The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
• • k a .
Eœnomic
Ê! Review
M
FEDERAL RESERVE BANK OF ATLANTA
> f \ >
V
9-
-oSl"^
MARCH/APRIL 1987
MONETARY POLICY
ffer Stock Money
COMMERCIAL BANKS
Declines in Profitability
INTERNATIONAL TRADE
Stemming the Tide of Protectionism
President
Robert P. Forrestal
Senior Vice President and
Director of Research
Sheila L. Tschinkel
Vice President and
Associate Director of Research
B. Frank King
Economic
Review
Research Department
Financial
David D. Whitehead, Research Officer
Peter A. A b k e n
Steven P. Feinstein
Larry D. Wall
R o b e r t E. G o u d r e a u
Macropolicy
R o b e r t E. Keleher, Research O f f i c e r
M a r y S. R o s e n b a u m , Research Officer
T h o m a s J. C u n n i n g h a m
William R o b e r d s
Jeffrey A. R o s e n s w e i g
J o s e p h A. Whitt, Jr.
R. M a r k R o g e r s
Regional Economics
G e n e D. Sullivan, Research Officer
William J. Kahley
J o n R. M o e n
W. G e n e W i l s o n
Visiting S c h o l a r s
Russell S. Boyer
William C. Hunter
Public Information Department
B o b b i e H. M c C r a c k i n , Public Information Officer
Public I n f o r m a t i o n
Larry J. Schulz, Public Information Coordinator
Linda D o n a l d s o n
Editorial
Harriette G r i s s o m , Publications C o o r d i n a t o r
B r e n d a Malizia N e g u s
Graphics a n d Typesetting
Cheryl B. Birthrong
J. E d w a r d R o o k s
Distribution
George Briggs
Vivian Wilkins
Ellen Gerber
The Economic Review s e e k s to inform the public about
Federal Reserve policies a n d the e c o n o m i c environment and,
in p a r t i c u l a r , t o n a r r o w t h e g a p b e t w e e n s p e c i a l i s t s a n d c o n cerned laymen.
V i e w s e x p r e s s e d in the Economic Review are not nece s s a r i l y t h o s e of t h i s B a n k o r t h e F e d e r a l R e s e r v e S y s t e m .
M a t e r i a l m a y b e r e p r i n t e d o r a b s t r a c t e d if t h e R e v i e w a n d
a u t h o r a r e c r e d i t e d . P l e a s e p r o v i d e t h e B a n k ' s P u b l i c Information Department with a c o p y of any publication containing
r e p r i n t e d material.
Free subscriptions a n d additional c o p i e s are available f r o m
t h e Information Center, Federal Reserve B a n k of Atlanta,
1 0 4 Marietta Street, N.W., Atlanta, G a . 3 0 3 0 3 - 2 7 1 3
(404/
521-8788).
ISSN 0732-1813
VOLUME LXXII, NO. 2. MARCH/APRIL 1987, ECONOMIC REVIEW
The Rising Tide of Protectionism
Robert P. Forrestal
"Buffer-Stock" Money and the
Transmission Mechanism
David Laidler
24
F.Y.I.
Larry D. Wall
Book Review
38
Thomas J. Cunningham
A(\
Statistical Pages
"
This article contends that protectionism
is a short-term palliative that will e n d up
costing Americans more jobs than it saves.
Based on an Atlanta Fed Distinguished
Lecturer Series presentation, this article
discusses how individuals and businesses
hold buffer stocks of money and affect the
transmission of monetary policy.
Commercial Bank Profitability:
Some Disturbing Trends
Rational Expectations and Inflation
by Thomas }. Sargent
Finance, Employment, General
Construction
FEDERAL RESERVE B A N K O F ATLANTA
3
The Rising Tide of
Protectionism
Robert P. Forrestal
Atlanta Fed President Robert P. Forrestal examines today's
rising tide of protectionism and concludes that Americans should
regain their faith in the free market system and sharpen
their ability to compete.
The United States is in the midst of a transformation that might be called "reinternationalizat i o n . " T h r o u g h m u c h of this n a t i o n ' s early
history, Americans were traders intent on keeping doors abroad open for American products.
As the country's frontiers expanded, however,
we found ourselves rich enough in labor and
resources to be self-sufficient. This advantage
had the negative effect of making us somewhat
complacent. We assumed that the rest of t h e
world needed us more than we n e e d e d it. Only
in the 1970s and 1980s, through the i n d e l i b l e
impressions made by the rise and collapse of oil
prices during the preceding decade and t h e
ballooning of the trade deficit, d i d the U.S. business community return to t h e awareness that
events outside our own borders resonate increasingly within them.
1 believe reinternationalization holds great
promise. In t h e short term, prospects for cont i n u e d growth—both in the United States as a
whole and in the Southeast—are p i n n e d upon
developments in international markets. In the
long run, this intensifying interdependence has
the potential to raise living standards for all t h e
world'scitizens. In the interim, though, the trade
situation has given rise to some uncomfortable
dislocations among domestic industries, and in
The author
is president
of the Federal
article is based on a speech,
delivered
in April
ference in Mobile,
4
"The
Reserve
Southeast
1987 at the Southeastern
Alabama.
Bank of Atlanta.
in a Global
International
This
Economy,"
Trade
Con-
.w
-//"»
response have come calls for protectionism. As
disturbing as the sight of empty factories and
idle workers may be, we must have the vision to
look b e y o n d t e m p o r a r y a d j u s t m e n t s toward
long-term advantages. Our hopes for the present and future could be dashed if we shirk t h e
responsibility these benefits carry—the responsibility of defending free and open markets that
we have traditionally borne and now must take
up again in the face of a rising t i d e of protectionist sentiment.
The Impact of
International Developments
Effects on the United States. The growing
importance of the international sector becomes
M A R C H / A P R I L . 1987, ECONOMIC REVIEW
apparent in light of the short-term outlook for
the United States. This year Gross National Product (GNP) should expand once again a t a rate of
2.5 percent or even a b i t faster. This forecast suggests the unemployment rate for 1987 will not
fall significantly, since the number of new jobs
will probably just keep pace with the number of
people who want them. Inflation, however, will
p r o b a b l y accelerate from last year's average
pace of less than 2 percent as measured by the
consumer price index to 4 or even 4.5 percent
in 1987.
The higher prices in this forecast, which represent an even faster rate of increase than in
1985, are due largely to international developments. Both the stabilization of oil prices and
the rise in other import prices, which were up 8
percent at the e n d of last year, will push price
levels higher. The international sector is critical
t o the outlook for GNP growth as well. Foreign
F E D E R A L RESERVE B A N K O F ATLANTA
trade is expected to provide the stimulus that
will maintain our moderate growth rate. The
other major c o m p o n e n t s of GNP—consumption, investment, and government p u r c h a s e s do not show much potential for strength.
An improvement in the U. S. international sector is likely for two reasons. One is the decl ine in
t h e value of t h e dollar in foreign exchange
markets. While the impact of the dollar's decline works with a lag, the dollar has been dropping for more than two years now and we are
beginning to see a change. Exports began to
pick up in real terms during the last three months
of 1986 while imports flattened. In the first three
months of 1987, real net exports (exports minus
i m p o r t s , a d j u s t e d for inflation) i m p r o v e d by
$13.8 billion.
The second i m p e t u s toward an i m p r o v i n g
trade balance is t h e fact that the United States
cannot continue to increase its borrowing from
abroad i n d e f i n i t e l y . For some t i m e we have
been consuming, whether privately as individuals or publicly through our government, more
than we actually p r o d u c e domestically. T h e
expansion of the federal budget deficit is particularly to blame for this situation. To meet the
country's aggregate demands, we have b e e n
importing far more than we export and borrowing from abroad to finance these imports. Of
course, this pattern cannot go on forever. Our
creditors may become less willing to l e n d ; in
a d d i t i o n , d e b t service inevitably rises along
5
with the d e b t and becomes a burden. It now
appears that the t i m e has come to start repaying. So, while GNP or national o u t p u t will growat
about the same rate in 1987 as it d i d last year,
more of the increase will be exported and less
will be available for domestic use. However,
even if overall consumption does not increase
much, gains in p r o d u c t i o n to m e e t greater
d e m a n d for American-made products should
help to achieve the moderate rate of growth that
has been predicted.
Outlook for the Southeast. The Southeast,
like t h e nation, will feel the weight of international factors during the year ahead. Aside
from responding to the general impact of t h e
shift in the trade balance, the Southeast will
experience some particular side effects from
developments abroad. If the recent stabilizat i o n in energy prices is joined by more d e m a n d
for domestic goods and commodities, those
areas of the country most d e p e n d e n t on mining
and manufacturing will benefit. These d e v e l opments, which should foster a more balanced
growth among economic sectors and regions of
the country than has been the case in the last
several years, would be welcome news to troub l e d parts of the Southeast. For example, stabilization of the energy sector would be especially
important to Louisiana and parts of Mississippi,
both of which suffered from last year's sharp fall
in oil prices.
A s i d e from s t i m u l a t i n g sales of d o m e s t i c
goods, a lower dollar should draw more visitors
from other c o u n t r i e s a n d p r e c i p i t a t e m o r e
domestic travel by Americans. Florida attracts
more overseas visitors than any other state and
draws large numbers of Canadians as well. Tourism tends to stimulate d e m a n d for services and
t r a d e just as p e r m a n e n t p o p u l a t i o n growth
does. The continuing inflow of visitors contributes significantly to employment and personal income in Florida and is a major reason for
that state's good record of growth.
Improvements in the national trade balance
should spell good news for many southeastern
manufacturers who have been grappling with
import c o m p e t i t i o n or difficulties in marketing
abroad for the past few years. One particular
p r o b l e m that slowed improvement in many of
the region's industries was the dollar's failure to
depreciate against major foreign competitors
such as Canada and the newly industrializing
countries of the Pacific rim. Consequently, the
Southeast's important forest products industry
continued to be battered by the flood of Canadian s o f t w o o d ; t h e same has b e e n true of
6
a p p a r e l makers who c o m p e t e w i t h c l o t h i n g
manufacturers in Taiwan, Korea, a n d Hong
Kong. Fortunately, this s i t u a t i o n has finally
begun to show some progress. In recent months
a new dollar index, d e v e l o p e d by economists at
the Federal Reserve Bank of Atlanta in part t o
measure t h e impacts of currency changes on
particular regions and industries, suggests that
the dollar is on a downward trend relative to
most of these currencies. However, t h e margin
of decline is still q u i t e small; so t h e extent of
improvement in some traditional southeastern
industries—and those areas d e p e n d e n t on
them—may not be very dramatic.
The Dangers of Protectionism
Because manufacturing in t h e Southeast remains troubled, it is t e m p t i n g to try t o p r o p u p
faltering industries and the communities that
"On the international stage, protectionism evokes retaliatory measures that could wreak havoc on
the world's economy."
d e p e n d on them. The Southeast, the rest of t h e
nation, and even the rest of the world could e n d
up much worse off, though, in t h e long run (and
even sooner) if we o p t for one of the quick fixes
currently gaining support, namely, protectionism. This tactic could pose a serious threat,
d e s p i t e the degree of currency it seems to have
gained recently among t h e American p e o p l e
and s o m e of our leaders. Protective t r a d e
barriers affect the marketplace, the workplace,
and the international stage. In the marketplace,
protectionism raises consumer prices and limits
choice. In the workplace, it creates distortions
by attempting to save low value-added jobs at
the expense of other, more p r o d u c t i v e jobs. On
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
t h e i n t e r n a t i o n a l stage, it evokes retaliatory
measures, that, taken together, c o u l d wreak
havoc on the world's economy now as they have
in the past.
In the Marketplace. The higher consumer
prices that result from p r o t e c t i o n i s m in t h e
marketplace affect everyone. In an open market,
consumers benefit from the competing efforts
of several companies that produce similar products, because t h e prices of each are held to their
lowest profitable level. When foreign products
are made artificially expensive by tariffs, market
d i s c i p l i n e is eased for American producers.
Tariffs in effect raise t h e prices of i m p o r t e d
goods, and domestic prices for the same items
often rise as well because there is less competition driving them down.
Another i m p o r t barrier is t h e quota. Quotas
serve not only to raise prices but also to 1 imit the
variety of goods available. In the case of quotas
like those imposed on cotton cloth imports or
those "voluntarily" accepted by the Japanese
auto industry, foreign manufacturers are able to
take advantage of the basic law of supply and
' The higher consumer prices that
result from protectionism in the
marketplace affect everyone."
d e m a n d when supplies of their products are
artificially limited. They often respond by narrowing exports to the more expensive items
covered by the statutory limits. In this way they
make u p much of t h e d i f f e r e n c e and even
increase profits. Domestically we are left with
fewer, more costly selections. Even if importers
do not make such substitutions, our consumer
choices are still l i m i t e d to some e x t e n t by
quotas. The cumulative effects of eliminating
c o m p e t i t i o n through these and other types of
non-tariff barriers like subsidies and local content requirements are considerable. A recent
government study estimates that all existing
tariffs and quotas cost the U.S. economy nearly
F E D E R A L RESERVE BANK O F ATLANTA
$ 13 billion per year. Such a hefty amount might
be worth paying if it could preserve American
jobs. However, the effects of protectionism in
the workplace show that this is not the case.
In the Workplace. It should be p o i n t e d out
that we have in fact protected t h e textile and
apparel industries with tariffs and quotas for
some time. Yet protection d i d not check t h e 1 oss
of jobs. The apparel industry has always thrived
on low wages because it is labor-intensive. In
t h e past, apparel c o m p a n i e s r e l o c a t e d from
northern states to the South in search of cheap
labor. Many of them are now repeating that process abroad, where relatively lower cost structures enable them to turn a profit. It is folly to
think that stemming t h e t i d e of imports will also
staunch t h e flow of U.S. m u l t i n a t i o n a l firms
abroad, where they can earn higher profits by
lowering their costs. Thus p r o t e c t i o n i s m will
not solve the p r o b l e m of j o b losses in those
industries in which our former c o m p a r a t i v e
advantage has eroded.
If we want to keep factories at home, the textile industry's approach is t h e best example to
follow. By substituting capital for labor, producers of fabric and carpet were able to turn
record profits last year. Not every industry lends
itself as readily to automation, b u t many industries s h o u l d b e a b l e to a p p l y technological
advances more effectively than in t h e past.
Automation will not save jobs, of course, since
more efficient manufacturing processes need
fewer workers to p r o d u c e t h e same o u t p u t .
Those left, however, can claim higher wages
because they are more productive. As for those
displaced, other remedies exist that are less
costly—and dangerous—than protectionism, and
I will discuss some of these later.
Another e m p l o y m e n t consideration that may
be overlooked is that protecting jobs in one
industry can lead to losses in another. For example, an estimated 14,000 retailing jobs w o u l d
have been lost in t h e South alone if President
Reagan had not vetoed the 1985 textiles and
a p p a r e l t r a d e bill. By b l u n t i n g c o m p e t i t i o n ,
tariffs cause prices to rise and so hurt retailers.
From the viewpoint of t h e larger economy, then,
protectionism is counterproductive. Aside from
costing at least as many—and probably m o r e j o b s than it saves, p r o t e c t i o n i s m r o b s t h e
American economic system of one of its great
advantages: the continuous process of change
that makes industry responsive to consumers'
needs. By keeping capital and labor resources
in noncompetitive industries t h a t survive only
because they are p r o p p e d up by trade barriers,
7
protectionism stifles the creation of potential
new firms, industries, and jobs.
On the International Stage. Protecting jobs
and whole industries from import competition,
however, is not the only rationale for protect i o n i s t tactics. Some advocates f e e l t h e s e
measures are n e e d e d as a bargaining chip to
o p e n foreign markets for U.S. exports. They
point out that Japan, Taiwan, and the European
Economic Community have their own guidelines
which pointedly discriminate against our products. Before capitulating to righteous indignation, however, we should examine our own
practices. American tariff rates are on average
s o m e w h a t lower than t h o s e of our t r a d i n g
partners, b u t these duties are unevenly a p p l i e d
from sector to sector. Apparel products are protected at an effective rate three to four times as
high as the average U.S. tariff, for example. U.S.
farm products are also heavily subsidized. Other
countries that export such agricultural products
might well claim they are at an unfair disadvantage against U.S. c o m p e t i t o r s in American
markets because U.S. farmers are so heavily—
albeit i n d i r e c t l y - p r o t e c t e d . What is more, the
United States maintains a range of non-tariff
barriers in a d d i t i o n to these other protectionist
measures, including quotas, licensing requirements, safety inspections, "buy-American" provisions, and variations on these themes.
Such trade-distorting practices can lead to
great costs on the international market, where
protectionism guarantees more protectionism.
This tendency arises from b o t h internal and
external dynamics. Internally, t h e American
p o l i t i c a l process is such that when t h e p e t
industry of one congressional representative is
p r o t e c t e d , industries w i t h political c l o u t in
other areas begin clamoring for similar preferential treatment. The great disaster of the
Smoot-Hawley tariff in 1933 came about as vested interests were a d d e d to the list in just this
way until tariffs in general e n d e d up at over 50
percent on an ad valorem basis.
T h e i n f l e x i b i l i t y of a c h i e v i n g p r o t e c t i o n
through legislation also presents a problem.
Even if t h e country changes its mind, it is very
difficult to get a law off the books. Once it is
passed, consumers and manufacturers are stuck
with it for a while.
Externally, protectionist measures are almost
sure to provoke retaliation. In the recent conf r o n t a t i o n b e t w e e n t h e U n i t e d States a n d
Canada over lumber, we saw clear examples of
this process. If t h e United States had imposed a
duty on Canadian wood, the Canadians were
8
prepared to tax feed corn accordingly. In att e m p t i n g to help one industry, another type of
producer entirely removed from the original
d i s p u t e was t h r e a t e n e d . The Smoot-Hawley
tariff h e l p e d t i p t h e w o r l d toward just such a
spiral of tit-for-tat maneuvers. The end result
was the collapse of world trade and a lengthy
depresssion. Do we really want to retrace that
unhappy course? Surely this country has moved
too far toward i n t e r n a t i o n a l i z a t i o n to fail t o
learn from past mistakes.
Policy Recommendations
Arguments for the benefits of protectionism
wear thin when viewed from an overall economic perspective. Protectionism cannot save
jobs; it costs jobs in non-protected industries
and prevents creation of new jobs by robbing
resources from potential new industries. Protectionism is expensive to the consumer and,
"Protectionism cannot save jobs;
it costs jobs in
non-protected
industries and prevents creation
of new jobs by robbing resources
from potential new industries. ''
perhaps worst of all, spreads like a communicable disease through t h e international business community. For these reasons protectionist
barriers should not be considered viable ins t r u m e n t s of international economic policy.
Instead, policymakers need to do precisely t h e
opposite and, in concert with our trading partners, push to diminish trade barriers further.
It is critical to continue expanding our vision
to include all the opportunities held out by the
evolving i n t e r n a t i o n a l order rather than to
overreact to short-term imbalances. Since the
e n d of World War II, t h e U n i t e d States has
encouraged free trade as the sound economic
basis for higher I iving standards in the rest of the
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
world and here at home. That farsighted strategy has contributed to forty years of relative
peace. In no small way this peace is related to a
worldwide standard of living much higher than
most p e o p l e would have predicted at the e n d of
World War II. The spirit of cooperation rather
than confrontation should continue to shape
U.S. relations, not only w i t h former e n e m i e s
b u t also w i t h t h e newly i n d u s t r i a l i z e d countries.
That does not mean we should forbear from
calling on Taiwan and Japan, for e x a m p l e - t w o
nations with extraordinarily high trade surpluses and substantial import barriers—to lower
the protective walls that make it impossible for
many of our nation's goods a n d services to
penetrate their markets. Nor should we refrain
in the upcoming round of GATT (General Agreement on Tariffs and Trade) talks from pressing
for the general agreement to b e extended to
cover service industries like insurance, hospital
management, and data processing—potentially
some of America's most profitable exports. With
direction from GATT and continued pressure
7 f may be that our loss of competitiveness is due more to our
failure to understand others than
it is to inefficient production and
lack of quality."
from the United States, intellectual properties
also could be better protected. Earnings from
American research and development efforts—an
extremely valuable and u n d e r c o m p e n s a t e d
export—just like earnings from books and musical compositions, ought rightly to be returned to
us. However, these pressures should be exerted
through the skillful dialogue of negotiations, not
t h r o u g h t h e m o n o l o g u e of p r o t e c t i o n i s m .
Through persuasion, the United States can convince its trading partners to assume more responsibility for keeping the exchange of goods
and services, together with labor and capital, as
unrestricted as possible and thus remove at
least some of the burden from us.
