The Financial System and the Economy: Principles of Money and Banking (with InfoTrac®)

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

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.

The greatest success of the International Monetary Fund and the World Bank has been as globalizers. But at whose cost? Would borrowing countries be better off without the IMF and World Bank? This book takes readers inside these institutions and the governments they work with. Ngaire Woods brilliantly decodes what they do and why they do it, using original research, extensive interviews carried out across many countries and institutions, and scholarship from the fields of economics, law, and politics.

The Globalizers focuses on both the political context of IMF and World Bank actions and their impact on the countries in which they intervene. After describing the important debates between U.S. planners and the Allies in the 1944 foundation at Bretton Woods, she analyzes understandings of their missions over the last quarter century. She traces the impact of the Bank and the Fund in the recent economic history of Mexico, of post-Soviet Russia, and in the independent states of Africa. Woods concludes by proposing a range of reforms that would make the World Bank and the IMF more effective, equitable, and just.

Hard to read but incisive, 200 pages of tightly packed information.......2007-02-21

The OLG framework is a very simple framework that has its limitations, yet it is a powerful explanatory device. Champ and Freeman apply it to the following exercises:
* Introduce money into an economy--any grad student of economics (as I once was) will tell you this is no simple task! We take money for granted, of course, but mathematical models tend to imply that money is unnecessary! Just getting money into an economic model without unreasonable assumptions is itself an accomplishment.

* Inflation--again, not easy to do in other mathematical models of money--and anticipated inflation

The book also has exercises in it that apply and extend the models introduced in each chapter.

RECOMMENDATION
I recommend this book for advanced year undergrads (in mathematical econ programs) and graduate students. It really is a great book that builds a conceptual knowledge of the interaction of the various components of monetary economics. This is useful for understanding more complicated dynamic optimization models. And it provides models that are useful in their own right and relevant as the basis for further (ie., dissertation) research.

This is not an introductory text to economics, and I reject the idea that those with strong mathematical background should be introduced to economics in a different way from others. Any beginner, mathematical or not, should read Samuelson and the like first.

Are exchange rates determined by economic fundamentals or are they a prey to random speculative forces? Some economists assert that economic theory has so far performed poorly in explaining the dramatic increase in exchange rate volatility in the recent floating rate period. This book argues that modern macroeconomics theory does provide guidelines for understanding exchange rate fluctuations.

Since the mid-1990s, there has been an outpouring of research that aims at laying new foundations for open-macroeconomic theory. The so-called "New Open Economy Macroeconomics" (NOEM) approach embeds micro-founded behavior into dynamic general equilibrium models. This provides a rich framework for thinking about exchange rate behavior and lays the groundwork for credible policy evaluation. This book shows how the most recent analytical tools proposed in this literature improve our understanding of exchange rate fluctuations.

With contributions from an international array of thinkers, this impressive book shall interest both students and researchers involved with Macroeconomics, Money and Banking as well as all those interested in International Finance, including financial institutions.