Cross-border mergers and acquisitions: The undervaluation hypothesis

Friedman and Schwartz (1982) and Goodhart (1982) report a zero correlation between money growth and output growth in U.K. historical data. This finding is puzzling, as there is wide agreement that changes in monetary policy are frequently nonneutral in the short run and that the U.K. experience, in particular, is replete with instances of real effects of monetary policy actions. This paper proposes a resolution to the puzzle. An analysis conducted on subperiods shows that a positive money growth/output growth correlation is indeed recoverable from U.K. historical data. Strike activity in the 1970s and shifts in the terms of trade during the interwar period are the two factors primarily responsible for obscuring the positive correlation between money and output in the United Kingdom.

/pdf/the-correlation-between-money-and-output-in-the-united-3b8qarhnta.pdf

The Correlation between Money and Output in the United Kingdom: Resolution of a Puzzle

The correlation between money and output in the United Kingdom: resolution of a puzzle

• Resumen: Para los macroeconomistas de fuera del Reino Unido y para otros que no son economistas los cambios en los debates fundamentales sobre la teoria y la politica macroeconomica desde finales de la ultima decada en dicho pais son mucho menos claros que para los macroeconomistas britanicos, y son vistos por aquellos en terminos de una distincion simple entre keynesianos y monetaristas. En este trabajo se argumenta que esta vision simplista del debate se ha convertido en falsa; se indican los cambios que se han presentado en la macroeconomia britanica desde comienzos de la decada de 1970 y se sugieren algunos de los factores que son responsables de estas transformaciones. Para demostrar este argumento se presenta una caracterizacion breve del keynesianismo y monetarismo britanicos de finales de la decada de 1960 y principios de la siguiente en terminos de cinco puntos fundamentales; luego se explican las razones por las cuales se han dado importantes elementos de convergencia acerca de estos puntos entre las dos corrientes; posteriormente se discuten algunos de los desarrollos teoricos y de las experiencias de la politica macroeconomica del Reino Unido que han contribuido a esta convergencia; y por ultimo se anotan las divergencias entre las dos nuevas corrientes del pensamiento macroeconomico, a saber: la corriente convergente y la corriente de los "nuevos clasicos" . • Abstract: Much of the recent debate about macroeconomic theory and policy in the United Kingdom has been seen as a simple clash between monetarists and Keynesians. This article argues that the vision is false. It traces out the changes which have taken place in the British economy since the start of the seventies and suggest some of the possible causes. These are developed around a framework of five fundamental differences that existed between monetarists and Keynesians at the start of the seventies and explains why there has been significant convergence over the disputed issues. Finally it notes the development of new dualism in policy discussion between the convergent views discussed in the earlier sections and the position taken by the new classical economists.

/pdf/el-debate-actual-entre-keynesianismo-y-monetaristas-44eps46n5s.pdf

El debate actual entre Keynesianismo y Monetaristas

The spread of monetarism in the 1970s did not occur by a simple process of intellectual conquest. In most countries monetarist ideas could not be incorporated in policy formation until they had adapted to local economic conditions and recognised existing traditions of monetary management. Although the framework of financial control assumed some monetarist characteristics in virtually all the industrial nations, each nation still retained distinctive institutional arrangements and policy approaches. The UK posed a particular problem. With its long history of monetary debate and practice, and with its unusually well-established institutional structures, it did not readily assimilate Chicago School doctrines. Nevertheless, in the late 1970s and early 1980s the media, leading politicians and the public at large believed that British macroeconomic policy was becoming progressively more monetarist. Perhaps the apex of monetarist influence on policy came in the Budget of 1980 with the announcement of the medium-term financial strategy, in which targets for both monetary growth and the budget deficit were stated for four years into the future. In a statement to regional city editors on 9 June 1980 Nigel Lawson, Financial Secretary to the Treasury (later to be Chancellor of the Exchequer), said that the ‘medium-term financial strategy is essentially a monetary — or, if you like, monetarist — strategy’.1

British and American Monetarism Compared

This paper is arranged as follows. Section I discusses definitions of ‘monetarism’ and proposes a very general meaning which can be derived, with minimal restrictions from a widely accepted model of the economy. We suggest that the two principle propositions to be tested are (a) that there is a stable demand for money and (b) that changes in the money supply have been an independent source of changes in prices. Section II examines the long-run relationship between money and nominal income. It reports previous empirical studies and also presents long-run graphical evidence. Section III examines in more detail the question of ‘causality’. The conclusions are summarised in the final section.

Does Monetarism fit the UK Facts

Company acquisitions, investment and Tobin's Q: Evidence for the United Kingdom

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Does Monetarism fit the UK Facts

Company acquisitions, investment and Tobin's Q: Evidence for the United Kingdom