F E D E R A L RESERVE B A N K O F ATLANTA
A s i d e from t a k i n g d i r e c t steps toward o p e n
markets, foreign governments could adjust their
domestic economic policies. In particular, other
advanced industrial economies need to rely
less on exports a n d m o r e on d o m e s t i c dem a n d . West G e r m a n y c o u l d f o l l o w Japan's
example and stimulate its economy by accelerating tax cuts and i m p l e m e n t i n g a generally
more expansive fiscal policy. Not only would fiscal stimulus relieve the high levels of unemploym e n t now prevailing there, b u t it would also
make more money available for consumption of
both imported and domestically manufactured
goods.
Though Japan and West Germany have been
criticized for dragging their feet on easing fiscal
policy, Americans, too, have been far too slow to
correct i n t e m p e r a t e fiscal policies that have
c o n t r i b u t e d to the very problems the protectionists purport to address. Government borr o w i n g t o f i n a n c e t h e d e f i c i t s of t h e early
eighties pressed beyond the ability of American
citizens, with their relatively low rate of savings,
to carry the debt. Resulting deficits p u s h e d
interest rates to a level that made government
securities attractive to foreign investors. The
subsequent rise in d e m a n d for dollars to buy
our dollar-denominated assets eventually made
our currency so expensive relative to others that
our goods lost price c o m p e t i t i v e n e s s on foreign markets. To maintain t h e m o m e n t u m that
has been b u i l d i n g toward a turnaround in international trade, the United States must continue
its attack on federal budget deficits.
Clearly, many of these r e c o m m e n d a t i o n s
must be i m p l e m e n t e d at t h e federal level.
Education, however, is one means by which
state a n d local g o v e r n m e n t s can help their
regions' economies adapt to competition rather
than avoid it. From elementary and high schools
to colleges and on into the business community,
Americans must b e c o m e more familiar w i t h
other cultures, learn to speak the languages of
foreign purchasers, and interpret their unspoken
signals. This familiarity w o u l d translate into
greater sensitivity to foreign markets and would
allow the United States to sell as aggressively
abroad as we do at home. Our experience in
marketing psychology should make it obvious
that a product's appeal to overseas consumers
is affected by subtleties of local taste and custom. Yet we persist in remaining international
illiterates, paying much less attention to und e r s t a n d i n g foreign c u l t u r e s than foreigners
pay to investigating ours. It may be that the loss
of our competitive edge is d u e more to our
9
failure to understand others than it is to inefficient production and lack of quality. Finally,
legislative b o d i e s could best show their concern for workers who have lost jobs in noncompetitive industries by directing funds toward
retraining them. Those parts of the Administration's trade bill that called for programs t o
assist d i s l o c a t e d workers, i n c l u d i n g farmers,
and proposed a job-training program to help
disadvantaged youths were moves in the right
direction.
Conclusion
The protectionist sentiment abroad in America today seems to reflect a crisis in confidence
10
and not a crisis in trade. Do we really b e l i e v e
that after leading the world's postwar recovery
by means of its ingenuity and adaptability, t h e
American business community, if unaided by
protection from its government, will collapse
rather than face the challenge of competition?
Competition is the essence of the free market
and of our system of government. It is probably
our favorite leisure pastime—it is something we
Americans d o well. Let us not fear that we will
fail in this moment's challenge any more than we
have in t h e past. Economic forces, especially t h e
exchange rate realignment, are already at work
to level the playing field of international trade. It
is time to take the field and do what we do best:
size up the opposition, devise a strategy, and
come out ahead.
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
"Buffer-Stock" Money
and the Transmission
Mechanism
by David Laidler
Economist David Laidler discusses the buffer-stock
approach to monetary economics and presents its
cautionary implications for policy.
Though not unknown, the topic of this lecture
is not fashionable in American economics. 1 The
"buffer-stock" approach to monetary economics
has conventional enough foundations, b u t it
takes a couple of particular turns that differentiate it b o t h from modern new-Classical macroeconomics and t h e m o r e t r a d i t i o n a l Keynesian alternative. In each case, however, the
turn in question seems to m e to be an empirically fruitful one. I t w o u l d not be appropriate
to turn this lecture into an exercise in abstract
model building, and I shall not therefore try to
e s t a b l i s h by rigorous a r g u m e n t t h e logical
coherence of the conclusions I shall discuss.
Rather I shall sketch an overview of the bufferstock approach as I see it, indicating where it is
identical to conventional theorizing and where
it differs. 1 shall pay particular attention to issues
This article is the text of a presentation
of the Atlanta
Fed's Distinguished
fessor of economics at the University
Canadian
Canada.
Economic
Association,
H e is currently
given in November
Lecturer
1986 as part
Series. The author is a pro-
of Western Ontario,
president of the
and a fellow of the Royal
doing research
on the history
economics.
FEDERAL RESERVE BANK O F ATLANTA 11
of
Society
of
monetary
that are empirically interesting and relevant t o
policy when viewed from t h e buffer-stock perspective. In short, though I shall not a t t e m p t t o
prove to you that this approach is correct, 1 shall
try to p e r s u a d e you that it is worth serious
attention.
Having c l a i m e d e m p i r i c a l c o n t e n t for t h e
approach, my first step in setting it out must be
to draw attention to a question that it does not
answer. The approach has nothing to say about
why that complex of social institutions which we
call the monetary system exists. It begins, not by
explaining them, b u t by describing them. No
d o u b t this is a deficiency, b u t we do have to start
somewhere with our economic theorizing. Economists have no qualms about taking t h e existence of such institutions as property rights, law,
and government for granted when they begin
their work, and t h e monetary system is surely an
institution on the same level as these. It would
be nice to be able to explain its existence, but
our inability to d o so should not prevent us from
addressing more tractable problems. Hence,
though I note that the buffer-stock approach
does not deal with these issues, 1 see no reason
t o apologize for this failing.
The buffer-stock approach, then, begins with
the observation that, in the world we inhabit,
economic activity is coordinated by monetary
exchange among agents—consumers, producers, workers, employers, savers, and investors—separated over space and time. Though
A Simplified View of the
Buffer-Stock Approach
INCOME
"as if" they w e r e c o o r d i n a t e d by markets.
Nevertheless, if monetary institutions are alternatives to markets, we should be particularly
wary of arguments by analogy with a world in
which monetary institutions do not exist when
we come to study the monetary system itself.
What I specifically mean by this will, I hope,
become clear as this lecture proceeds.
The Demand for Money
The amount of buffer stock held in reserve by any individual
depends on the degree of uncertainty about income and
expenditure.
we continually speak of the United States as a
"market economy," we argue by analogy when
we do so. To an economic theorist, a market is a
place where agents come together to trade with
one another, a place where each one of t h e m
can obtain c o m p l e t e and accurate information
about the prices of all the goods and services
that interest them before making any commitments as to production or consumption plans,
and also a place in which the actual exchange of
i n p u t s a n d o u t p u t s can be carried o u t costlessly. When we describe the United States as a
"market economy," what we are saying is that
t h e outcome of the monetary coordination process for economic activity is similar to that which
would be achieved in a market such as I have
just sketched out.
Of course, radical critics of modern economic
theory often reject this analogy outright, b u t I do
not wish to be counted among them. The laws of
supply and d e m a n d do seem to have considerable explanatory power over the world we live
in, and it is hard to believe that they would have
that power if it were not val id to argue that actual
economies behaved to a considerable extent
12
Consider a typical agent carrying on economic
activity in a world characterized by monetary
exchange. If this agent is a household, it will supply various productive services to firms, obtain
income from these transactions, and use that
income to obtain goods and services to consume. The transactions here will not, of course,
be by barter. Income is paid out in money, and
goods are bought with it. Furthermore, because
t h e t i m i n g and a m o u n t of b o t h income and
expenditures is never quite certain, it will pay
this typical household to keep on hand a certain
stock of money to t i d e it over unexpected discrepancies b e t w e e n t h e two flows. A buffer
stock of money enables plans about expenditures to be insulated (to a degree) from surprises about receipts and enables spur-ofthe-moment decisions to be made about expenditures even when the timing of receipts
w o u l d not p e r m i t such expenditures. Nor is this
line of argument confined to the household.
Firms cannot plan their sales and purchases
precisely either as to timing or amount, and also
find a buffer stock of money indispensable to
their smooth functioning. This is not to say that
money is the only means available of coping
with such problems. Readily available lines of
credit, not to m e n t i o n stocks of other l i q u i d
assets, and indeed inventories of goods, can
and do also function as buffers. However, the
analysis that follows requires not that money is
the only buffer stock in the economy, b u t only
that it is an important one.
There is of course nothing new here. All I have
done is briefly state the basis of modern approaches to the "transactions/precautionary"
d e m a n d for money. I have said no more than
that in a world in which the timing and amount of
p a y m e n t s and receipts is less than certain,
agents will find it convenient to h o l d some of
their wealth in t h e form of money balances. 2
They will do so because holding money enables
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
t h e m t o mitigate the consequences of uncertainty for their ability to carry out their plans. In a
true market economy, where all could make
arrangements to deal in pre-planned amounts
at known prices for everything that concerned
t h e m , t h e r e w o u l d b e no n e e d for money,
because there w o u l d be no uncertainty a b o u t
payments and receipts. These would b e fully
coordinated in advance before production and
c o n s u m p t i o n were u n d e r t a k e n . Though this
argument too is commonplace, when we p u t it
together with a third idea, also uncontroversial
among economists, a n d b r i n g it t o bear on
theorizing about money, the buffer-stock approach begins to take a turn that differentiates it
from more conventional treatments of monetary
issues.
The third idea in question is that in a world in
which agents are not presented gratis with all
the information they need to make their plans,
i n f o r m a t i o n itself is an e c o n o m i c g o o d . We
should therefore think of agents as being able to
gain knowledge by devoting t i m e and trouble t o
its acquisition, and we should also think of t h e m
as doing so up to the p o i n t at which t h e subjectively p e r c e i v e d marginal value to t h e m of
acquiring more of it is just counterbalanced by
the marginal costs involved in that acquisition.
Specifically, we should think of households and
firms as being able to reduce the amount of
u ncerta i nty they face about their future patterns
of payments and receipts by devoting resources
to investigating t h e factors u p o n which they
d e p e n d . But, of course, the benefits t o be obtained from such research will come in t h e form
of reduced costs arising from the unexpected
disruption of plans. We have already seen that
holding buffer stocks of money is also a means
of reducing such disruption. Hence we must
conclude that to devote wealth to money holding is, for the individual agent, an alternative t o
devoting it to the production of information. 3
The implications of this argument are of profound importance for the study of macroeconomics. The last decade or so has seen
this branch of our discipline subjected to t h e socalled "new-Classical Revolution," whose very
essence has been to argue that macroeconomic
problems must be analyzed using economic
models in which agents are always in equilibrium in the sense of being able to execute their
plans, and in which those agents base their
plans upon all economically available information. When they are put this way, the bufferstock advocate can have no quarrel with newClassical prescriptions for the construction of
FEDERAL
RESERVE BANK O F ATLANTA
economic models. However, the actual way in
which t h e pioneers of this approach have translated their principles into practice is a different
matter, for they interpret t h e m in a very special
way. Moreover, it is the special nature of the
interpretation in question which gives newClassical economics its particular character.
The new-Classical models of, for example,
Robert E. Lucas (1972), Thomas Sargent and Neil
Wallace (1976), or Robert J. Barro (1978), to c i t e
three key contributions t o this body of thought,
assume not only that all agents execute their
plans, b u t that those plans are coord inated by a
set of market-clearing c o m p e t i t i v e prices at
which all trade takes place. Furthermore, agents'
access to information is such that though they
are deprived of knowledge of the prices of the
goods they plan to purchase at t h e times at
which they consummate their sales, they nevertheless know e n o u g h a b o u t t h e processes
d e t e r m i n i n g those prices to ensure that their
receipts from sales are just sufficient to enable
them to make the market-clearing volume of
purchases when the m o m e n t comes for them to
buy. They know all this d e s p i t e the fact that they
do make errors in forecasting buying prices. In
effect, in these models, information is assumed
either to b e available to agents at zero marginal
cost (in which case they use it in the formation of
expectations, which also impose zero marginal
computational costs u p o n them) or else to be
completely unavailable. 4
It should be apparent from t h e earlier discussion that, in t h e buffer-stock approach, t h e
gathering and processing of i n f o r m a t i o n are
thought of as being subject to rising marginal
cost, and that, for the individual agent, money
holding is viewed as a substitute for devoting
resources to such activities. Thus, in a monetary
economy, "all economically available" information is unambiguously less than "all available"
information. Furthermore, if the agent we are
considering is a firm, it needs information for
activities such as setting the price of output,
making wage offers to employees, and so on.
Since m o n e y h o l d i n g mitigates t h e consequences of making mistakes here, we should
expect money wages and prices to be set on t h e
basis of less than "all available" information
and, hence, sometimes to take values that fail to
equate supply and demand. Since it is costly t o
vary prices, and since money holding mitigates
the costs of trading at prices that represent unequal current supply and demand, we might
also e x p e c t m o n e y h o l d i n g by firms t o b e
associated w i t h less f r e q u e n t variations in
13
prices than in a market of costlessly variable
prices arrived at "as if" at the will of a Walrasian auctioneer. 5
In short, to use economists' jargon, the bufferstock approach to monetary economics argues
that the twin assumptions of "clearing markets"
and "rational expectations" (as the latter are
actually i m p l e m e n t e d in new-Classical economics) are i n a p p r o p r i a t e bases for d e a l i n g
with macroeconomic issues. It does so because
the interaction between market uncertainty and
money holding runs in both directions. Uncertainty causes agents to hold money, b u t the very
fact that doing so protects them from its consequences also helps to ensure that t h e uncertainty in question persists. The first argument is
quite standard, b u t t h e second less so. Even so,
the first argument, refined along well-known
lines, leads to quite conventional conclusions
a b o u t agents' d e m a n d for m o n e y b e i n g a
d e m a n d for so-called "real balances," that is,
money measured in units of constant purchasing power. The amount of protection that a given
amount of nominal money will provide against
uncertainty about future fluctuations in real conditions of supply and d e m a n d will vary in direct
proportion to t h e average price level at which
transactions are carried out. If that price level
changes by a certain amount, then the typical
agent will have to make an equiproportional
adjustment in his money holdings in order to
obtain the same degree of insulation against
unexpected shocks as he had before.
In saying that the d e m a n d for money is a
d e m a n d for "real balances," the buffer-stock
approach is saying nothing which differentiates
it from other approaches to m o d e l l i n g t h e
demand-for-money function; nor is there any
novelty in anything else that it says about the
nature of the d e m a n d for money per se. The
individual agent might be expected to make do
with smaller real balances on average as the cost
of holding them (as measured by some nominal
interest rate) increases. He might also be expected to hold more of them as the amount of
his real wealth increases, and this for two reasons. Not only does an increase in wealth mean
that the agent has more resources available for
asset holding in general, so that some of them
might be expected to be devoted to money in
any event, but as an agent's wealth increases, so
might the scale of his market transactions. If
exposure to uncertainty about the volume of
payments and receipts increases with the scale
of market transactions, then the amount of work
14
that an agent will require his money holdings to
perform will also increase.
Thus, when the price level, the interest rate,
or his wealth varies, the typical agent will want to
eliminate the discrepancy to which this gives
rise b e t w e e n his actual and d e s i r e d money
holdings. He can make that adjustment only by
temporarily altering his rate of flow of expenditure on goods, services, and assets other than
money. A firm or a household seeking to b u i l d
up a cash balance to a higher desired level will
cut down its purchases and attempt to increase
its sales and vice versa; the particular items that
will be subjected to variations in their supply
and d e m a n d here will, of course, vary from agent
to agent, but the same s i m p l e principle will be
at work in each case. In short, for the individual
agent, a discrepancy between actual and desired money holdings will set up a real-balance
effect on expenditure flows, both on currently
produced goods and services, and also on t h e
acquisition of other assets. However, since it is
"Uncertainty
causes agents to
hold money, but the very fact
that doing so protects them from
its consequences also helps to
ensure that the uncertainty
in
question
persists."
the essence of a buffer stock of money that it be
allowed to vary over t i m e about some planned
average value as it absorbs unexpected shocks,
responses here will not be rapid. The typical
agent will make a conscious effort to adjust his
money holdings by changing his market activities only when those holdings persistently take
an average-over-time value that is " t o o high" or
"too low." 6
The Transmission Mechanism
Economists study the d e m a n d for any item in
order to be able to make predictions about
changes in its supply. In t h e case of money, this
does indeed mean that the purpose of studying
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
the d e m a n d for money, which was the subject of
the previous section of this lecture, is to enable
us t o discuss the consequences of changes in
the supply of money. Without a theory of t h e
d e m a n d for money, one cannot discuss monetary policy in a coherent fashion, and a good
criterion by which to judge any approach to
theorizing about the d e m a n d for money (though
not the only one, of course) is how h e l p f u l it is in
throwing light on policy issues. The questions
that arise in this context fall into two categories.
Some of them concern the ultimate effects of
changes in the quantity of money, and some concern the processes w h e r e b y those u l t i m a t e
effects are brought about; they concern, if you
like, t h e e q u i l i b r i u m consequences of monetary
policy and the transmission mechanism whereby t h e economy moves towards its final equilibrium.
Now knowledge about the d e m a n d for money
is necessary to enable us to make predictions
about the effects of monetary policy, b u t it is not
"If the price level changes...
then
the typical agent will have
to...
adjust his money holdings
...to
obtain the same degree of insulation against unexpected shocks. "
sufficient. There is not space here to discuss the
whole of macroeconomic theory, and I hope that
a few brief assertions will suffice to put what 1
have to say about buffer-stock money into a
broader macroeconomic context. It is my judgment that, over the long run, the levels of real
income and e m p l o y m e n t in t h e economy are
d e t e r m i n e d largely i n d e p e n d e n t l y of monetary
policy, and that, in the wake of monetary disturbances, t h e economy will t e n d to return t o
values of these variables given by supply-side
factors. Similarly, 1 would argue that t h e real rate
of return on capital in the economy is supplyside determined, and that the nominal interest
rate varies with this real rate of return, suitably
adjusted for the expected inflation rate. These
are very "monetarist" judgments that not everyone will share; so let me a d d immediately that,
although in t h e following discussion I will argue
FEDERAL RESERVE BANK O F ATLANTA
"as if" they were correct, much of what 1 have to
say about the buffer-stock approach to money
retains its valid ity in the context of other ways of
looking at macroeconomic phenomena.
Be that as it may, these assertions imply,
crucially, that everything upon which the demand for money depends, except the general
price level, is d e t e r m i n e d i n d e p e n d e n t l y of the
behavior of t h e money supply in t h e long run.
Hence, only the price level is ultimately free to
vary in order to return the supply and d e m a n d
for money to e q u i l i b r i u m after a change in the
quantity of money. Moreover, since t h e d e m a n d
for nominal money is proportional to the general level of prices, a given change in the level of
the money supply will cause an equiproportional change in the price level. Also, in the presence of an ongoing rate of monetary expansion,
prices will rise at t h e same rate (minus an
allowance for the effects of ongoing real growth
on the d e m a n d for money); hence a given
change in t h e monetary expansion rate w i l l
change the inflation rate by an equal amount. 7
These, however, are the ultimate effects of monetary policy, and what 1 have said about them is
neither new nor very controversial; b u t how are
they brought about? I would claim that it is here
that the buffer-stock approach has something
useful to tell us.
To u n d e r s t a n d t h e c o n t r i b u t i o n t h a t t h e
buffer-stock idea makes to the analysis of the
transmission mechanism, it is helpful to contrast its implications with those of other approaches to macroeconomics. Consider first t h e
"new-Classical" macro model. As is well known,
new-Classical macroeconomics d i s t i n g u i s h e s
sharply between the effects of " a n t i c i p a t e d "
and "unanticipated" changes in the money supply. The former are said to affect only t h e
general price level, taking it immediately to its
new, long-run e q u i l i b r i u m value. The latter
affect b o t h prices and quantities because, it is
argued, agents operating in particularsegments
of the economy, seeing t h e money prices of what
they have to sell varying, mistake these changes
for relative price changes and respond to them.
Once such confusion is removed, so are the
quantity effects (except to the extent that erroneous investment decisions have been made
in the past in response to price confusions and
distort t h e economy's current capacity to prod u c e goods and services relative t o what it
otherwise would have been).
On the matter of how the effects of monetary
changes on the price level are brought about,
new-Classical macroeconomics is totally silent.
