10
My daughter, a freshman at Indiana University, e-mailed me a list of the books she needed. This was on it... I ordered it, paid for it, and had it shipped directly to her. It arrived sooner than expected, and before she needed it for class.
Great Job.
Julie K.
An Excellent Edition of Collingwood's Art........2004-02-03
This is a very fine edition of Collingwood's magnum opus The Idea of History. It also includes two earlier papers on the philosophy of history, etc. Any student or scholar who studies the discipline of history will need this book, and should read it closely. Van Der Dussen's introductory essay is also very good. Highly recommended.
R. G. Collingwood's Most Famous Book.......2003-07-02
Highly Recommended.
This book is one of the best books ever written on the Nature and Aims of History. This along with his "Principles of History" should give most readers all they need to know about the how and why of history.
The book is extremely easy to read; harder to understand. Some criticisms of the book are not up to the mark, as for example complaints that Collingwood used Greek and Latin phrases in the book, and not everyone understands them. Most of the Greek and Latin are very easy to understand, any good comprehensive foreign phrase dictionary will readily yield them. In fact everyone at the Oxford of Collingwood's day, and nearly everyone who considered themselves a philosopher at that time, could read Latin, and most of them Greek. Don't complain because Kant wrote in German (and Latin and Greek), and that Collingwood writes British English (and Latin and Greek). His style is beautiful, the thoughts expressed profound.
One does not get Collingwood's complete philosophy in this book, and indeed, parts of it cannot be understood without reading his other works. I think particularly of his famous doctrine of "re-enactment" of past thought, which is best understood in the light of the chapters on language presented in his "Principles of Art" (Oxford, 1938). Much invalid criticism has been written by those who have assumed this meant some kind of mental telepathy or intuition.
This book, and everything Collingwood has written, will amply repay the thinking reader. He may, in fact, soon find himself armed with new philosophical ideas with which to think about the world.
A magnificent book if you're motivated enough.......2003-04-04
R. G. Collingwood's The Idea of History would be more correctly classified as a work of philosophy than a work of history, as the primary goal of the work is to present Collingwood's philosophical conception of the nature of history. In terms of methodology, Collingwood's book can be divided into two main sections.
Parts I-IV are more historical as Collingwood traces the development of the practice of history. It begins with its Greco-Roman roots, examines the influence of Christianity, and moves on toward the development of modern scientific history, and finally finishes by examining the concept of history up to the then-present day. Throughout this first portion Collingwood does not directly present his philosophy, leaving it to the reader to infer it from his critiques of other historians. Part V is where Collingwood finally lays out his entire philosophy of history, fully elaborating what he only partially revealed in parts I-IV.
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