15
Prices move to keep markets in e q u i l i b r i u m at
all times, we are told, b u t who moves them, and
how they know what values to move them to,
remains a mystery. Perhaps in t h e case of
anticipated changes in the money supply, pricesetting firms know enough about the structure
of the economy that they immediately and costlessly calculate t h e changes t h a t they must
make to their own prices in order to do their part
to maintain e q u i l i b r i u m between t h e supply
and d e m a n d for money in the aggregate economy. And perhaps in the case of unanticipated
changes, each firm, though misinformed about
the state of its own market (and hence undertaking an o u t p u t response along with a price response) nevertheless knows enough about every
other firm's misinformation for the collective
outcome of their pricing decisions to be a price
level change which (making d u e allowance for
the o u t p u t change) still maintains e q u i l i b r i u m
between the supply and d e m a n d for money. In
either event, as far as new-Classical macroeconomics is concerned, the "transmission mechanism" linking monetary changes to the price
level is an unanalyzed b u t purely psychological
phenomenon operating in the minds of extraordinarily well-informed marketing executives. 8
The root of this weakness in new-Classical
economics is, of course, its insistence on m o d elling t h e consequences of monetary changes
"as if" they took place in a market economy of
the type briefly described at the beginning of
this paper, in which there w o u l d b e no role for
money to play in the first place. The buffer-stock
approach has more to say about the transmission mechanism, precisely because it takes
note of t h e fact that price stickiness and imperfect information are inherent properties of an
economy characterized by monetary exchange.
In this respect it is similar, though not, as we
shall see below, identical to traditional Keynesian macroeconomics. It observes that, in such
an economy, t h e first manifestation of an increase in the money supply will be a preponderance of agents finding themselves, on average, with too much money on hand, and that
their response to this state of affairs will be to
increase their rate of flow of expenditures on
goods, services, and other assets i n c l u d i n g
financial assets. It further notes that, if t h e
money supply of the economy they inhabit is
exogenously set by monetary authorities, then
what each individual thinks can be accomplished by such means, namely a reduction in
his cash holdings, cannot be accomplished by
all agents at the same time. At first, therefore,
16
agents will pass excess money to one another
like the proverbial "hot potato".
Only as t h e e x p e n d i t u r e flows thus set in
motion cause changes in the variables upon
which the d e m a n d for money d e p e n d s will they
b e d a m p e n e d d o w n . I n t e r e s t rates w i l l b e
pushed down as agents try to acquire bonds
with their excess cash, and o u t p u t will increase,
b o t h as lower interest rates have their own
effects on demand and as direct expenditure
effects of excess money make themselves felt.
In d u e course, increased d e m a n d for goods and
services will p u t pressure on input markets, not
least the market for labor, and money wages and
prices will begin to rise. All of these effects will
reduce excess money holdings, and the expenditure flows associated with them will be diminished. Ultimately prices (and money wages)
will be high enough to absorb the increased
money supply, interest rates and o u t p u t will
return t o their long-run, s u p p l y - s i d e - d e t e r m i n e d e q u i l i b r i u m values, and t h e mechanism just described will cease to operate. 9
Now in contrasting this buffer-stock story
about the transmission mechanism with its newClassical counterpart, I d o not mean to imply
that the distinction between anticipated and
unanticipated shocks to the monetary system is
irrelevant to the former approach. On t h e contrary this distinction is one of the lasting cont r i b u t i o n s of new-Classical analysis to economics in general. The extent t o which prices
a n d interest rates, as o p p o s e d t o levels of
expenditure and output, will vary in response to
an increase in t h e money s u p p l y (or t o an
increase in its rate of growth) will surely d e p e n d
upon the extent to which those agents involved
in the setting of goods and asset prices "ant i c i p a t e " t h e change in question. However,
because in new-Classical economics all prices
are always free to vary, "anticipated" and "exp e c t e d " policy changes are synonymous. The
buffer-stock approach, stressing as it does the
rationality of price stickiness in a monetary
economy, forces its proponents to distinguish
between anticipated and expected changes,
and to take account of the fact that a pricesetting agent must not only perceive and understand t h e consequences of a policy change
(in which case it is "expected") but must also be
free to act upon that information before a policy
change can be "anticipated."
The implication of applying the "unanticipated-anticipated" distinction in the context of
the buffer-stock approach, then, is not that a
clearly announced and fully understood monM A R C H / A P R I L . 1987, E C O N O M I C REVIEW
etary policy change will have no real effects.
Rather, it is that the manner in which the effects
of a policy change d i v i d e themselves u p over
t i m e between real and nominal variables will
d e p e n d upon the extent to wh ich that change is
understood to have taken place, and the extent
to which contractual arrangements already in
place permit agents to act upon new information. These conditions, however, are likely to
vary from t i m e to t i m e a n d place to place;
though the transmission mechanism of monetary policy can be d e s c r i b e d q u a l i t a t i v e l y
along lines set out above, it is impossible to
make any quantitative generalizations a b o u t its
nature. The well-known proposition of Milton
Friedman about the effects of monetary policy,
namely that they are subject to "long and varia b l e lags," thus f o l l o w s naturally from t h e
buffer-stock approach. Hence, t h e a p p r o a c h
implies that monetary policy does have real
effects, b u t immediately adds the qualification
that the size and timing of these effects is sufficiently uncertain as to render it useless, ind e e d dangerous, as a stabilization device.
The Role of the Interest Rate
Now the account that 1 gave above of the
transmission mechanism must have sounded
very "Keynesian," stressing as it d i d the role of
sticky prices in the economy, and yet the policy
conclusion I have just stated is far from being
"Keynesian," at least as that adjective is understood in North America. In fact, my analysis is
not as inconsistent as it might appear at first
sight, because there is one distinctly un-Keynesian characteristic to my description of the
transmission mechanism. I likened money to
the proverbial " h o t p o t a t o " which no individual
willingly holds, b u t which t h e economy as a
whole must, and argued that newly injected
money continues to influence expenditure flows
until the price level moves sufficiently far to
make agents willingly hold it. I have thus argued
that the existence of a discrepancy between t h e
quantity of money s u p p l i e d and d e m a n d e d is a
critical and persistent feature of the transmission mechanism. An orthodox textbook Keynesian account of this mechanism has no m o r e
room for such a discrepancy than does a newClassical m o d e l , though a Keynesian m o d e l
rules out its existence by somewhat different
means.
F E D E R A L RESERVE B A N K O F ATLANTA
The key element here is the role played by
the responsiveness of t h e d e m a n d for money to
interest rates in maintaining e q u i l i b r i u m between the supply and d e m a n d for money in
Keynesian economics. Financial markets are
extremely flexible and quick to clear, and therefore (so it is argued) any incipient discrepancy
between the quantity of money s u p p l i e d or
d e m a n d e d must i m m e d i a t e l y move interest
rates to values at which it is el iminated. Thereafter, t h e longer-term effects of a change in the
quantity of money come about as a result of the
private sector's response to the incentives to
increase or lower spending i m p l i e d by these
new interest rates. As compared to a bufferstock model, the Keynesian variant removes
one important source of uncertainty about the
detailed operation of the transmission mechanism; and in so doing it narrows the range of
e m p i r i c a l q u e s t i o n s that need to b e asked
about that mechanism to those involving the
effects of interest rates on expenditure. Hence,
a "Keynesian" can be more confident than a
" b u f f e r - s t o c k " advocate of t h e p o s s i b i l i t y of
learning enough about the quantitative nature
of the transmission mechanism to deploy discretionary monetary policy usefully.
An argument to the effect that interest rates
do not m a i n t a i n p e r p e t u a l e q u i l i b r i u m between the supply and d e m a n d for money is thus
an essential c o m p o n e n t of t h e buffer-stock
story about the transmission mechanism. It is
important to grasp, therefore, that this argument does not d e p e n d in any way upon an
implicit assumption that interest rates are a
"sticky price" as that phrase is usually understood. What is at play here is a special case of a
rather general proposition that arises from viewing money as a buffer stock, namely, that in a
monetary economy, goods, services, and assets
of all sorts are traded not directly against one
another, b u t against money. Moreover, prices
are stated in terms of money, and e q u i l i b r i u m
emerges in a monetary economy as a result of
price-setting agents in individual markets setting the money prices of whatever it is they deal
in in order to maintain equality between the
supply and d e m a n d for that specific item. This is
true for every i t e m t r a d e d in t h e economy
except money.
Now, of course, for a monetary economy to be
in equilibrium, t h e price level and the structure
of nominal interest rates have to take appropriate values, b u t no one sets these variables with
such an e n d in view. Dealers in goods and services are concerned to get the money prices of
17
individual items right, and dealers in financial
assets, to get particular interest rates right, in
the light of signals emanating from the particular
markets in which they operate. Specifically,
interest rates move in response to the supply
and d e m a n d for credit, for what used to be
called "loanable f u n d s . " l 0 T h i s is not to say that
the flow supply and d e m a n d for credit is ind e p e n d e n t of the existence or size of disc r e p a n c i e s b e t w e e n t h e stock s u p p l y a n d
d e m a n d for money; nor is it to say that for t h e
system as a whole t o b e in full equilibrium, t h e
supply and d e m a n d for b o t h money and credit
d o not have to be equal. It is, however, to say
that, out of equilibrium, the rate of interest will
move in response t o an excess supply of money
in t h e economy only t o t h e extent t h a t this
affects t h e supply and d e m a n d for credit, and
that there is no reason to expect this change t o
b e such as to eliminate immediately t h e excess
supply of money in question. 1 1
Having made this point, though, does it matter? A buffer-stock modeller and a Keynesian
would b o t h agree that an increase in the quantity of money lowers interest rates in the short
run as a part of the transmission mechanism.
Disagreement here seems only to concern t h e
size of t h e effect. There is, however, a I ittle more
to it than that. The orthodox Keynesian model
has t h e economy always " o n " its demand-formoney function, so that all observed variations
in the velocity of circulation, that is, in the rate at
which money changes hands, should be explicable in terms of fluctuations in t h e variables
(including interest rates) upon which the demand for money depends. Not so the bufferstock model. Here, t h e economy's being "off" its
demand-for-money function is central to the
transmission mechanism, and, in addition to
variations in the factors affecting the d e m a n d for
money, variations in the quantity of money supp l i e d can also affect the velocity of circulation.
The implications of this last argument for empirical questions concerning the stability of t h e
demand-for-money function, which is estimated
using the quantity of money s u p p l i e d to measure the quantity of money demanded, are as
obvious as they are important. 1 2
Some Loose Ends
It should by now be apparent that the phrase
"buffer-stock approach" is a label for a par18
ticular set of interrelated hypotheses about t h e
way in which t h e macroeconomy functions in t h e
short run, and in one lecture it is impossible to
cover all aspects of so c o m p l i c a t e d a topic.
Nevertheless, before concluding this discussion it is important to touch upon a couple of
issues which u n d o u b t e d l y complicate the application of t h e ideas set out above to any real
world economy. These issues are familiar enough
to anyone working in macroeconomics and may
be expressed in two questions: "How exogenous is the money supply?" which is to say, to
what extent is the money supply d e t e r m i n e d by
external factors l i k e t h e d i s c o u n t rate? a n d
" H o w unique among the spectrum of assets is
money?" I shall touch upon t h e m in turn.
A sine qua non of t h e foregoing discussion is the
proposition that, although t h e individual agent
can get rid of excess money, the economy as a
"The very existence of monetary
exchange implies that the economy should be characterized by
a certain degree of
ignorance
and price
stickiness."
whole cannot, and a more formal presentation
of my arguments w o u l d be conveniently cast in
terms of a model in which t h e nominal money
supply is an exogenous variable d e t e r m i n e d by
external factors. The real world, it may be objected, is not like that; the quantity of money is
in fact an endogenous variable d e t e r m i n e d by
the actions and reactions of banks, businesses,
and consumers. 13 This is true, but it does not
follow that buffer-stock analysis is irrelevant.
That a variable is endogenous to the economic
system does not also imply that it is completely
passive. Whenever there exists some agent, say
a central bank, which stands ready to buy and
sell some other asset, say b o n d s or foreign exchange, in exchange for money at a fixed price,
t h e e q u i l i b r i u m q u a n t i t y of m o n e y w i l l b e
d e m a n d - d e t e r m i n e d in full equilibrium. However, it does not follow from this that disturbances
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
to such an e q u i l i b r i u m cannot arise from fluctuations in t h e supply of money, or that discrepancies between the supply and d e m a n d for
money w i l l b e costlessly e l i m i n a t e d by an
i m m e d i a t e restoration of t h e money supply to
its initial value. 14
Thus, under an interest rate-pegging regime,
money created in connection with t h e funding of
either a government deficit or the satisfying of
the private sector's d e m a n d for bank credit will
surely come into circulation and exert an influence on expenditure flows. Even when t h e
interest rate is pegged, the private sector does
not transact with the banking system with the
conscious intention of varying its money holdings. People borrow from banks to buy goods
and assets, not to obtain money to hold, b u t
money is nevertheless created as a by-product
of such activities. In a fixed-exchange-rate, open
economy, a surplus in t h e balance of payments
"The buffer-stock
approach
...
predicts that systemic
policies
can indeed have real
effects.
However,
it warns that
their
magnitude and timing are sufficiently uncertain as to render
them positively
dangerous."
The same may be said about the effects of
recognizing the non-uniqueness of " m o n e y " as
a "buffer-stock" asset. 15 Of course other financial assets, not in and of themselves means of
exchange, but readily and cheaply convertible
i n t o money, are h e l d o u t of p r e c a u t i o n a r y
motives, and of course firms in particular hold
inventories of all manner of inputs and outputs
for similar reasons. The availability of such alternatives to money will p r e s u m a b l y affect t h e
e q u i l i b r i u m d e m a n d for it and i n d e e d might
make it possible to talk meaningfully of more
than one monetary aggregate. Also, shocks to
the system might well originate in t h e markets
for these other buffer stocks, and we should b e
careful in their presence not t o insist on a
theoretically unique role for the money supply
as a source of disturbances. Moreover, even
when a change in the money supply is the disturbing factor under analysis, variations in stocks
of these other assets will surely play a role in t h e
economy's subsequent adjustment. That is to
say, their existence affects the number of and
type of shocks to which an economy might be
subjected, and it will also affect t h e details of
t h e transmission mechanism. N o n e of this,
however, means that changes in the money supply will necessarily cease to be important, or
that buffer-stock analysis throws no light on
their transmission mechanism.
Concluding Comments
caused by, shall we say, an increased foreign
price level will increase b o t h t h e d o m e s t i c
money supply and price level and, according to
the buffer-stock approach, will do so by way of
mechanisms of the type described earlier. Furthermore, an increase in t h e money supply arising from the creation of domestic credit must
ultimately b e offset by an equal and o p p o s i t e
movement of foreign exchange reserves, b u t
such an increase is q u i t e capable of influencing
d o m e s t i c variables as part of t h e short-run
mechanism that shifts the balance of payments.
In short, endogeneity of the supply of money
certainly changes our view of t h e nature of t h e
e q u i l i b r i u m relation between money and other
variables, and complicates any account that we
might give of the transmission mechanism, b u t
it does not eliminate all scope for buffer-stock
effects.
F E D E R A L RESERVE B A N K O F ATLANTA
The argument that I have advanced in this lecture is easy to summarize. 1 have claimed t h e
very existence of monetary exchange implies
that the economy should be characterized by a
certain degree of ignorance and price stickiness. I have claimed this argument to imply in
turn that the transmission mechanism for monetary policy involves a chain of causation that
runs from discrepancies between agents' actual
and desired money holdings to flows of expend iture on goods and services, thence to changes
in interest rates, output, and eventually, as t h e
only lasting consequence, to price level changes.
I have contrasted this view with two undoubtedly more fashionable alternatives, suggesting
that new-Classical economics has nothing to say
about the transmission mechanism, and that
orthodox Keynesian economics places u n d u e
emphasis on t h e behavior of interest rates in a
19
sequence of events otherwise rather similar t o
that suggested by buffer-stock analysis.
I have thus tried to show that the buffer-stock
approach is the most plausible among available
ways of thinking about an important class of
monetary issues, and I have also suggested that
its essential usefulness, though best seen in t h e
context of a model with a clearly defined and
exogenously d e t e r m i n e d money stock, is not
destroyed as we move to a more complicated
monetary environment. I have also referred,
along the way, to certain policy implications of
my arguments. I have drawn attention to the
i n h e r e n t v a r i a b l e n e s s of t h e t r a n s m i s s i o n
mechanism i m p l i e d by buffer-stock analysis,
showing that such analysis may u n d e r p i n a case
against attempts to use discretionary policy in
order to influence real economic variables. It
should be noted that this case is different from
the new-Classical case against such measures.
In new-Classical analysis any systematic policy,
because it is "anticipated," will influence only
prices, and steady money growth emerges as
the best policy because it is the simplest. The
buffer-stock approach distinguishes between
" e x p e c t e d " and "anticipated" policies and predicts that systematic policies can i n d e e d have
real effects. However, it warns that their magn i t u d e and t i m i n g are sufficiently uncertain as
20
to render t h e m positively dangerous. Hence, it
makes a much stronger case for steadiness in
the conduct of monetary policy than does the
new-Classical alternative.
Though I have p u t the above arguments to you
because I believe t h e m to be closer to the truth
about certain important issues than currently
available alternatives, let me nevertheless e n d
this lecture with a warning. A priori plausibility
d o e s not make an a r g u m e n t right. T h o u g h
theoretical exercises a good deal tighter than
anything I have engaged in here do exist, and
though empirical evidence bearing on t h e issues I have raised, and t e n d i n g to favor t h e
buffer-stock approach, is available, there is, in
the current state of knowledge, ample room for
reasonable p e o p l e to disagree about the importance of t h e issues I have raised. I do not,
therefore, ask that my listeners be convinced of
the correctness of what I had to say. I shall have
succeeded in my aims this afternoon if I have
convinced some of you that t h e ideas I have discussed deserve your attention and consideration in the future as you think about monetary
issues.
* l am grateful
to Michael
Burns and \ohan My firman for discussion
many of the issues dealt with here, and to Peter Abken,
Russell
of
Boyer,
]oel Fried, and Peter Howitt for helpful comments on an earlier draft, hut
I do not wish to implicate
them in any errors remaining
herein.
M A R C H / A P R I L . 1987, ECONOMIC REVIEW
Appendix:
A Formal "Buffer-Stock" Model
A macroeconomic model incorporating the essential
features of the analysis discussed informally in this lecture may be set out as follows. All variables except
interest rates are measured in logarithms, and are
defined as follows: y* is the permanent, or full-employment equilibrium, level of real income; y is the transitory,
or cyclical, component of real income; m is money and
the subscripts s and d refer to supplied and demanded;
p* is the level of the real interest rate that is compatible
with full employment equilibrium, the Wicksellian "natural" rate; p is the difference between the actual real rate
of interest and its natural value; r is the nominal interest
rate; p is the price level; E is the expectations operator; I
represents information used in forming expectations;
and the subscripts -1 and + 1 represent a one-period
time lag and lead respectively.
THE MODEL
The Demand for Money
M d = S0 + 5-j y* + 6 2 y - 6 3 r + p
The Nominal Interest Rate
r = p* + p + ( E p + 1 l l ) - p
The Real Interest Rate
p + p* = - y ( M s - M d ) + p*
Output
y = a1(Ms-Md)-a2p
The Price Level
p = fiy + Epll
equilibrium, and this discrepancy happens to take a
zero value.
(ii) Though expectations about the money supply may
be thought of as "rational," there is no requirement that
this be the case. Moreover, and crucially, inflation expectations are based entirely on the expected rate of monetary expansion and therefore are only asymptotically
rational in this model. This property, which may be
defended with respect to the arguments about the costs
of acquiring information set out in the text of this lecture,
is crucial to this particular model's behavior.
(iii) There is, as noted in the text of the lecture, no particular reason to suppose that the coefficients linking
aggregate demand or the interest rate to discrepancies
between the supply and demand for money will remain
stable and predictable over time in any real-world
economy. Nor is there any reason to suppose that the
coefficient linking the price level to the level of transitory
income in the Phillips curve equation will be independent
of the conduct of policy.
(iv) One may obtain a feel for the transmission
mechanism of monetary policy in this model by noting
that an unanticipated increase in the money supply will
lead to a discrepancy between the supply and demand
for money, and thus it will affect aggregate demand both
directly and indirectly as it drives down the real rate of
interest; this first round effect will put upward pressure
on prices; all three effects will tend to diminish the discrepancy between money supplied and demanded; and
a dynamic process, which will eventually restore the
economy to full employment equilibrium, will be set in
motion by the above effects.
Expected Inflation
(EPII.-,) " P . ! = (EMgll.-]) - Ms.-,
The above model is analyzed extensively in Laidler
(1987), but the following observations upon its properties may be helpful.
(i) Though similar in some respects to an IS-LM model
supplemented by an expectations-augmented Phillips
curve, this model cannot be analyzed using the IS-LM
framework. It is a sine qua non of the LM curve that the
economy be "on" its demand-for-money function, and
the presence of a discrepancy between the quantity of
money supplied and demanded in this model means that
this condition will hold only when the model is in full
FEDERAL RESERVE BANK OF ATLANTA
(v) This model can incorporate a Keynesian theory of
economic disturbances, since an increase in the marginal efficiency of capital will cause p* to rise, and vice
versa. The discrepancy between the demand and supply
of money that this would cause will act as a stabilizing
factor. The model could also be extended to include fiscal policy effects on aggregate demand.
(vi) The model yields, as a reduced form for the
behavior of the real quantity of money in circulation, an
equation of exactly the form frequently referred to as a
"short-run demand-for-money function." In particular
this equation has a lagged dependent variable on its
right-hand side.
21
FOOTNOTES
'Even so, let it be explicitly p o i n t e d out that the w o r k of B o r d o ,
6
The relationship b e t w e e n the role of m o n e y as a buffer stock, and
traditional analysis of real-balance effects is o n e of the t o p i c s
C h o u d r y , a n d S c h w a r t z (1984), Carr and Darby (1981), and Gor-
e x p l o r e d in J o n s o n ' s seminal ( 1 9 7 6 ) paper o n this topic.
d o n ( 1 9 8 4 ) o n the d e m a n d - f o r - m o n e y function, and Greenfield and
Yeager ( 1 9 8 6 ) o n the role of credit m a r k e t s in the m o n e y s u p p l y pro-
2
7
lt s h o u l d be noted that, t o the extent that the d e m a n d for real balan-
c e s s are notable c o n t r i b u t i o n s to the literature of w h a t I a m here
c e s d e p e n d s u p o n the e x p e c t e d inflation rate, p e r i o d s of transition
t e r m i n g the buffer-stock a p p r o a c h .
b e t w e e n o n e equilibrium inflation rate and another will be m a r k e d
b y a short-run t e n d e n c y for the inflation rate t o overshoot its n e w
The genesis of m o d e r n w o r k o n this a p p r o a c h t o modelling t h e
long-run equilibrium value.
d e m a n d for m o n e y is t o be f o u n d in Patinkin (1965). The c o n tributions of Miller a n d O r r (1966), W e i n r o b e (1972), a n d G r a y a n d
3
8
lt has a l r e a d y b e e n p o i n t e d o u t t h a t t r a d i t i o n a l n e w - C l a s s i c a l
Parkin ( 1 9 7 3 ) are also n o t e w o r t h y in this context.
analysis has t e n d e d t o fall out of favor lately. Even so, the f o r e g o i n g
There is, as w a s noted b y Laidler (1974), a relationship b e t w e e n the
criticism of its treatment of the t r a n s m i s s i o n m e c h a n i s m is not
i n f o r m a t i o n - e c o n o m i z i n g role of m o n e y d i s c u s s e d here a n d the
directed at a straw man. New-Classical m o d e l s still have a n i m p o r -
similar f u n c t i o n a c c o r d e d to prices in traditional a c c o u n t s of the vir-
tant place in the t e x t b o o k literature, a n d as far as current research is
t u e s of market m e c h a n i s m s . B o t h Peter Howitt a n d Peter A b k e n
c o n c e r n e d , real b u s i n e s s c y c l e models, of the t y p e pioneered b y
have d r a w n m y attention t o the fact that the a r g u m e n t s w h i c h I
K y d l a n d a n d Prescott (1982), d e n y a role t o m o n e y in generating
a d v a n c e b e l o w a b o u t the incompatibility of the existence of m o n e y
real fluctuations b e c a u s e their p r o p o n e n t s believe all variations in
with models that d e s c r i b e w h a t o n e might term a "full information"
the quantity of m o n e y t o be readily a n d immediately observable.
equilibrium for the e c o n o m y also run strongly parallel t o t h o s e
T h e y t h e r e f o r e believe that s u c h v a r i a t i o n s will be a b s o r b e d
a d v a n c e d b y G r o s s m a n and Stiglitz (1976). They assert that the
immediately in price level fluctuations i n d u c e d b y t h e e x p e c t a t i o n a l
very existence of a price s y s t e m is incompatible with the a s s u m p -
effects d e s c r i b e d in the f o r e g o i n g argument. Thus, real b u s i n e s s
tion that a g e n t s have a c c e s s to e n o u g h information t o ensure that
cycle m o d e l s are v u l n e r a b l e t o the c r i t i c i s m that t h e y treat the
s u c h a s y s t e m c a n attain general equilibrium in the a b s e n c e of
transmission m e c h a n i s m linking m o n e t a r y p o l i c y t o the price level
a s a purely p s y c h o l o g i c a l p h e n o m e n o n .
a n auctioneer.
9
"The c l a s s of m o d e l s referred to here is criticized in m o r e detail in
The reader w h o f i n d s a l g e b r a i c a n a l y s i s h e l p f u l m i g h t c o n s u l t
the a p p e n d i x , w h e r e a t y p i c a l m o d e l incorporating buffer s t o c k
Laidler (1982d), Chapter 3. Since that b o o k w a s written, these m o d -
effects is set out a n d briefly described.
els have b e g u n t o fall out of favor a m o n g e c o n o m i s t s b e c a u s e of the
'"This matter is d i s c u s s e d at greater length in Laidler (1984).
d i f f i c u l t i e s t h e y have e n c o u n t e r e d w i t h e m p i r i c a l e v i d e n c e . A s
" T h e reader w h o is familiar with Greenfield a n d Yeager (1986) will
M c C a l l u m ( 1 9 8 6 ) has noted, the c h o i c e n o w seems to be b e t w e e n
recognize the essential similarity b e t w e e e n their a r g u m e n t a n d that
"real b u s i n e s s c y c l e " models, w h i c h maintain the new-Classical
a s s u m p t i o n s of clearing m a r k e t s a n d rational e x p e c t a t i o n s b u t
s k e t c h e d here.
12
O n this matter see the a p p e n d i x .
a c c o r d no role to m o n e y in generating real fluctuations, and m o d e l s
in the tradition of Fischer ( 1 9 7 7 ) a n d Taylor ( 1 9 7 9 ) that base price
' 3 R a s c h e ( 1 9 8 7 ) levels this criticism at a certain s i m p l e t y p e of buffer-
s t i c k i n e s s o n t h e e x i s t e n c e of n o m i n a l c o n t r a c t s . B u f f e r - s t o c k
5
s t o c k model.
e f f e c t s are, of c o u r s e , q u i t e c o m p a t i b l e w i t h the e x i s t e n c e of
'"These issues are d i s c u s s e d in s o m e detail b y G o r d o n (1984).
nominal contracts, a n d models incorporating t h e m are a particular
,5
Purvis (1978) analyzes the role of w h a t m i g h t fairly be t e r m e d
subset of the general c l a s s of sticky price models.
" b d f f e r - s t o c k e f f e c t s " in a T o b i n e s q u e m o d e l involving a multiplicity
ln t h e 19th c e n t u r y L e o n W a l r a s p i o n e e r e d the e c o n o m i c t h e o r y
of liquid assets.
of general equilibrium in w h i c h costs, outputs, and supplies in all
markets are d e t e r m i n e d simultaneously.
REFERENCES
Barro, R.J. " U n a n t i c i p a t e d M o n e y , O u t p u t a n d Price Level in the
United States," Journal
of Political
Economy,
vol. 8 6 (August
Gray, M.R. and J.M. Parkin. "Portfolio Diversification as O p t i m a l Precautionary Behaviour" in M. M o r i s h i m a a n d others, Theories
Demand,
1978), pp. 8 4 9 - 8 8 0 .
Bordo, M.D., E.U. Choudri, and A.J. Schwartz. " M o n e y
Growth
Variability a n d M o n e y S u p p l y I n t e r d e p e n d e n c e U n d e r Interest
Real, and Monetary.
1973.
Greenfield, R.L. and L.B. Yeager. " M o n e y and Credit C o n f u s e d : A n
Rate Control: S o m e E v i d e n c e f o r C a n a d a , " W o r k i n g Paper No.
Appraisal of E c o n o m i c Doctrine a n d Federal R e s e r v e
1 4 8 0 (National B u r e a u of E c o n o m i c Research, 1974).
cedure," Southern
Carr, J. a n d M. D a r b y . " T h e R o l e of M o n e y S u p p l y S h o c k s in the
Short-Run D e m a n d for M o n e y , " Journal of Monetary
Economics,
Economic
Pro-
Journal, vol. 5 3 (October 1986), pp.
364-373.
G r o s s m a n , S.J. and J.E. Stiglitz. " I n f o r m a t i o n a n d Competitive Price
S y s t e m s "American
vol. 8 ( S e p t e m b e r 1981), pp. 1 8 3 - 1 9 9 .
Fischer, S. " L o n g Term Contracts, Rational Expectations a n d the
of
London: O x f o r d University Press,
Economic
Review, vol. 6 6 (May 1976, Papers
and Proceedings), pp. 2 4 6 - 2 5 3 .
vol.
J o n s o n , P.D. " M o n e y Prices a n d O u t p u t : A n Integrative Essay,"
G o r d o n , R.J. " T h e Short R u n D e m a n d for Money: A R e c o n s i d e r a -
K y d l a n d , F.E. a n d E.C. P r e s c o t t . " T i m e t o Build a n d A g g r e g a t e
O p t i m a l M o n e y S u p p l y Rule," Journal
of Political
Economy,
Kredit und Kapital,
8 5 (February 1977), pp. 1 9 1 - 2 0 6 .
tion," Journal of Money, Credit, and Banking,
Part 2, 1984), pp. 4 0 3 - 4 3 4 .
22
vol. 16 (November,
vol. 4 (1976), pp. 4 9 9 - 5 1 8 .
F l u c t u a t i o n s , " Econometrica,
vol. 5 0 ( N o v e m b e r 1 9 8 2 ) , p p .
1345-1370.
MARCH/APRIL. 1987, ECONOMIC REVIEW
Laidler, D. "Information, M o n e y a n d the M a c r o e c o n o m i c s o f Inflation," Swedish Journal of Economics,
vol. 7 6 ( M a r c h 1974), p p
26-41.
L a i d l e r , D. Monetarist
Perspectives,
University Press, 1 9 8 2 .
Cambridge, Mass.: Harvard
Laidler, D. " T h e Buffer S t o c k Notion in Monetary E c o n o m i c s , " Conference Proceedings
Supplement
to the Economic
Journal,
1984, pp. 17-34.
Laidler, D. " S o m e M a c r o e c o n o m i c C o n s e q u e n c e s o f Price S t i c k iness," The Manchester
School,
(forthcoming).
Lucas, R.E., Jr. " E x p e c t a t i o n s and the Neutrality of M o n e y , "
of Economic
Theory, vol. 4 (April 1972), pp. 1 0 3 - 1 2 4 .
vol. 18 ( N o v e m b e r
1986), pp. 3 9 7 - 4 1 4 .
Journal
Purvis, D.D. " D y n a m i c M o d e l s of Portfolio Behaviour: M o r e Pitfalls in
Financial M o d e l Building," American Economic Review, vol. 6 8
(June 1978), pp. 4 0 3 - 4 0 9 .
Rasche, R.H. " M 1 —Velocity a n d M o n e y D e m a n d Functions: D o Stable Relationships Exist?" Carnegie Rochester Conference
Series
(forthcoming).
Sargent, T.J. and N. Wallace, " R a t i o n a l Expectations a n d the T h e o r y
of Economics,
Economics,
vol. 2 ( M a y
1976), pp. 1 6 9 - 1 8 3 .
Taylor, J.B. " S t a g g e r e d W a g e Setting in a M a c r o M o d e l , "
Economic
Review,
American
vol. 6 9 (May 1979), pp. 1 0 8 - 1 1 3 .
Weinrobe, M.D. " A S i m p l e M o d e l of the Precautionary D e m a n d for
M o n e y , " Southern
Miller, M.H. a n d D. Orre, " A M o d e l of the D e m a n d for M o n e y b y
F i r m s , " Quarterly
2 n d ed. N e w York: Harper
of E c o n o m i c Policy," Journal of Monetary
Journal
M c C a l l u m , B.T. " O n 'Real' a n d 'Sticky Price' Theories of the B u s i n e s s
C y c l e," Journal of Money, Credit, and Banking,
Patinkin, D. Money, Interest and Prices,
a n d Row, 1965.
Economic
Journal,
vol. 3 9 (July 1 9 7 2 ) p p
11-18.
vol. 8 0 ( A u g u s t 1 9 6 6 ) ,
pp. 4 1 3 - 4 3 5 .
FEDERAL RESERVE BANK OF ATLANTA
23
Commercial Bank Profitability:
Some Disturbing Trends
by Larry D. Wall
Banks of all sizes experienced falling profitability ratios in 1986, but small banks suffered
most. A m o n g banks w i t h assets b e l o w $25
million, 27 percent had negative net income.
Whereas last year's profitability study indicated
small bank p r o b l e m s m i g h t b e c o n f i n e d t o
economically distressed areas of the nation, this
year's results p o i n t to more widespread weakness for banks under $25 million.
Profitability s l i p p e d for banks overall according to all three principal measures, return on
assets (ROA), return on equity (ROE), and adjusted net interest margin. Declines appeared
to lessen as bank asset size became larger, with
t h e biggest banks r e g i s t e r i n g t h e s m a l l e s t
drops. The least profitable banks in all size
categories fared worst, however, suggesting that
high rates of of bank failure will continue.
Though southeastern banks maintained profit ratios higher than those of banks nationwide,
profitability fell in the region as well (Chart I).1
Most of the loss in the Southeast is attributable
to lower ratios in Georgia, where ROA d r o p p e d
0.12 percentage points, and in Louisiana, where
it fell 0.42 percentage points. Georgia's profitability ratios remaining strong, d e s p i t e the
d r o p in ROA, but banks in Louisiana on average
lost money, showing an ROA of-0.04. Mississippi
also posted a slightly lower ROA in 1986, while
the ROA ratios for Alabama, Florida, and TenThe
author
department.
24
is a financial
economist
in the Atlanta
Fed's
research
nessee were all somewhat higher than last
year's.
Profitability Measures
Three different profitability measures provide information on bank performance. 2 Adjusted net interest margin, which measures t h e
difference between the bank's interest income
and its interest expense, is roughly similar to a
business's profit margin. It is calculated by subtracting a bank's interest expense from its
interest revenue, net of loan losses, and dividing that result by its net interest-earning assets.
Interest revenue from tax-exempt securities is
adjusted upward by the bank's marginal tax rate
to avoid penalizing institutions holding substantial state and local securities portfolios that
reduce their tax burden. Loan-loss expenses
are subtracted from interest revenue to place
banks that make low-risk loans at low interest
rates on a more equal footing with those that
make high-risk loans generating greater interest
income.
The ROA ratio, obtained by dividing a bank's
net income by its assets, gauges how well a
bank's management is employing its assets. The
ROE figure is i m p o r t a n t for a bank's shareholders because it tells them how much the
institution is earning on their investments. It is
MARCH/APRIL. 1987, ECONOMIC REVIEW
calculated by d i v i d i n g a bank's net income by its
total equity.
D i f f e r e n c e s in t h e s e t h r e e ratios b e c o m e
a p p a r e n t in a c o m p a r i s o n of b a n k p e r f o r mance in Florida and Mississippi. The a d j u s t e d
n e t i n t e r e s t margins of b a n k s in F l o r i d a exc e e d e d those of banks in Mississippi in 1986,
yet Mississippi banks had a higher return on
assets ratio than banks in Florida (see Tables 13
and 17). The differences b e t w e e n t h e two ratios
may reflect changes in t h e banks' n o n - i n t e r e s t
revenues and non-interest expenses, and
changes in their securities gains or losses. Des p i t e their lower ROA ratio, Florida banks had a
greater ROE than banks in Mississippi, suggesting t h a t t h e F l o r i d a i n s t i t u t i o n s have l o w e r
e q u i t y c a p i t a l - t o - a s s e t r a t i o s t h a n t h o s e in
Mississippi (Table 18).
Chart 1.
Bank Profitability
in the Southeast and the Nation
(Based on percentage return on assets,
1985 compared with 1986)
( H D Southeast
Nation
Adjusted Net Interest Margins
Continue Dropping
A d j u s t e d net interest margins fell n a t i o n w i d e
for banks in all six size categories (Table 1). Most
of t h e d e c l i n e at banks in t h e t h r e e size categ o r i e s b e l o w $100 m i l l i o n o c c u r r e d b e c a u s e
interest revenue as a p e r c e n t of interest-earning assets fell faster than interest expense as a
percent of interest-earning assets. The primary
reason for t h e d e c l i n e in t h e t h r e e largest
categories is an increase in loan-loss expense.
The c o n t i n u i n g increase in loan-loss expense
is w o r r i s o m e since faltering loans historically
peak in t h e first year of a recovery and d e c l i n e
thereafter (Table 3). The persistence of these
increases p r o b a b l y r e f l e c t s t h e fact t h a t m a n y
regions d e p e n d e n t on agriculture and energy
are still experiencing e c o n o m i c difficulty. The
increase in loan losses is also consistent with
the idea that s o m e banks are investing in m o r e
high-risk, high-return assets t o offset increased
f u n d i n g costs d u e t o d e r e g u l a t i o n of d e p o s i t
interest rates. Regardless of t h e reason for t h e
i n c r e a s e d l o a n losses, t h e p r o s p e c t of even
higher loss levels s h o u l d a recession occur is
troubling.
The difference in interest e x p e n s e as a percent of interest-earning assets across d i f f e r e n t
size categories has narrowed considerably since
t h e early 1980s (Table 4). T h e g a p has shrunk in
all size categories, b u t t h e change is especially
dramatic for banks w i t h assets above $ I b i l l i o n .
For e x a m p l e , t h e d i s p a r i t y b e t w e e n f u n d i n g
FEDERAL
RESERVE BANK OF ATLANTA
Although, on average, banks in the region remained more
profitable than banks in the nation as a whole, southeastern
banks also experienced declining profitability in 1986.
Source: Figures in all charts a n d tables have been c o m p u t e d by the
Federal Reserve B a n k of Atlanta f r o m data in FDIC, " C o n s o l i d a t e d R e p o r t s of C o n d i t i o n for I n s u r e d C o m m e r c i a l
B a n k s , " and " C o n s o l i d a t e d Reports of I n c o m e for Insured
Commercial Banks, 1980-86."
25
Table 15.
Adjusted Net Interest Margin as a Percentage of Interest-Earning Assets
(Insured commercial
banks by consolidated
assets)
Year
All
Banks
0-$25
million
$25-$50
million
$50-$ 100
million
$100-$500
million
$500 million$1 billion
$1 billion +
1981
4.10
5.43
5.11
4.93
4.74
4.76
3.49
4.78
3.41
1982
4.00
5.15
5.00
4.94
4.71
1983
3.86
4.90
4.74
4.73
4.61
4.69
3.30
5.47
5.63
5.30
5.02
3.55
5.16
5.35
5.35
4.85
3.61
5.06
4.98
4.71
3.48
1984
3.98
1985
4.18
1986
3.96
5.17
4.72
4.24
4.75
Table 2.
Tax-Equivalent Interest Revenue as a Percentage of Interest-Earning Assets
(Insured commercial
banks by consolidated
$100-$500
million
13.61
12.44
13.81
14.23
17.45
13.88
13.82
13.82
14.00
15.60
12.52
12.70
All
Banks
0-$25
million
$25-$50
million
1981
15.89
13.65
14.06
14.91
$500 million$1 billion +
$1 billion
$50-$100
million
Year
1982
assets)
1983
12.61
12.76
12.58
12.46
12.35
1984
13.11
12.81
12.67
12.48
13.41
13.19
13.27
1985
12.02
12.76
12.95
12.97
12.61
12.22
11.64
11.41
11.69
11.80
11.51
11.45
11.35
10.78
1986
Table 3.
Loan Loss Expense as a Percentage of Interest-Earning Assets
(Insured commercial
Year
All
Banks
1981
.34
0-$25
million
.38
banks by consolidated
$25-$50
million
.32
assets)
$500 millionSi billion
$50-$ 100
million
$100-$500
million
.32
.32
.32
.36
.54
$1 billion +
1982
.52
.54
.49
.45
.51
.50
1983
.60
.65
.58
.56
.51
.54
.64
.69
.91
.75
.61
.54
.57
.73
.99
.92
.70
.80
.76
.91
.84
1.01
.88
1984
1985
1986
26
.79
.90
1.24
1.27
1.03
MARCH/APRIL. 1987. E C O N O M I C REVIEW
Table 4.
Interest Expense as a Percentage of Interest-Earning Assets
(Insured commercial banks by consolidated
Year
All
Banks
0-$25
million
$25-$50
million
$50-$100
million
1981
assets)
$100-$500
million
$500 million$1 billion +
Si billion
11.45
7.83
8.18
8.32
8.75
9.15
13.59
1982
10.39
8.37
8.40
8.43
8.61
8.73
11.65
1983
8.15
7.22
7.26
7.17
7.23
7.29
8.76
1984
8.45
7.58
7.63
7.55
7.57
7.61
8.98
1985
7.04
6.79
6.79
6.69
6.57
6.57
7.26
1986
5.92
5.90
5.90
5.82
5.69
5.73
6.00
Table 5.
Percentage Return on Assets
(Insured commercial banks by consolidated
$50-$100
million
$100-$500
million
1.16
1.08
.94
.88
.61
1.10
1.06
.86
.81
.57
Year
All
Banks
0-$25
million
$25-$50
million
1981
.76
1.20
.71
1.02
1982
assets)
$500 million$1 billion +
$1 billion
1983
.67
.88
.98
.98
.88
.78
.54
1984
.65
.60
.78
.90
.90
.86
.54
1985
.70
.36
.70
.76
.88
.72
.67
1986
.65
.15
.52
.68
.74
.63
.65
as a p e r c e n t of interest earnings for $ l
b i l l i o n banks and those costs for banks with
assets of less than $50 m i l l i o n e x c e e d e d 300
basis p o i n t s (3 percent) in 1982. In 1986 t h e difference d i m i n i s h e d to a m e r e 10 basis p o i n t s
(0.10 percent). Banks in t h e $ 100-mill ion-to-$ I b i l l i o n range now claim t h e lowest cost of funds,
replacing those with assets under $50 million.
COStS
Banks' Returns on Assets and Equity
During 1986 t h e e x t e n t of t h e d r o p in ROA
ratios for banks n a t i o n w i d e grew more severe as
bank size decreased (Table 5). Banks with assets
in excess of $ I b i l l i o n e x p e r i e n c e d a m e r e 0.02
FEDERAL
BANK OF ATLANTA
Digitized
forRESERVE
FRASER
p e r c e n t d e c l i n e in their ROA ratio, w h i l e banks
with assets b e l o w $25 m i l l i o n saw their ROA
slashed by m o r e than half—from 0.36 percent in
1985 t o 0.15 p e r c e n t in 1986. U.S. b a n k s in t h e
below-$25 m i l l i o n c a t e g o r y have s h o w n s u b stantial d r o p s in average ROA every year since
1981. Banks with assets in the $!00-to-$500m i l l i o n range p o s t e d t h e best ROA values of t h e
six size c a t e g o r i e s for t h e t h i r d c o n s e c u t i v e
year.
National ROE figures reinforce t h e pattern
that emerges in t h e ROA figures (Table 6). The
ROE of banks w i t h assets b e l o w $ 2 5 m i l l i o n was
a m e r e 1.63 percent. When c o m p a r e d to o t h e r
investment o p p o r t u n i t i e s , this return is clearly
i n a d e q u a t e c o m p e n s a t i o n for t h e risks taken by
these banks' shareholders and raises serious
questions a b o u t t h e long-term viabil ity of many
27
Table 6.
Percentage Return on Equity
(Insured commercial
banks by consolidated
assets)
$500 million$1 billion +
Si billion
Year
All
Banks
0-$25
million
$25-$50
million
$50-$100
million
$100-$500
million
1981
13.15
12.81
13.70
13.43
12.83
12.99
13.17
12.16
1982
12.17
10.76
12.80
13.18
11.80
12.07
1983
11.82
9.06
11.34
12.06
12.13
11.59
11.11
1984
10.74
6.20
9.08
11.19
12.46
12.66
10.51
8.10
9.38
12.12
10.29
12.53
8.34
10.25
9.40
11.83
1985
1986
11.35
10.38
3.77
1.63
6.03
Table 7.
Adjusted Net Interest Margin as a Percentage of Interest-Earning Assets
(Insured commercial
banks in the Southeast
by consolidated
assets)
$500 million$1 billion +
Si billion
Year
All SE
Banks
0-S25
million
$25-$50
million
$50-$100
million
$100-$500
million
1981
5.41
5.54
5.39
5.35
5.13
5.42
5.76
5.16
5.35
5.28
1982
5.22
5.05
5.09
5.36
1983
5.07
4.86
4.94
4.96
4.97
5.27
5.23
1984
5.25
5.62
5.93
5.72
5.88
5.55
5.48
1985
5.44
5.71
5.94
5.84
5.95
4.87
5.09
5.11
5.45
5.62
5.60
4.73
5.11
1986
5.27
Table 8.
Tax-Equivalent Interest Revenue as a Percentage of Interest-Earning Assets
(Insured commercial
banks in the Southeast
by consolidated
assets)
$500 million$1 billion +
Si billion
Year
All SE
Banks
0-$25
million
$25-$50
million
$50-$ 100
million
$100-$500
million
1981
14.91
13.99
14.06
13.97
14.13
14.98
17.41
1982
14.35
14.25
14.13
14.22
14.04
14.53
14.83
1983
12.85
12.87
12.66
12.70
12.49
12.90
13.34
12.95
12.81
12.50
13.85
13.67
13.81
12.87
12.15
11.73
11.38
1984
13.44
1985
12.75
13.26
13.59
13.52
13.15
1986
11.76
12.00
12.31
12.39
12.13
28
MARCH/APRIL. 1987, E C O N O M I C REVIEW
Table 14.
Loan-Loss Expense as a Percentage of Interest-Earning Assets
(Insured commercial banks in the Southeast by consolidated
assets)
Year
All SE
Banks
0-S25
million
$25-$50
million
1981
.41
.49
.42
.36
.36
.32
1982
.51
.52
.72
.57
.49
.51
.55
.47
1983
.54
.84
.59
.66
.52
.54
1984
.45
.54
.75
.65
.64
.48
.69
.46
$50-$100
million
$100-$500
million
$500 millionSi billion
$1 billion +
1985
.75
.89
.86
.93
.70
1.16
.60
1986
.82
1.07
.96
.88
.89
1.18
.70
Table 10.
Interest Expense as a Percentage of Interest-Earning Assets
(Insured commercial banks in the Southeast by consolidated
Year
All SE
Banks
0-$25
million
$25-$50
million
$50-$100
million
$100-S500
million
assets)
$500 millionSi billion
$1 billion +
1981
9.10
7.95
8.24
8.26
8.64
9.23
1982
11.14
8.61
8.48
8.47
8.37
8.38
8.64
1983
9.09
7.26
7.17
7.13
7.09
7.01
7.09
1984
7.67
7.65
7.46
7.56
7.56
7.49
7.43
1985
7.87
6.56
6.66
6.78
6.73
6.49
6.83
1986
6.45
5.66
5.82
5.90
5.89
5.64
5.82
5.57
small banks. The ROE for banks in t h e $25-to$50-million range was somewhat b e t t e r at 6.03
percent, b u t this rate of return is still inadeq u a t e c o m p e n s a t i o n for risks. The best ROE was
p o s t e d by banks with assets above $ l b i l l i o n .
Banks in the $ 100-to-$500-million category have a
l o w e r ROE t h a n t h o s e w i t h assets e x c e e d i n g
$ l b i l l i o n b e c a u s e t h e s m a l l e r b a n k s have
higher e q u i t y capital-to-assets ratios.
Southeastern Banks Stay Ahead
Southeastern banks once again s h o w e d higher a d j u s t e d net interest margins, ROAs, and
ROEs than their peers across t h e nation in every
F E D E R A L RESERVE BANK O F ATLANTA
size category b u t one. Banks with assets between $500 m i l l i o n a n d $ I b i l l i o n had somewhat
lower ratios. Even in t h e $ 5 0 0 - m i l l i o n - t o - $ l b i l l i o n range, however, t h e southeastern banks
c l o s e d t h e gap.
Southeastern banks w i t h assets exceeding $ l
bill ion r e p o r t e d t h e lowest loan-loss expenses
as a p e r c e n t of interest-earning assets a n d t h e
lowest interest expense as a percent of intereste a r n i n g assets (Tables 9 a n d 10). T h e r e l a t i v e
d r o p in f u n d i n g costs is impressive given that in
1981 these banks had t h e highest f u n d i n g costs
by a c o n s i d e r a b l e margin. Banks with more than
$ l b i l l i o n r a n k e d only fourth in a d j u s t e d net
interest margins, however, because they also
had t h e lowest interest revenue as a p e r c e n t of
interest-earning assets (Tables 7 and 8).
29
Table 11.
Percentage Return on Assets
(Insured commercial
banks in the Southeast
by consolidated
assets)
Year
All SE
Banks
0-S25
million
$25-$50
million
$50-$100
million
$100-$500
million
$500 million$1 billion
$1 billion +
1981
1.05
1.16
1.18
1.17
1.00
.99
.95
.97
.92
.92
1982
.98
.90
1.08
1.16
1983
.97
.70
1.01
1.01
.97
.94
.98
1984
.94
.76
.90
.90
1.00
.84
.96
.89
.82
.99
.50
.99
.68
.78
.85
.61
.94
1985
1986
.91
.85
.76
.40
Table 12.
Percentage Return on Equity
(Insured commercial
banks in the Southeast
by consolidated
assets)
Year
All SE
Banks
0-$25
million
$25-$50
million
$50-$ 100
million
$100-$500
million
$500 million$1 billion
$1 billion +
1981
14.10
12.28
13.68
14.30
13.58
14.13
15.81
1982
13.45
9.57
12.36
14.16
13.17
13.26
15.27
1983
13.51
7.15
11.39
12.53
13.19
13.81
16.57
1984
13.37
7.53
10.12
11.17
13.57
11.84
16.59
7.28
9.98
9.97
13.39
7.64
16.74
9.30
11.38
9.68
15.70
1985
1986
13.14
12.35
3.83
7.57
Table 13.
Adjusted Net Interest Margin as a Percentage of Interest-Earning Assets
(Insured commercial
Year
banks in the Southeast by state)
All SE
Banks
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
4.33
1981
5.41
4.94
6.00
6.29
5.47
4.25
1982
5.22
4.69
5.87
5.57
5.52
4.01
4.28
1983
5.07
4.92
5.58
5.56
4.83
4.10
4.36
1984
5.25
4.99
5.73
5.36
4.83
4.86
4.92
1985
5.44
6.04
5.57
5.92
4.43
5.78
5.02
1986
5.27
5.84
5.70
5.60
3.26
5.49
5.30
30
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
Table 14.
Tax-Equivalent Interest Revenue as a Percentage of Interest-Earning Assets
(Insured commercial banks in the Southeast by state)
Year
All SE
Banks
1981
14.91
15.17
15.40
1982
14.35
14.12
14.65
Alabama
Florida
Georgia
Louisiana
Mississippi
15.04
14.79
13.78
14.48
14.12
14.47
13.65
14.44
Tennessee
1983
12.88
12.70
13.27
13.21
12.40
12.19
12.75
1984
13.44
12.90
13.78
13.40
13.14
13.25
13.56
1985
12.75
13.13
12.75
13.00
12.44
13.05
12.32
1986
11.76
11.93
12.03
11.82
10.98
11.82
11.62
Unfortunately, southeastern banks with assets b e l o w $50 m i l l i o n e x p e r i e n c e d significant
d r o p s in their ROA and ROE ratios just as their
national counterparts d i d (Tables 11 and 12). In
1985 these banks were a b l e t o m a i n t a i n their
ROA r a t i o at levels near 1984 figures, e v e n
t h o u g h ROA and ROE ratios d r o p p e d for small
banks in t h e nation as a whole.
The ROE figures for t h e Southeast are consist e n t with ROA results. Smaller banks, particularly those with assets b e l o w $25 million,
have unsustainably low ROE, w h i l e t h e strongest ROE n u m b e r s are for banks with assets in
excess of $ I b i l l i o n . Banks w i t h $ 100 m i l l i o n t o
$500 m i l l i o n in assets show t h e second strongest ROE ratios.
A State-By-State Breakdown
Banks in five of t h e six southeastern states
p o s t e d higher a d j u s t e d n e t interest margins,
ROA, and ROE figures than o t h e r banks around
t h e nation, b u t Louisiana institutions markedly
lagged b e h i n d t h e nation's, showing negative
ROA and ROE ratios.
Higher interest revenue as a p e r c e n t of interest-earning assets, and lower loan-loss expenses and interest e x p e n s e ratios than t h e
nation's average h e l p e d banks in five southeastern states, excluding Louisiana, (Tables 14,
15, and 16). Credit q u a l i t y appears to have b e e n
t h e m a i n p r o b l e m for Louisiana banks. Loanloss expense as a p e r c e n t of interest-earning
FEDERAL RESERVE B A N K O F ATLANTA
assets c l i m b e d p r e c i p i t o u s l y from a very high
1.36 percent in 1985 to 1.95 p e r c e n t in 1986. The
extent of loan-loss expense u n d o u b t e d l y reflects t h e effect of lower energy prices on t h e
state's e n t i r e economy.
A l a b a m a b a n k s l o g g e d t h e h i g h e s t ROA
average and t h e second-highest ROE a m o n g t h e
six states (Tables 17 a n d 18). The d e c l i n e of loanloss expense as a percentage of interest-earning assets partly explains Alabama banks'
strong performance. Georgia banks fell t o seco n d place in t h e ROA rankings b u t h e l d first
place for ROE ratios. They registered t h e second
largest increase in loan-loss expense ratio.
Mississippi banks had somewhat higher
a d j u s t e d net interest margins and ROA ratios
than banks in Tennessee, b u t Tennessee banks
scored a higher ROE ratio. Tennessee's stronger
ROE suggests ban ks t h e r e have less e q u ity capital than those in Mississippi. Tennessee banks,
like those in Alabama, cut their loan-loss ratio
in 1986.
Banks in Florida s h o w e d t h e second highest
a d j u s t e d net interest margins, b u t their ROA
average ranks fifth in t h e region. The state's ROE
ratio improved, giving Florida banks t h e t h i r d
highest profitability according to this measure.
Distribution of Bank Profitability
Clearly, banks have b e c o m e less p r o f i t a b l e in
t h e past few years, a n d s m a l l e r banks have
e x p e r i e n c e d t h e g r e a t e s t d e c l i n e . However,
31
Table 15.
Loan-Loss Expense as a Percentage of Interest-Earning Assets
(Insured commercial
banks in the Southeast by state)
Year
All SE
Banks
Alabama
Florida
Georgia
1981
.41
.51
.33
.42
.56
.37
.43
1982
.52
Mississippi
Tennessee
.40
.46
.45
.55
.73
.75
.68
.74
Louisiana
1983
.54
.46
.41
.43
.70
1984
.54
.42
.48
.45
.83
.55
.58
1985
.75
.60
.65
.56
1.36
.61
.71
.82
.44
.66
.66
1.95
.65
.64
1986
Table 16.
Interest Expense as a Percentage of Interest-Earning Assets
(Insured commercial
banks in the Southeast by state)
Year
All SE
Banks
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
1981
9.10
9.72
9.07
8.32
8.92
9.07
9.70
8.41
8.12
8.40
8.91
9.40
7.64
1982
8.61
8.87
1983
7.26
7.32
7.28
7.21
6.86
7.42
1984
7.65
7.50
7.58
7.59
7.49
7.84
8.06
1985
6.56
6.48
6.53
6.53
6.67
6.65
6.59
5.65
5.66
5.57
5.77
5.69
5.67
1986
5.66
Table 17.
Percentage Return on Assets
(Insured commercial
banks in the Southeast by state)
Year
All SE
Banks
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
1981
1.05
1.12
.96
1.26
1.24
1.02
.78
.98
1.05
.98
1.12
1.20
.84
.64
.97
1.12
1.03
.83
.69
.77
.90
.85
1982
1983
.97
1.12
1984
.94
1.09
.90
1.14
1985
.91
1.20
.87
1.20
.38
1.03
.96
1986
.85
1.22
.88
1.08
-.04
1.02
.99
32
M A R C H / A P R I L . 1987. E C O N O M I C REVIEW
Table 18.
Percentage Return on Equity
(Insured commercial banks in the Southeast by state)
Year
All SE
Banks
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
10.86
1981
14.10
13.32
13.39
16.90
16.39
13.64
1982
13.45
12.77
14.06
15.38
15.60
11.41
9.25
1983
13.51
13.75
14.66
16.24
12.81
11.21
10.03
1984
13.37
13.59
14.22
17.23
9.52
12.25
12.53
1985
13.14
14.93
13.79
18.40
4.78
14.04
13.93
1986
12.35
15.22
14.36
16.48
-.52
13.65
13.94
these statistics d o not p r o v i d e information on
p r o f i t a b i l i t y gains and losses w i t h i n t h e size
categories. For example, perhaps only t h e most
p r o f i t a b l e banks were u n a b l e t o sustain their
earnings, w h i l e t h e majority of banks were unaffected by t h e changing environment. Although
s l u m p i n g earnings w o u l d d i s p l e a s e t h e owners
and managers of highly p r o f i t a b l e banks, m o d e r a t e l y r e d u c e d p r o f i t a b i l i t y at t h e s e b a n k s
s h o u l d pose no p u b l i c policy p r o b l e m s . On t h e
other hand, if t h e least p r o f i t a b l e banks have
suffered m o s t of t h e d e c l i n e in p r o f i t a b i l i t y ,
t h e d r o p c o u l d s p e l l a potential increase in t h e
n u m b e r of p r o b l e m and failed banks. A growing
incidence of t r o u b l e d banks not only raises concern a b o u t t h e safety and soundness of t h e
banking system, b u t also threatens t o p u t stress
on t h e Federal D e p o s i t Insurance Corporation,
which insures accounts up to the first $100,000.
O n e way of analyzing t h e d i s t r i b u t i o n of bank
p r o f i t a b i l i t y is t o s t u d y t h e ROA f i g u r e s at
various p r o f i t a b i l i t y p e r c e n t i l e s . This s t u d y
focuses on t h e p r o f i t a b i l i t y of banks across t h e
nation at t h e 75th, 50th, and 25th percentiles in
ROA. If a bank is in t h e 75th percentile, it means
that it was m o r e p r o f i t a b l e than three-fourths of
t h e institutions analyzed. Those at t h e 50th perc e n t i l e had p r o f i t a b i l i t y higher than half t h e
banks. Banks at t h e 25th p e r c e n t i l e were least
profitable, with ROAs higher than only t h e b o t t o m 25 p e r c e n t of t h e banks s t u d i e d . The ranking was d o n e separately for each year, so t h a t
s o m e banks will shift t o d i f f e r e n t p r o f i t a b i l i t y
ranges over t h e six-year p e r i o d analyzed.
The results indicate that banks at t h e 25th
p e r c e n t i l e ( l o w - p r o f i t banks) have seen m o r e
FEDERAL
B A N K O F ATLANTA
Digitized
forRESERVE
FRASER
adverse (or less favorable) changes in prof i t a b i l i t y than those at t h e 50th or 75th percentile. In all size categories, banks at t h e 25th
p e r c e n t i l e s h o w a l a r g e r d r o p o r a s m a l l e r g a i n in
profits than banks in t h e same size category at
t h e 50th or 75th percentiles. This f i n d i n g suggests that bank failure rates will c o n t i n u e t o
b e high.
Banks w i t h assets b e l o w $50 m i l l i o n have
shown d e c l i n i n g p r o f i t a b i l i t y every year since
1981 in all t h r e e percentiles. Indeed, in b o t h t h e
under-$25-million and the $25-to-$50-million
categories, banks that were in t h e 75th percent i l e ( h i g h - p r o f i t banks) in 1986 have l o w e r ROA
ratios t h a n b a n k s t h a t w e r e in t h e 50th p e r c e n tile ( m e d i u m - p r o f i t banks) in 1981 (Tables 19
and 20). Moreover, banks that were in t h e 25th
p e r c e n t i l e in 1981 s h o w e d ROA figures at least
equal to those for banks in t h e 50th p e r c e n t i l e
last year. A m o n g banks with assets of less t h a n
$25 m i l l i o n in 1986, t h e 25th p e r c e n t i l e recorde d an ROA of -0.21 p e r c e n t (Chart 2).
As n o t e d earlier, 27 p e r c e n t of t h e banks in
this size category had negative income in 1986.
The results are slightly b e t t e r at t h e 25th perc e n t i l e for b a n k s in t h e $ 2 5 - t o - $ 5 0 - m i l l i o n
category; they p o s t e d a p o s i t i v e ROA of 0.31
percent.
ROA ratios fell across t h e b o a r d for banks with
assets b e t w e e n $50 and $100 m i l l i o n . The figures were b e l o w their 1981 levels in all t h r e e
p e r c e n t i l e s (Table 21). For banks b e t w e e n $100
a n d $500 m i l l i o n , t h e o n l y s i g n i f i c a n t d r o p
since 1981 occurred a m o n g low-profit (25th percentile) banks (Table 22). They e x p e r i e n c e d a
33
Chart 2.
The Decline in
Small Bank Profitability
Table 19.
Percentage Return on Assets
(A comparison of the return on assets ratios for
banks with assets under $25 million according
to profitability percentile, 1981-1986)
(Insured commercial banks with assets below $25
million)
Percentile According to Profitability
75th Percentile 50th Percentile 25th Percentile
(Most Profitable) (Mid-Range
(Least Profitable)
Profitability)
1981-
Year
75%
50%
25%
.76
1981
1.66
1.24
1982
1.59
1.17
.72
1983
1.51
1.07
.58
1984
1.36
.93
.35
1985
1.30
.83
.07
1986
1.13
.68
-.21
1982-
Table 20.
Percentage Return on Assets
1983-
(Insured commercial banks with assets of
$25 million to $50 million)
1984-
Percentile According to Profitability
1985-
1986p-
p-
O'
O'
O'
O'
75%
50%
25%
1981
1.58
1.26
.85
1982
1.54
1.46
1.17
1.11
.80
1983
1984
1.34
1.00
.60
.73
-'
1985
1.34
.98
.50
Percent
1986
1.24
.85
.31
K
The most profitable small banks in 1986 were less profitable
than those in the middle range of profitability in 1981. Banks
in the middle range of profitability in 1986 are only half as
profitable as in 1981, and the least profitable banks experienced a dramatic decline.
decrease in ROA from 0.67 percent in 1981 t o
0.59 p e r c e n t in 1986.
Banks with assets above $500 m i l l i o n fared
b e t t e r than smaller banks in 1986. The ROA
ratios for banks b e t w e e n $500 m i l l i o n and $ l
b i l l i o n and for those greater than $ I b i l l i o n h e l d
at a p p r o x i m a t e l y t h e same level for all t h r e e
percentiles, w i t h t h e exception of low-profit,
25th-percentile banks in t h e $500-million-to$ I - b i l l i o n category (Tables 23 and 24). The ROA
for these banks was off 0.04 percentage points.
Except for this low-profit group, larger banks
34
Year
have managed t o increase their ROA ratios bet w e e n 198I a n d 1986.
The c o n t i n u i n g fall in ROA figures at all levels
of p r o f i t a b i l i t y for banks with assets b e l o w $50
m i l l i o n raises t h e q u e s t i o n of w h e t h e r small
banks will b e a b l e t o survive. Last year's survey
of bank profitability, p u b l i s h e d in t h e A u g u s t /
S e p t e m b e r 1986 Economic Review, c i t e d a study by
Lynn N e j e z c h l e b (1986) which suggested that
t h e p r o b l e m was regional rather than national.
Banks w i t h assets less than $ 100 m i l l i o n located
east of t h e Mississippi River e x p e r i e n c e d only a
small d e c l i n e in their profits b e t w e e n 1981 and
1985, while their peers west of t h e Mississippi
had seen their ! 985 ROA fall t o less than onehalf its 198I level. 3 Nejezchleb's hypothesis was
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
Table 21.
Percentage Return on Assets
(Insured commercial banks with assets of $50
million to $100 million)
Table 23.
Percentage Return on Assets
(Insured commercial banks with assets of
$500 million to $1 billion)
Percentile According to Profitability
Percentile According to Profitability
Year
75%
50%
25%
Year
1981
1.45
1.09
.76
1981
1982
1.47
1.11
.79
1982
1983
1.41
1.09
.76
1983
1.10
.88
1984
.61
1.31
1.02
.69
1984
1.19
.91
1985
.62
1.34
1.03
.60
1985
1.19
.92
1986
.65
1.29
.95
.49
1986
1.18
.93
.58
75%
50%
25%
1.13
.88
.62
1.15
.91
.58
Table 22.
Percentage Return on Assets
Table 24.
Percentage Return on Assets
(Insured commercial banks with assets of
$100 million to $500 million)
(Insured commercial banks with assets
over $1 billion)
Percentile According to Profitability
Percentile According to Profitability
Year
75%
50%
25%
Year
1981
1.30
.98
.67
1981
.95
.76
1982
.53
1.29
.97
.66
1982
.95
.76
.51
1983
1.27
.97
.67
1983
.98
.75
1984
.46
1.28
1.01
.73
1984
1.05
.86
.54
1985
1.32
1.03
.74
1985
1.10
.88
.59
1986
1.28
.98
.59
1986
1.10
.90
.60
s u p p o r t e d by t h e relatively strong performance
of s o u t h e a s t e r n banks. However, t h i s year's
f i n d i n g that p r o f i t a b i l i t y ratios have d e c l i n e d
s h a r p l y for s o u t h e a s t e r n b a n k s w i t h assets
b e l o w $50 m i l l i o n c o u l d p o i n t to a more pervasive p r o b l e m .
O n e e x p l a n a t i o n for t h e d r o p in t h e p r o f itability of southeastern banks with assets less
than $50 m i l l i o n is t h e weakness of Louisiana's
banks. To test this hypothesis, ROA ratios for
1985 and I986 were recalculated for southeastern banks excluding those in Louisiana. The
ROA ratios for t h e Southeast are much stronger
when Louisiana is left out, b u t they still show
falling p r o f i t a b i l i t y in 1986. The ROA ratio for
non-Louisiana banks w i t h assets less than $25
FEDERALfor
RESERVE
BANK O F ATLANTA
Digitized
FRASER
75%
50%
25%
m i l l i o n d r o p p e d from 0.94 p e r c e n t in 1985 t o
0.77 p e r c e n t in 1986. Though t h e figures for these
five s o u t h e a s t e r n s t a t e s are clearly s t r o n g e r
than national averages, they are, n e v e r t h e l e s s ,
relatively weak c o m p a r e d with these banks' historical ROA ratios. The ROA for southeastern
banks excluding those in Louisiana with assets
b e t w e e n $25 and $50 m i l l i o n decreased from
1. 12 p e r c e n t in 1985 to i .04 percent in 1986, still
a reasonably strong score. These figures suggest
serious, w i d e s p r e a d p r o f i t a b i l i t y p r o b l e m s for
banks with assets b e l o w $25 million. Although
t h e p r o f i t a b i l i t y of t h e average U.S. bank in t h e
$25-to-$50-million category is very weak for t h e
nation as a whole, it is not yet a serious p r o b l e m
in five of t h e six southeastern states.
35
Conclusion
Overall ROA and ROE figures for the nation
are down for all six size categories examined in
this study. Not since 1981 has profitability fallen
in every category. The decline in ROA ranged
from a small d i p of 0.02 percentage points to a
substantial d r o p of 0.18 percentage points. The
most serious downturns were recorded by banks
with assets below $25 million. This group experienced a 50 percent d r o p in ROA and ROE
ratios nationwide between 1985 and 1986 and
nearly a 50 percent decrease in t h e Southeast. In
contrast, banks w i t h assets above $1 b i l l i o n
showed only a small decline in profitability.
Despite a generally poorer performance than
in 1985, southeastern banks continued to stay
ahead of their peers across the country. Alabama r e p l a c e d Georgia as t h e southeastern
state with the highest ROA. Average ROA at
Louisiana banks, which have shown the region's
weakest profitabil ity for the last three years, was
negative in 1986.
Profitability problems for banks with assets
below $50 million appear to be widespread and
persistent, as reflected in substantial ROA
d e c l i n e s for high-, m e d i u m - , and l o w - p r o f i t
banks of this size. Moreover, the problems are
not confined to banks in midwestern agricultural and energy states. Profits also fell for banks
in t h e southeastern states, even when the drag
exerted by Louisiana banks was excluded.
The author
thanks
Sfierley
Wilson
for research
assistance.
APPENDIX
The data in this article were taken from reports of condition and income filed by insured commercial banks with
their federal bank regulators. The 1985 sample selected
consisted of all banks that had the same identification
number at the beginning and end of each year. The number of banks in the sample was 13,868.
The three profitability measures used in this study are
defined as follows:
Return on Equity = —
Net Income
————=—-—
Average Capital Equity
Average interest-earning assets and average stockholders' equity are derived by dividing the sum of beginning-, middle-, and end-of-the-year balance sheet figures.
The expected interest income component to net interest
margin incorporates two significant adjustments from
ordinary interest income. Revenue from state and local
securities exempt from federal incometaxes is multiplied
by the reciprocal of the bank's marginal tax rate, and
loan-loss expenses are subtracted from interest income.
Adjusted Net Interest Margin =
Expected Interest Revenues - Interest
Average Interest-Earning Assets
The figures presented in this study differ somewhat
from those presented by the author in last year's study
because errors occasionally are found in the reports filed
by the banks.
Net Income
Return on Assets =
—
7~
Average Consolidated Assets
NOTES
tially higher than the rates o n p r i m e c o m m e r c i a l loans, but the loan
' I n this study the Southeast refers t o the six states that are entirely or
partially w i t h i n the Sixth Federal Reserve District: Alabama, Florida,
losses o n credit c a r d s have also been larger. Loan losses o n credit
Georgia, Louisiana, Mississippi, a n d Tennessee. The outlook for the
c a r d s were 1.25 percent of credit c a r d v o l u m e in 1 9 8 5 a c c o r d i n g to
Michael Weinstein (1985).
e c o n o m i e s of these states is reviewed in the D e c e m b e r 1 9 8 6 issue
of the Economic
2
3
Review.
See Wall (1986).
For example, the interest rates o n credit c a r d s have b e e n substan-
REFERENCES
Nejezchleb, L y n n A. " D e c l i n i n g Profitability at Small C o m m e r c i a l
B a n k s : A Temporary D e v e l o p m e n t or a Secular Trend?" in Federal
Reserve B a n k of C h i c a g o , Proceedings
Structure
and Regulation,
of a Conference
on Bank
1986, f o r t h c o m i n g .
Wall, Larry D. "Profits in '85: L a r g e B a n k s Gain W h i l e O t h e r s Con-
36
tinue t o Lag," Federal Reserve B a n k of Atlanta, Economic
Review,
vol. 7 1 ( A u g u s t / S e p t e m b e r 1986), pp. 18-31.
Weinstein, Michael. "Another G o o d Year Is E x p e c t e d for Bank C r e d i t
C a r d s , A l t h o u g h Prices Are Under Pressure and Losses A r e U p , "
American
Banker,
D e c e m b e r 3 1 , 1 9 8 5 , p. 3.
MARCH/APRIL. 1987, ECONOMIC REVIEW
Distinguished
Lecturer
Series
Sponsored by the
Federal Reserve Bank of Atlanta
The Atlanta Fed's Distinguished Lecturer Series continues this year with a presentation
on "The Dollar: How Much Further Depreciation Do We Need?" by well-known economist
Rudiger W. Dornbusch. The lecture will take place on September 25, 1987, from 2 to 4 p.m.
in the Richard Rich Auditorium at Atlanta's High Museum of Art. Dr. Dornbusch's remarks
will be directed to a general audience and should be of particular interest to business
leaders as well as academics interested in international economics.
Educated at the University of Geneva and the University of Chicago, Professor Dornbusch has p u b l i s h e d many books and articles in prominent economic journals on LDC
debt, exchange rates, and other international trade issues. He also writes for the Wall Street
journal as an occasional columnist and for other popular publications. Currently t h e Ford
International Professor of Economics at the Massachusetts Institute of Technology in Cambridge, Massachusetts, Dornbusch serves as an associate editor for the Quarterly journal of
Economics and journal of International Economics. His other professional affiliations include the
Brookings Institution, NBER, and Shearson Lehman.
The lecture is free, b u t seating will be limited and so pre-registration is requested. To do
so, please c o m p l e t e and return the form below or call Ellen Gerber at (404) 521-8764.
r
1
Please pre-register me for t h e Rudiger W. Dornbusch lecture.
Name
Affiliation
Address
Telephone (Day)
Return to Ellen Gerber; Public Information Department; Federal Reserve Bank of
Atlanta; 104 Marietta St., N.W.; Atlanta, Ga. 30303-2713.
L
FED
E RFRASER
A L RESERVE BANK O F ATLANTA
Digitized
for
J
37
Book Review
Rational Expectations and
\nflation
by Thomas J. Sargent
N e w York: Harper & Row, 1986. 212 pages.
$9.00
The message contained in Thomas Sargent's
Rational Expectations and Inflation is quite clear:
inflation is not really a monetary phenomenon;
that is, it has little to do with inappropriate
changes in the quantity, per se, of money. The
real culprit b e h i n d an increasing price level is a
decrease (or an expected decrease) in the value
of assets that back the money supply. As such,
this book breathes some new life into the Real
Bills doctrine, though in a rational expectations
framework, implying that money, like any other
financial instrument, gains its value by the assets b e h i n d it. 1 The Real Bills doctrine, at least
as i n t e r p r e t e d by Sargent and some others,
holds that if the money supply is backed by
"real'' assets, then price level stability, among
other things, will not be a problem. 2
The book is a collection of six related essays,
written on a level accessible to undergraduates.
It centers on the p r o b l e m of the interaction
("strategic i n t e r d e p e n d e n c e " ) of fiscal and
monetary regimes and their resulting impact on
the price level. It can be loosely d i v i d e d into
three, two-chapter sections.
The first third of the book contains two essays
concerning the implications of rational expectations for mainstream macroeconomics. Sargent finds fault with models that d o not regard
Thanks
to Elsevier
Science
Publishers
for permission
to reprint parts of
this review, which appeared in the J o u r n a l o f B a n k i n g a n d F i n a n c e ,
vol. 10 (Winter
38
1986), pp. 6 1 8 - 6 2 0 .
an i n d i v i d u a l ' s or an i n s t i t u t i o n ' s economic
behavior as a function of the policy regime—
"the rules of the g a m e " - a n d provides a rather
interesting analogy t o t h e National Football
League. A change in the rules of the game will
lead to c o m p o u n d changes in behavior, and
these changes will invalidate the results of any
model that does not take into account the effect
of the policy regime along with other factors.
Sargent argues that t h e insights of rational
expectations require macroeconomics, including econometrics, to be forward-looking enough
to see fundamental changes of behavior resulting from changes in policy.
The text goes well beyond this problem, a
s i m p l e generalization of the "Lucas critique." 3
Sargent also addresses the issue of the credibility and sustainability of policy regimes once
announced, as well as associated changes in
macroeconomic behavior given t h e eventual
outcome of the regime. It is in this respect that
inflation stops b e i n g a monetary p h e n o m e non.
Sargent's second chapter, "Reaganomics and
Credibility," argues that a continuous series of
large deficits cannot persist indefinitely when
accompanied by a tight monetary pol icy. Rather,
he contends, the deficit regime must be expected to ultimately end or result in an increase in
the base money supply as the fiscal authority
finds it has progressively more difficulty marketing its growing s u p p l y of bonds. (In view of
MARCH/APRIL 1987, ECONOMIC REVIEW
recent U.S. experience, this discussion is q u i t e
timely.) It comes down to a game of " c h i c k e n " either the fiscal authorities stop deficit spending, or the monetary authorities relax their grip
on the money supply, and agents must guess
who will be the first to back down.
This analysis impl ies that a change in policy
must be evaluated not simply on its own, b u t
also by what the new policy portends for future
changes in policy. Not only do agents modify their
behavior as a result of a change in policy; they
also recognize t h e constraints t h a t t h e new
policy may place on future regimes and modify
their behavior now as a reaction to what is perceived as being a necessary policy change in
the future.
continued deficit (factoring out interest payments) is not compatible with a tight money
policy if t h e rate of interest is greater than the
economy's growth rate. Asa result, if fiscal policy
" d o m i n a t e s " monetary policy, expectations
about future money growth, and hence future
inflation, will result in higher rates of inflation.
The last essay, Chapter 6, contains some interesting speculations regarding currency depreciation in Hong Kong. Sargent, with David J.
Beers and Wallace, contends that the d r o p in
value of t h e Hong Kong dollar during the early
1980s may have been the result of t h e uncertain
value of the assets backing loans in financial
firms' portfolios. This uncertainty, they argue,
may be d u e to the possiblechange in ownership
of Hong Kong, coming with the expiration of the
British lease of the territory. Inflation then may
be welcomed by the financial community, for it
lowers the real value of firms' liabilities as the
value of their assets drops. In effect, inflation
divides the asset value loss of financial institutions between the firms themselves and their
depositors. The depreciation of the currency
may be serving to " s m o o t h t h e Hong Kong
economy's adjustment to lower real property
values in terms of foreign currency" (p. 202).
The second third of the bookcontains two historical essays concerning the p r o b l e m of e n d i n g
inflation. Sargent examines o n e e p i s o d e of
moderate inflation and four periods of hyperinflations (all inter-war, European). He finds that,
in these cases, a change in fiscal regime, not a
change in monetary policy, brought the inflations to
quick and rather costless ends, that is, with no
prolonged bouts of increased unemployment.
The e n d s of t h e four h y p e r i n f l a t i o n s w e r e
characterized by a r a p i d s t a b i l i z a t i o n of t h e
price level that accompanied a c r e d i b l e change
in fiscal policy away from clearly uncontrolled
deficits. The money supply itself continued, in
each of t h e cases s t u d i e d , to grow at q u i t e
remarkable rates for extended periods of time.
The vast increase in the supply of money d id not
have any impact on the price level; Sargent
attributes this to t h e change in the backing of
the money—away from clearly worthless government d e b t toward private d e b t that was backed
by real assets. Sargent thus makes a compelling
case for the Real Bills doctrine.
The final third of t h e book contains two essays
that probably w o u l d have been better placed
with the first and second thirds of the book, respectively. Chapter 5, "Some Unpleasant Monetarist Arithmetic," is the now familiar article
wherein Sargent and Neil Wallace argue that a
Overall, Rational Expectations and \nflation should
serve to rekindle interest in t h e Real Bills doctrine. My only regret is that Sargent d i d not
include "The Real Bills Doctrine vs. The Quantity Theory: A Reconsideration" (journal of Political
Economy, 1982, with Neil Wallace), though I suspect this was in keeping with trying to make t h e
book as accessible as possible. At t h e very least,
this text focuses attention on the importance of
non-monetary (particularly fiscal) developments in making monetary policy. For those
interested in policy issues or inflation, this book
is well worth reading.
—Thomas J. Cunningham
The reviewer, a specialist in macroeconomics and monetary theory, is an
economist in the macropolicy section of the Atlanta Fed's
Research
Department.
NOTES
" ' R a t i o n a l e x p e c t a t i o n s " a s s u m e s that people f o r m their e x p e c -
o f the Real Bills interpretation, m o s t e c o n o m i s t s h o l d the doctrine,
tations o n the basis of all available information. S o m e of the far-
t h o u g h not necessarily in this specific form, in disrepute, either
reaching implications of this a p p r o a c h , w h i c h g a i n e d a c c e p t a n c e in
b e c a u s e of price level instability, procyclicality p r o b l e m s , or s o m e
the 1 9 7 0 s , are detailed in the text.
J
c o m b i n a t i o n of both. Further, it s h o u l d be a d d e d that "real a s s e t s "
Not everyone agrees; there are other interpretations of the Real Bills
doctrine a n d other facets t o this interpretation, t h o u g h the m o n e y /
price relationship is, I believe, the m o s t important for the present discussion. W h e t h e r or not there is a n y a g r e e m e n t o n the specific form
FEDERAL RESERVE BANK OF ATLANTA
d o not necessarily imply, say, a g o l d standard.
3
R o b e r t E. Lucas, Jr., " E c o n o m e t r i c Policy Testing: A Critique," in The
Phillips
Curve and Labor Markets,
edited b y Karl B r u n n e r a n d Allen
H. Meltzer ( A m s t e r d a m : North-Holland, 1976), pp. 19-46.
39
IMPORTANT MESSAGE F O R D A T A USERS
In J u n e of e a c h y e a r , c h a n g e s a r e m a d e to the deposit a n d r e s e r v e r e q u i r e m e n t criteria used to select
RNANCE
institutions for inclusion in the s a m p l e on w h i c h t h e s e d a t a a r e b a s e d .
A s of S e p t e m b e r
1986
current a n d previous m o n t h l y d a t a a r e f r o m institutions w i t h o v e r $ 2 6 . 8 m i E i o n in deposits a n d $ 2 . 6
million o f r e s e r v e r e q u i r e m e n t s .
P r e v i o u s l y , d a t a w e r e b a s e d o n a d i f f e r e n t s a m p l e o f institutions,
t o r publication p u r p o s e s , m o n t h l y year-ago c o m p u t a t i o n s a r e m a d e on the basis o f t h e s e c u r r e n t r e p o r t i n g
critwia.
T h e r e f o r e , t h e y a r e n o t entirely c o m p a r a b l e to or consistent w i t h previously published d a t a
c o v e r i n g the past periods.
D a t a users n e e d i n g further detail should c o n t a c t C h e r y l C o r n i s h , D a t a b a s e C o o r d i n a t o r ,
404-521-8816
ANN.
$
MAY
APR.
MAY
1987
1987
1986
CHG.
1,695,221
1,708,542
1,551,094
+ 9
—
M o r e o v e r , p e r c e n t c h a n g e s s h o w n d o n o t control for the s a m p l e c h a n g e .
ANN.
%
MAY
APR.
MAY
1987
1987
1986
%
CHG.
millions
UNITED
WM
STATES
Commercial
Bank
Deposits
S&Ls
Total
Deposits
__
676,952
Demand
373,374
372,Í
327,831
682,705
+14
NOW
613,180
NOW
156,446
159,102
34,193
117,121
34,743
+34
Savings
26,405
29
515,923
165,323
524,365
166,701
447,380
137,269
+15
Time
20
474,908
695,294
478,944
694,706
447,230
690,885
+
64,366
63,925
43,749
47
8,907
9,100
6,040
47
Time
54,612
54,352
36,598
49
Deposits
88,281
88,698
Savings
Time
1
Credit
Union
Share
Drafts
Savings
Commercial
Bank
Deposits
2 0 1 ., 6 4 4
4 1 ., 6 9 3
2 0 3 ., 1 7 8
4 2 ., 1 2 9
184,647
38,414
NOW
2 2 ., 1 5 4
2 2 ., 5 0 9
16,073
Savings
5 8 ., i y «
5 9 ., 1 2 5
50,716
+15
Time
8 4 ., 1 5 /
8 4 ., 0 8 6
83,422
+
Demand
&
S&Ls Total
+
6
—
79,886
5,654
11
5,708
4,382
29
20,833
20,752
18,081
15
61,067
61,631
56,901
7,152
7,053
5,445
31
853
867
604
6,041
6,001
41
4,575
32
6,097
6,156
388
382
4,724
247
1,147
4,591
1,159
867
4,649
953
936
144
149
140
+
3
783
777
669
+
17
NOW
56,371
3,486
56,347
3,527
56,412
3,047
Savings
14,243
14,096
13,337
37,945
38,164
39,483
+
-
7
4
3,728
3,680
2,946
+
27
+
+
42
29
9
NOW
+38
1
Deposits
-IT
Savings
Time
Credit
Union
Share
Deposits
Drafts
Savings
&
Time
7
ALABAMA
Commercial
20,388
20,683
Demand
Bank D e p o s i t s
4,167
4,189
3,929
NOW
+ 6
NOW
2,164
2,199
1,518
+43
Savings
Time
Savings
4,672
4,738
3,745
+25
Time
9,906
10,034
9,428
+
5
Credit
Union
Share
Drafts
Savings
Commercial
Bank
Deposits
78,318
Demand
16,292
79,074
16,659
69,742
14,563
NOW
+1?
+12
10,049
10,139
Savings
+44
27,129
27,488
6,976
23,454
Time
26,639
26,754
26,444
+
S&Ls
+16
1
Deposits
&
Total
Time
Deposits
Time
Credit
Union
Share
Deposits
Drafts
Savings
&
Time
+
29
+
57
3,615
+
+
32
27
793
+
20
443
446
312
3,056
3,021
2,369
7,468
7,559
6,664
0
+ 14
_____
Commercial
Bank
Deposits
Demand
NOW
Savings
Time
31,948
31,968
28,842
+ 11
8,598
8,539
7,838
+10
NOW
3,115
3,172
552
+44
Savings
9,029
9,240
1,640
1,458
8,058
+1?
1,618
916
2,166
Time
12,815
4,987
5,047
12,515
4,689
12,117
1,368
1,344
879
149
+
6
S&Ls
Total
Deposits
911
Credit
Union
Share
28,367
Demand
28,610
28,334
+ 0
S&Ls Total
5,236
5,205
NOW
5,150
+ 2
NOW
2,290
8,188
2,350
1,856
+23
Savings
8,300
7,441
+10
Time
13,175
13,233
14,221
- 7
Conmerci al
Bank
Deposits
Savings
Time
Credit
Deposits
Drafts
Savings
&
Deposits
Union
Share
Time
1,201
152
74
1,203
795
9,842
10,089
Savings
Time
5
S&Ls
51
6,053
63
391
394
265
48
2,217
1,356
62
7,268
7,479
4,451
63
Deposits
&
Time
Total
Deposits
H
f
f
i
1,859
1,872
777
- 0
NOW
1,459
1,471
103
105
1,146
+27
Savings
56
3,106
3,150
283
2,694
+15
Time
118
+140
7,410
7,464
- 0
290
1,361
*
575
*
+136
*
*
*
*
*
*
375
384
215
Credit
1,358
Union
28,488
Deposits
Drafts
&
Time
+139
+
84
28,632
26,026
Demand
4,997
5,034
4,520
NOW
3,077
3,178
2,411
+11
+?8
Savings
6,074
6,209
5,324
1,352
+14
1,350
Time
945
43
14,173
14,140
4,918
4,931
13,748
,088
20
1,103
1,093
827
33
78
50
742
35
Savings
Time
+
+
9
3
S&Ls
Total
Credit
Union
than
four
institutions
40
Deposits
Drafts
Savings
- fewer
Deposits
NOW
Share
*
+
2,414
Savings
Deposits
56
+101
2,503
7,449
Bank
+
2,403
Share
Commercial
+ 6
2,190
H
+
65
+ 11
Drafts
Savings
Demand
NOW
12
+
&
Time
26
117
120
1,001
1,000
74
reporting.
M A R C H / A P R I L 1987, E C O N O M I C REVIEW
I M P O R T A N T MESSAGE F O B D A T A USEKS
r*|kl II I I A r
r NANLt
,
n
l
,
W
I
"
In June of each year, changes are m a d e to the deposit and reserve requirement criteria used to select
institutions for inclusion in the sample on which these data are based. A s of September 1986,
a nd p r e V 1 U S m o n t h l
n
,
°
y data
torn
institutions with over $ 2 6 . 8 million in deposits and $2.6
" u U l o n K ° f r f s e r v e requ.rements. Previously, data were based on a different sample of institutions
CU
^ T J ^ ^ 3 ' m ° n t h l y y e a r " a g 0 i m p u t a t i o n s are made on the basis of these current reporting
Therefore, they are not ent.rely comparable to or consistent with previously published d a U
covering the past p e n o d s . Moreover, percent changes shown do not control for the sample change
Data users needing further detail should contact Cheryl Cornish, Database Coordinator, 404-521-8816.
I Z ^
.704,535 1,695,221
369,769
373,374
154,886
156,446
518,358
515,923
705,211
695,294
Conmercial
Demand
NOW
Savings
Time
Bank Deposits
Commerci a !
Demand
NOW
Savings
Time
Conmercial Bank
Demand
NOW
Savings
Commercial
Demand
NOW
Savings
Time
Deposits
Bank Deposits
Commercial Bank
Demand
NOW
Savings
Time
Deposits
Coronerei al
Demand
NOW
Savings
Time
* = f e w e r than four i n s t i t u t i o n s
FEDERAL RESERVE B A N K O F ATLANTA
201,920
41,543
21,743
58,277
85,103
201,644
41,693
22,154
58,198
84,157
1 , 5 7 6 , ,765
3 4 2 , ,638
1 2 2 , ,366
4 5 7 , 704
6 8 8 , 727
185,751
39,057
16,492
51,381
82,920
+ 8
+ 8
+27
+13
+ 2
+ 9
+ 6
+3?
+13
+ 3
JUNE
1987
MAY
1987
JUNE
1986
673,822
33,938
163,676
473,667
65,046
8,898
55,291
676,952
34,193
165,323
474,908
64,366
8,907
54,612
"62ÏV233
27,911
139,416
451,979
45,255
6,513
37,734
87,646
5,535
20,607
60,847
7,290
861
6,120
88,281
5,654
20,833
61,067
7,152
853
6,041
84,559
4,834
19,115
60,111
5,297
D,UUö
376
1,139
4,520
970
143
793
o,ua/
388
1,147
4,591
953
144
783
4,b8b
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Savings & Time
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Savings & Time
S&Ls Total
NOW
Deposits
Savings
Time
Credit Union Deposits
Share D r a f t s
Savings & Time
255
885
3,564
800
152
677
+
+
+
+
+
+
28
47
29
27
21
6
17
+
+
+
8
0
1
11
34
40
37
+11
+ 4
+36
+22
+ 6
77,847
16,033
9,696
27,110
26,864
78,318
16,292
10,049
27,129
26,639
69,766
14,585
7,093
23,550
26,275
+12
+10
+37
+15
+ 2
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Savings & Time
55,895
3,388
14,024
37,840
3,809
449
3,095
56,371
3,486
14,243
37,945
3,728
443
3,056
60,430
3,403
14,158
42,334
2,851
320
2,259
32,417
8,739
3,090
9,069
13,186
31,948
8,598
3,115
9,029
12,815
29,236
8,051
2,249
8,238
12,007
+ 11
+ 9
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share D r a f t s
Savings & Time
7,468
906
7,468
911
1,628
4,978
1,398
151
1,221
1,618
4,987
1,368
149
1,201
6,452
566
1,410
4,515
798
9,,843
396
2.,181
7,,261
*
*
*
9,,842
391
2,,190
7,,268
*
*
*
6,468
289
1,479
4,718
*
*
*
1,812 ~
99
279
1,343
1,859
103
283
1,358
867
63
132
633
+10
28,213
5,133
2,303
8,175
13,067
28,367
5,236
2,290
8,188
13,175
28,401
5,258
1,893
7,589
14,071
- 1
- 2
+22
+ 8
- 7
14,159
2,365
1,418
3,099
7,510
14,135
2,403
1,459
3,106
7,449
13,574
2,435
1,164
2,751
7,435
+ 4
- 3
+22
+13
+ 1
28,488
4,997
3,077
6,074
14,173
26,195
4,704
2,504
5,387
13,612
+ 9
+ 8
+23
+13
+ 6
S&Ls Total
NOW
Deposits
Savings
Time
C r e d i t Union Deposits
Share Drafts
Savings & Time
S&Ls Total
NOW
Deposits
Savings
Time
C r e d i t Union Deposits
Share Drafts
Savings & Time
S&Ls Total Deposits
NOW
Savings
Time
C r e d i t Union Deposits
Share Drafts
Savings & Time
6,620
370
1,356
4,905
1,113
118
1,011
b ,644
375
1.. 3 5 2
4,, 9 1 8
1.,103
117
1,,001
reporting.
41
17
5
44
37
47
638
4,404
4,024
1,589
3,866
9,520
+37
+10
22
4
15
8
1
38
35
39
4,167
2,164
4,672
9,906
Deposits
:
+
+
+
+
+
+
+
4,178
2,167
4,726
10,057
Total
NOW
ANN.
%
CHG.
82
709
5,657
258
1,051
4,347
848
84
759
+ 16
+ 60
+
+
+
+
+
15
10
75
84
72
+
+
+
+
52
37
47
54
+ 57
+111
+112
+
+
+
+
+
+
+
17
43
29
13
31
40
33
EMPLOYMENT
1987
FEB
1987
MAR
1986
118,353
110,229
8,124
117,967
109,464
8,503
116,309
107,643
8,667
MAR
C i v i l i a n Labor Force - t h o u s .
Total Employed - thous.
Total Unemployed - t h o u s .
Unemployment Rate - * SA
Mfg. Avg.
Mfg. Avg.
Civilian
Total
Total
Wkly. Hours
Wkly. E a r n . - $
Labor Force - t h o u s .
Employed - thous.
Unemployed - thous.
Unemployment Rate - X SA
Mfg. Avg.
Mfg. Avg.
W k l y . Hours
Wkly. Earn. - $
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - thous.
Unemployment Rate - % SA
Mfg. Avg. Wkly.
Mfg. Avg. Wkly.
Hours
Earn. - $
C i v i l i a n Labor Force - thous.
T o t a l Employed - t h o u s .
T o t a l Unemployed - t h o u s .
Unemployment Rate - X SA
Mfg. Avg. Wkly.
Mfg. Avg. Wkly.
Hours
Earn. - $
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - thous.
Unemployment Rate - X SA
Mfg. Avg.
Mfg. Avg.
W k l y . Hours
Wkly. E a r n . - $
ANN.
X
CHG
+2
+2
-6
6.6
6.7
7.2
40.9
403
40.8
401
40.7
396
+0
+2
16,170
14,931
1,239
16,045
14,768
1,277
15,654
14,403
+3
+4
-1
7.5
7.7
7.9
1,251
40.9
358
41.1
40.8
359
350
+0
+2
1,868
1,866
1,680
186
1,866
+U
1,685
183
1,672
195
+1
-6
9.2
9.3
8.9
40.6
353
41.0
355
40.4
+0
350
+1
5,811
5,498
313
5,722
5,439
5,124
316
+7
5,422
300
5.6
5.7
6.1
40.5
328
40.5
328
40.6
324
+/
-1
-0
+1
3,085
3,053
2,951
+5
2,907
178
2,870
183
2,773
178
+5
0
5.5
5.7
5.8
41.0
344
41.2
345
40.5
337
+1
+2
1,949
1,668
281
1,987
1,744
243
+/
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
-3
-4
Unemployment Rate - X SA
13.1
13.9
11.8
Mfg. Avg.
Mfg. Avg.
42.1
456
42.1
454
41.6
445
+1
+2
1,157
1,028
128
1,147
1,008
140
1,154
1,021
133
+1
-4
Wkly. Hours
Wkly. E a r n . - $
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
Unemployment Rate - X SA
10.5
11.1
10.9
M f g . A v g . W k l y . Hours
Mfg. A v g . W k l y . E a r n . - $
39.9
303
40.1
303
40.4
300
-1
+1
2,314
2,137
176
2,308
2,120
188
2,256
2,069
187
+3
+3
-6
7.2
6.9
8.3
C i v i l i a n Labor Force - t h o u s .
T o t a l Employed - t h o u s .
T o t a l Unemployed - t h o u s .
Unemployment Rate - X SA
M f g . A v g . W k l y . Hours
Mfg. A v g . W k l y . E a r n . - $
41.2
362
41.5
366
41.1
342
+0
+6
MAR
1987
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & P u b . U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
Nonfarm Employment - t h o u s .
42
MR
ANN.
X
1986
0 «
101,148
19,082
4,633
23,830
17,286
23,737
6,510
5,344
100,500
19,062
4,559
23,706
17,176
23,498
6,461
5,316
98,617
19,148
4,441
23,221
17,013
22,593
6,144
5,215
+3
-Ü
+4
+3
+2
+5
+b
+2
13,319
2,319
780
3,325
2,346
2,933
787
12,948
2,308
767
3,203
2,301
2,777
749
720
+3
+0
+2
+4
728
13,248
2,320
777
3,300
2,338
2,900
785
726
+2
+6
+5
+1
1,467
1,465
1,448
+1
Manufacturing
Construction
350
75
355
74
353
74
-1
+1
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
324
300
265
70
71
321
300
263
70
71
312
301
255
68
71
+4
-0
+4
+5
0
4,800
525
341
4,759
525
339
4,584
517
336
+5
+2
+1
1,313
733
1,280
352
247
1,298
729
1,262
350
246
1,235
708
1,201
332
245
+6
+4
+7
+6
+1
2,735
2,724
2,624
+4
567
155
689
468
531
149
167
564
158
687
466
524
149
167
565
147
646
457
491
140
164
+0
+5
+7
+2
+8
+6
+2
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. 6 Real. Est.
T r a n s . , Com. & P u b . U t i l .
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
NOTES: A l l labor f o r c e data are from Bureau o f Labor S t a t i s t i c s r e p o r t s supplied by state
O n l y the unemployment r a t e data are s e a s o n a l l y a d j u s t e d .
The Southeast data represent the t o t a l o f t h e s i x s t a t e s .
FEB
1987
1,547
-4
167
94
373
325
321
86
112
-2
-12
-5
-2
105
1,486
163
83
357
320
315
85
105
855
221
34
184
195
138
38
40
849
221
31
182
195
137
38
39
846
223
34
179
193
134
36
38
+1
-1
0
+3
+1
+3
+6
+5
1,965
493
92
456
328
1,899
483
81
457
318
+4
+2
+14
399
93
97
376
87
90
+7
+7
+8
1,485
163
83
355
320
316
85
1,978
493
92
461
331
403
93
97
-2
-0
-6
+1
+4
agencies.
M A R C H / A P R I L . 1987, E C O N O M I C REVIEW
EMPLOYMENT
Mfg. Avg.
Mfg. Avg.
Wkly. Hours
Wkly. E a r n . - $
C i v i l i a n Labor Force - thous.
Total Employed - t h o u s .
Total Unemployed - thous.
APR
ANN.
X
1987
1986
CHG
116,317
111,041
7,306
118,353
110,229
8,124
108,201
8,115
6.2
6.5
7.0
40.4
399
40.9
402
40.7
393
16,099
14,995
1,104
16,174
14,929
1 245
117,234
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Cora. & P u b . U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
1,682
Unemployment Rate - % SA
Mfg. Avg.
Mfg. Avg.
W k l y . Hours
Wkly. E a r n . - $
MAR
APR
1987
1986
102,091
19,134
4,889
24,122
17,316
23,966
6,554
5,377
101,131
19,102
4,644
23,818
17,275
23,720
6,501
5,345
99,553
19,154
4,783
23,493
17,006
22,871
6,203
5,229
13,373
2,330
787
13,320
2,319
782
3,326
2,344
t
CHG
+3
-0
+2
+3
+2
+5
+6
t f w l ;
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
C i v i l i a n Labor Force - thous
Total Employed - t h o u s .
Total Unemployed - t h o u s .
ANN.
APR
1987
10.0
40.7
355
40.6
352
730
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Rea!. Est.
T r a n s . , Com. & Pub. U t i l .
180
9.3
3,340
2,349
2,943
791
2,932
788
728
349
76
324
300
265
+3
+1
10
Unemployment Rate - X SA
MAR
1987
CO
>£>
03
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - t h o u s .
APR
2,314
772
3,215
2,304
2,794
758
719
1,463
359
75
316
301
259
70
71
+?
+4
*?
+5
+4
+2
•1
-1
+1
+3
+0
+3
+3
0
—"——i v i l i a n Labor Force - t h o u s .
Total
Employed - thous.
Total
Unemployed - t h o u s .
Unemployment Rate - % SA
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - thous.
Unemployment Rate - *
SA
M f g . A v g . Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
- i v i l i a n Labor Force - thous.
Total Employed - thous.
Total Unemployed - t h o u s .
5,768
5,469
299
5,498
5,525
5,204
313
321
5.5
5.6
5.8
40.1
324
40.5
327
40.5
322
3,087
2,908
180
2,941
2,778
163
3,081
2,924
157
5.3
5,811
5.6
5.9
40.2
338
41.0
344
40.7
345
1,922
1,938
1,676
263
1,692
230
Unemployment Rate - % SA
11.8
13.1
12.5
41.5
449
42.2
457
41.0
435
1,145
1,039
107
1,157
1,028
129
M 5 5
1.023
132
10.6
11.8
39.9
303
40.2
299
2,319
2,160
159
2,315
2,138
177
2,266
2,088
178
7.0
7.2
8.2
40.4
359
41.1
361
40.8
345
Unemployment Rate - % SA
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
C i v i l i a n Labor Force - t h o u s .
Total Employed - t h o u s .
Total Unemployed - thous.
Unemployment Rate - X SA
Mfg. Avg.
Mfg. Avg.
W k l y . Hours
Wkly. E a r n . - $
9.6
39.4
The Southeast data represent the total o f the s i x
FEDERAL RESERVE B A N K O F ATLANTA
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & P u b . U t i l .
Nonfarm Employment - thous.
-1
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & P u b . U t i l .
Nonfarm Employment - t h o u s .
Manufacturing
Construction
Trade
M f g . A v g . W k l y . Hours
Mfg. Avg. Wkly. Earn. - $
C i v i l i a n Labor Force - thous.
Total Employed - t h o u s .
Total Unemployed - t h o u s .
+4
+5
-7
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
-1
+2
-19
"2
Nonfarm Employment - thous.
Manufacturing
Construction
Trade
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & Pub. U t i l .
Nonfarm Employment - thous.
+3
-11
4,797
525
338
1,310
733
1,280
353
248
2,751
558
158
694
469
536
150
168
1,490
166
84
355
320
317
85
105
861
223
35
186
195
138
38
40
1,994
Manufacturing
Construction
Trade
4g4
97
468
Government
Services
F i n . , Ins. & Real. Est.
T r a n s . , Com. & P u b . U t i l .
331
405
94
98
4,798
525
339
1,314
732
1,279
352
247
4,577
516
334
1,227
707
1,203
336
244
2,736
566
157
689
468
531
149
167
2,652
566
152
658
457
498
143
165
1,488
164
83
354
320
317
85
105
1,534
855
221
+5
*Z
+1
+7
+4
+6
+5
+2
+4
+0
+4
+5
+3
+8
+5
+2
-3
0
166
92
371
327
-9
-4
-2
320
86
108
-1
-1
-3
847
221
35
+2
+1
0
34
184
195
138
38
40
181
+3
193
134
37
39
+3
+4
1,978
494
93
461
330
402
94
1,917
AHfi
HOD
83
462
319
380
88
states.
43
+1
+2
+4
+2
+17
+1
+4
+7
+7
ü
GENERAL
LATEST
DATA
- mils.
Personal Income
.
b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. Arr. ( t h o u s . )
Petroleum Prod, ( t h o u s . )
Consumer P r i c e I n d e x
1967=100
K i l o w a t t Hours
PREV.
PERIOD
YEAR
AGO
ANN.
%
CHG.
Q4
3,529.7
N.A.
N.A.
APR
8,413.3
3,379.7
N.A.
N.A.
8,790.5
APR
Prices
(i
per
lb.)
337.7
335.9
325.3
FEB
Soybean P r i c e s
($
per
bu.)
197.7
209.1
193.2
Broiler
MAR
APR
- 4
Broiler
430.3
N.A.
6,817.6
1,422.5
427.4
N.A.
5,713.2
1,424.0
410.6
N.A.
6,040.4
1,411.0
+
5
+13
+ 1
.-— , —
P e r s o n a l Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. Arr.
(thous.)
Petroleum Prod, ( t h o u s . )
Consumer P r i c e I n d e x
Persona]
169.1
MAR
3,513.0
APR
21.0
MAR
178.4
159.9
3,061.5
23.0
JAN
177.2
9.2
3,197.2
31.0
MAR
174.5
82.0
MAR
1967=100
ATLANTA
K i l o w a t t Hours - m i l s .
Personal
8.6
^
s
e
n
g
e
r
S
v
l
CHG.
125
90,686
75.10
123
89,111
(Q2)183
72.50
29.10
121
+ 3
84,863
58.90
+ 7
+28
29.90
4.73
5.22
- 1
- a
(Ql)174
(Q2)189
- 3
113
108
36,761
70.43
35,386
55.03
28.17
5.27
27.80
4.86
168
+
fi
+ 7
+33
- 1
- 6
- 4
181
N.A.
2,308.8
N.A.
DEC
342.2
4.9
81.3
N.A.
1,891.6
N.A.
OCT
339.9
5.5
77.3
N.A.
2,152.1
N.A.
DEC
335.3
4.6
+
Agriculture
Farm Cash R e c e i p t s - $ m i l .
Dates: F E B . , FEB.
B r o i l e r Placements ( t h o u s . )
7
( i per
( $ per
lb.)
bu.)
( $ per
ton)
950
2,402
83.50
27.00
4.91
177
2,213
73.50
27.00
4.87
175
407
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( t per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed C o s t ( $ per t o n )
14,683
14,308
- fi
+ fi
67.60
27.00
4.74
51.90
27.50
+35
- ?
5.23
- 4
175
181
- 2
Agriculture
Farm Cash R e c e i p t s
- $ mil,
Dates: F E B . , FEB.
Broiler Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( t per l b . )
Soybean Prices ( $ per b u . )
B r o i l e r Feed Cost ( $ per t o n )
MAR
Agriculture
Farm Cash R e c e i p t s - $ m i l .
D a t e s : F E B . , FEB.
B r o i l e r Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( t per l b . )
S o y b e a n P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per t o n )
58.1
N.A.
57.2
N.A.
54.8
N.A.
378.1
N.A.
285.8
N.A.
198.6
N.A.
N.A.
FEB
V
1986
by Farmers
B r o i l e r Feed Cost
FEB
l
1987
Index ( 1 9 7 7 = 1 0 0 )
B r o i l e r Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( i per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per t o n )
+ 2
Income
1967=100
K i l o w a t t Hours - m i l s .
Agriculture
Prices Rec'd
+ 2
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. A r r . ( t h o u s . )
Petroleum Prod, ( t h o u s . )
Consumer P r i c e I n d e x
Personal Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. Arr. (thous.)
Petroleum P r o d , ( t h o u s . )
Consumer P r i c e I n d e x
ANN.
%
4.82
( $ per t o n )
Broiler Prices
Soybean P r i c e s
- mils.
1967=100
K i l o w a t t Hours - m i l s .
Feed Cost
Farm Cash R e c e i p t s - $ m i l .
Dates: F E B . , FEB.
Broiler Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. A r r . ( t h o u s . )
Petroleum P r o d , ( t h o u s . )
Consumer P r i c e I n d e x
1967=100
K i l o w a t t Hours
APR
29.60
+10
-32
Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. Arr. (thous.
Petroleum Prod, ( t h o u s . )
Consumer P r i c e I n d e x
MAR
Agriculture
Farm Cash R e c e i p t s - $ m i l .
D a t e s : F E B . , FEB.
B r o i l e r Placements ( t h o u s . )
Calf Prices ($ per c w t . )
B r o i l e r P r i c e s ( i per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed C o s t ( $ per t o n )
- mils.
P e r s o n a l Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . ( t h o u s . )
Petroleum P r o d , ( t h o u s . )
Consumer P r i c e I n d e x
1977=100
MIAMI
K i l o w a t t Hours - m i l s .
Agriculture
P r i c e s R e c ' d by Farmers
Index ( 1 9 7 7 = 1 0 0 )
Broiler Placements ( t h o u s . )
Calf Prices ($ per c w t . )
3,498.7
N.A.
N.A.
8,433.0
- mils.
1967=100
K i l o w a t t Hours
R
APR
1987
——
P e r s o n a l Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. Arr. ( t h o u s . )
Petroleum Prod, ( t h o u s . )
Consumer P r i c e I n d e x
1967=100
K i l o w a t t Hours
CURR.
PERIOD
^
6.1
N.A.
6.3
N.A.
6.1
+90
0
Commerce
Agriculture
Farm Cash R e c e i p t s - $ m i l .
Dates: F E B . , FEB.
B r o i l e r Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( t per l b . )
Soybean P r i c e s ( $ p e r b u . )
B r o i l e r F e e d Cost ( $ per t o n )
Taxable Sales
are r e p o r t e d
232
7,047
341
6,760
-32
+ 4
55.60
+36
4.80
147
30.10
5.28
181
0
- 6
61.60
67.20
55.40
30.00
4.98
29.90
26.00
5.41
75.80
30.10
4.96
159
6,804
73.60
29.90
265
N.A.
205
300
N.A.
4.94
187
as a 12-month c u m u l a t i v e
189
-12
-12
+11
+1.5
- a
+
total.
8
Plane
44
M A R C H / A P R I L 1987, E C O N O M I C REVIEW
GENERAL
LATEST
CURR.
DATA
PERIOD
Personal Income
( $ b i l . - SAAR)
Taxable S a l e s - $ b i l .
Plane Pass. Arr. (thous.)
Petroleum Prod, ( t h o u s . )
Consumer Price Index
1967=100
K i l o w a t t Hours
MAY
MAR
338.7
193.0
337.7
197.7
Q4
430.3
N.A.
6,438.0
1,426.0
427.4
N.A.
6,817.6
1,422.5
N.A.
N.A.
29.0
30.2
45.2
N.A.
MAY
45.4
N.A.
170.8
56.0
N.A.
4.1
N.A.
MAR
4.0
N.A.
3.7
+11
169.1
168.1
159.9
+ 6
APR
MAY
3,263.5
23.0
MAY
179.1
8.3
2,699.9
31.0
MAY
173.0
8.1
+21
-26
MAR
3,513.0
21.0
MAR
178.4
8.8
APR
MAY
MAR
Personal Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane Pass. A r r . (thous.)
Petroleum P r o d , ( t h o u s . )
Consumer Price Index
Q4
APR
- mils.
1967=100
ATLANTA
K i l o w a t t Hours - m i l s .
Q4
APR
MAR
Q4
Petroleum P r o d , ( t h o u s . ;
Consumer P r i c e Index
1967=100
K i l o w a t t Hours - m i l s .
MAR
Personal Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . ( t h o u s . ;
Petroleum P r o d , ( t h o u s . ) '
Consumer P r i c e Index
1967=100
K i l o w a t t Hours - m i l s .
Q4
APR
MAY
50.4
N.A.
APR
MAR
Soybean P r i c e s ( $ per b u . )
Broiler Feed Cost ( $ per ton)
339.9
4.9
+ 5
5,268.8
1,417.0
+22
+ 1
N.A.
28.0
+ 4
43.7
N.A.
134.8
62.0
185.2
55.0
81.3
N.A.
2,308.8
N.A.
OCT
410.6
N.A.
77.3
N.A.
1,869.8
N.A.
DEC
335.3
4.8
+ 4
+27
-10
+ 4
+ 2
+ 6
+17
+ 2
+ 4
50.3
N.A.
+ 0
372.2
1,268.0
50.5
N.A.
382.4
1,267.5
296.0
1,240.0
+26
+ 2
N.A.
4.1
N.A.
4.3
N.A.
4.0
+ 2
25.3
N.A.
46.1
79.0
25.1
N.A.
50.1
79.0
24.6
N.A.
35.7
84.0
N.A.
N.A.
N.A.
1.9
2.1
1.9
58.1
N.A.
394.9
N.A.
57.2
N.A.
378.1
N.A.
54.8
N.A.
232.6
N.A.
MAR
Personal Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . ( t h o u s . '
Petroleum P r o d , ( t h o u s . )
Consumer P r i c e Index
1967=100
K i l o w a t t Hours - m i l s .
APR
MAY
82.0
N.A.
2,190.5
N.A.
DEC
342.2
5.0
3,379.7
N.A.
N.A.
8,848.0
N.A.
5.6
N.A.
6.1
N.A.
5.5
+ 3
+29
- 6
0
+70
+ 2
R
APR
1987
MAY
1987
Agriculture
P r i c e s R e c ' d by Farmers
Index ( 1 9 7 7 = 1 0 0 )
B r o i l e r Placements ( t h o u s . )
C a l f P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( i per l b . )
MAY
K i l o w a t t Hours - m i l s .
Personal Income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . ( t h o u s . )
Petroleum Prod, ( t h o u s . )
Consumer P r i c e Index
ANN.
%
CHG.
3,498.7
N.A.
N.A.
8,413.3
- mils.
Personal income
( $ b i l . - SAAR)
Taxable Sales - $ b i l .
Plane P a s s . A r r . ( t h o u s . ;
Petroleum P r o d , ( t h o u s . ) '
Consumer P r i c e Index
1977=100
MIAMI
K i l o w a t t Hours - m i l s .
YEAR
AGO
3,529.7
N.A.
N.A.
8,444.0
-•ersonal Income
b i l . - SAAR)
Taxable S a l e s - $ b i l .
Plane P a s s . A r r . ( t h o u s . )
Petroleum P r o d , ( t h o u s . )
Consumer P r i c e Index
1967=100
1967=100
Kilowatt Hours
PREV.
PERIOD
Agriculture
P r i c e s R e c ' d by Farmers
Index ( 1 9 7 7 = 1 0 0 )
B r o i l e r Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( t per l b . )
Soybean P r i c e s ( $ per b u . )
129
91,353
77.60
30.00
5.33
(Q2)183
118
37,944
75.11
28.83
5.41
(Q2)Í73
Agriculture
Farm Cash R e c e i p t s - $ m i l .
D a t e s : M A R . , MAR.
416
Broiler Placements ( t h o u s . )
13,292
C a l f P r i c e s ( $ per c w t . )
76.80
B r o i l e r P r i c e s ( $ per l b . )
29.00
Soybean P r i c e s ( $ per b u . )
5.43
B r o i l e r Feed Cost ( $ per ton)
177
Broiler Feed Cost ( $ per ton)
Agriculture
Farm Cash Receipts - $ m i l .
D a t e s : M A R . , MAR.
B r o i l e r Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
Broiler P r i c e s ( t per l b . )
Soybean P r i c e s ($ per b u . )
B r o i l e r Feed Cost ( $ per ton)
125
90,686
75.10
29.60
4.90
(Ql)174
123
85,391
58.00
30.90
5.25
(Q2)189
112
114
37,897
72.93
27.85
4.96
1,537
2,401
29.00
5.43
177
+ 5
+ 7
+43
- 3
+ 2
- 4
13,228
71.80
27.00
5.03
175
447
12,186
49.70
30.00
5.33
181
- 7
+ 9
+55
- 3
+ 2
- 2
1,554
2,349
55.90
29.00
5.33
- 1
+ 2
+45
0
585
15,178
72.80
28.00
5.31
177
Agriculture
Farm Cash Receipts
- $ mil.
D a t e s : M A R . , MAR.
B r o i l e r Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
Broiler P r i c e s ( i per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per ton)
256
N.A.
73.50
29.80
5 32
159
72.50
30.10
5.10
147
Agriculture
Farm Cash Receipts - $ m i l .
D a t e s : MAR.,MAR.
B r o i l e r Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
Broiler P r i c e s ( t per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per ton)
307
7,073
74.00
29.80
5.38
159
7,047
74.20
30.10
5.05
147
15,169
70.20
27.00
5.04
175
397
N.A.
71.80
29.10
5.41
205
- 3
+ 2
- 3
(Ql)168
2,402
76.30
27.00
5.03
175
81.10
+ 5
+ 7
+34
35,525
52.70
29.78
5.31
(Q2)181
Agriculture
Farm Cash Receipts - S m i l .
D a t e s : M A R . , MAR.
Broiler Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
B r o i l e r P r i c e s ( i per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per ton)
Agriculture
Farm Cash R e c e i p t s - $ m i l .
D a t e s : M A R . , MAR.
B r o i l e r Placements ( t h o u s . )
Calf P r i c e s ( $ per c w t . )
Broiler P r i c e s ( i per l b . )
Soybean P r i c e s ( $ per b u . )
B r o i l e r Feed Cost ( $ per t o n )
ANN.
MAY
%
1986 CHG.
181
+ 2
- ?
607
14,230
49.80
29.00
5.20
181
- 4
+ 7
+46
- 3
+ 2
- ?
308
N.A.
56.40
31.00
5.30
181
438
6,760
53.30
31.20
5.29
181
418
N.A.
51.40
27.50
5.39
189
70.50
30.00
5.01
187
+30
- 4
+ 0
-12
-30
+ 5
+39
- 4
+ 2
-12
- 5
+40
+ 6
+ 0
+ 8
NOTES:
P a s s e n g e r S ^ Y r c o S S ^ ^
supplied by Bureau of Labor S t a t i s t i c s .
the total of the six
R = revised.
states.
N. A .
= not
AgriculLre
available.
data suoolied bv M
l ^ l l l u t l
s
b v Y T T '
"
£
??reaU
u „ „„
,
l
.
.
The annual percent change c a l c u l a t i o n
T
V
°l
S
^
Mlnes
r
"
u 1 a t
C o n s
"
e
t0tal
P r i c e Index
data
nccMy ia m .
m e soutneast data reoresenl
is based on most recent data over prior J e a r ?
F E D E R A L RESERVE B A N K O F ATLANTA
^
45
CONSTRUCTION
ANN.
t
CHG
MAR
1987
FEB
1987
MAR
1986
N o n r e s i d e n t i a l B u i l d i n g Permits - $ M i l .
Total Nonresidential
47,020
Industrial Bldgs.
8,424
Offices
13,599
Stores
12,014
Hospitals
2,571
Schools
1,154
46,693
8,445
13,644
11,875
2,481
1,170
64,743
8,775
16,487
11,540
2,157
1,087
-18
+4
+19
+6
R e s i d e n t i a l B u i l d i n g Permits
Value - $ M i l .
R e s i d e n t i a l Permits - T h o u s .
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
7,798
1,109
1,925
2,337
442
161
10,906
1,192
2,638
2,291
381
154
-28
-6
-30
+5
+24
-2
R e s i d e n t i a l B u i l d i n g Permits
Value - $ M i l .
R e s i d e n t i a l Permits - Thous.
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
614
75
176
193
24
635
65
155
163
16
17
-7
0
+14
+12
+19
-6
Value - $ M i l .
R e s i d e n t i a l Permits - T h o u s .
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
12-month cumulative
rate
Nonresidential B u i l d i n g
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Permits
Nonresidential Building
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Permits
Mil.
7,865
1,120
1,858
2,395
472
151
Residential
18
N o n r e s i d e n t i a l B u i l d i n g Permits
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
3,771
421
906
1,115
281
39
Nonresidential Building
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Permits - $
Nonresidential B u i l d i n g
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Permits
"f
N o n r e s i d e n t i a l B u i l d i n g Permits
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
N o n r e s i d e n t i a l B u i l d i n g Permits - $
Total N o n r e s i d e n t i a l
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
"0TES:
Mil.
1,761
350
407
541
20
40
46
1,761
334
439
518
21
44
5,604
492
1,194
1,228
218
49
-31
-15
-26
-fi
+43
-24
-13
+5
-?7
+54
-49
467
43
104
141
+90
1,133
49
-59
-18
405
230
46
46
-75
-41
-15
-11
Value - $ M i l .
R e s i d e n t i a l Permits - T h o u s .
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
39
41
36
42
Mil.
234
23
312
32
67
74
-25
-28
-16
+5
+28
0
R e s i d e n t i a l B u i l d i n g Permits
Value - $ M i l .
R e s i d e n t i a l Permits - T h o u s .
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
56
78
23
7
245
23
62
85
22
7
18
7
Mil.
970
224
235
304
59
9
Value - $ M i l .
R e s i d e n t i a l Permits - Thous.
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
940
212
239
286
59
9
1,194
223
261
245
45
14
of the six
-19
+0
-10
+24
+31
-36
states.
Building
FEB
1987
MAR
1986
ANN.
%
CHG
96,641
95,114
85,282
+13
1,075.6
639.5
973.3
782.8
143,661
141,807
150,025
15,763
15,652
15,414
+2
207.2
126.1
205.2
129.5
200.6
167.3
+3
-25
23,628
23,450
26,320
-10
1,C
626.8
+12
-20
Permits
R e s i d e n t i a l B u i l d i n g Permits
Value - S M i l .
R e s i d e n t i a l Permits - T h o u s .
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ Mil.
Residential
459
40
102
135
Building
2,029
332
556
352
39
21
Mil.
The southeast data represents the total
-27
-4
MAR
1987
671
682
589
+14
11.5
6.5
11.3
7.8
9.6
8.9
+20
-27
1,259
1,296
1,224
8,630
8,501
8,715
106.2
3,724
3,739
3,411
+9
51.2
21.7
51.1
23.4
48.8
28.4
+5
-24
5,485
5,500
5,440
+1
Permits
R e s i d e n t i a l B u i l d i n g Permits
Value - $ M i l .
R e s i d e n t i a l Permits - Thous.
Single-family u n i t s
Multifamily units
Total B u i l d i n g Permits
Value - $ M i l .
ass?» '«*» -
521
537
733
-29
7.8
2.0
8.0
2.3
11.2
5.5
-30
-64
980
1004
1,865
-47
328
330
351
-7
5.4
1.8
5.4
2.0
5.9
2.9
-8
-38
561
575
662
-15
1,889
1,864
1,615
+17
23.5
13.2
23.2
13.6
19.4
20.8
+21
-37
2,859
2,804
2,809
+2
• »»•
M A R C H / A P R I L 1987, E C O N O M I C REVIEW
CONSTRUCTION
12-month cumulative rate
APR
1987
Nonresidential Building Permits - $ M i l .
Total Nonresidential
47,290
Industrial Bldgs.
8,374
Offices
13,849
Stores
11,991
Hospitals
2)513
Schools
1*180
Nonresidential Building Permits - $ M i l .
Total Nonresidential
7,866
Industrial Bldgs.
1,125
Offices
i)883
Stores
2,397
Hospitals
'445
Schools
152
561
72
164
174
17
21
Nonresidential Building Permits - $ M i l .
Total Nonresidential
3,852
Industrial Bldgs.
407
Offices
891
Stores
1,162
Hospitals
314
Schools
32
Nonresidential Building Permits - $ M i l .
Total Nonresidential
1,752
Industrial B l d g s .
350
Offices
411
Stores
532
Hospitals
21
Schools
42
MAR
1987
APR
1986
ANN.
X
CHG
47,020
3,424
13,599
12,014
2,571
1,154
62,887
8,776
16,058
11,619
2,302
1,104
-25
-5
-14
+3
+9
+7
7,865
1,120
1,858
2,395
472
151
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
10,632
1,173
2,512
2,339
390
159
+3
-6
+24
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
5 ,455
469
1 . ,145
1 . ,238
213
54
-29
-13
-22
-6
+47
-41
Residential Building Permits
Value - S M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
2,008
349
528
382
36
21
-13
588
65
176
182
19
16
649
57
167
169
18
17
3,854
418
882
1,155
312
37
1,761
350
407
541
21
40
APR
1987
-14
+26
+0
-22
+39
-42
+99
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
Nonresidential Building Permits - $ M i l .
Total Nonresidential
448
Industrial Bldgs.
39
Offices
91
Stores
130
Hospitals
36
Schools
41
459
40
102
135
39
41
1,051
39
376
222
35
45
-57
0
-76
-41
+3
-9
Residential Building Permits
Value - S M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
240
21
59
81
24
8
234
23
56
78
23
7
307
32
65
74
17
7
-22
-34
-9
+9
+41
+14
Residential Building Permits
Value - $ M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
-13
+4
+15
+25
-53
-53
Residential Building Permits
Value - S M i l .
Residential Permits - Thous.
Single-family units
Multifamily units
Total Building Permits
Value - $ M i l .
970
224
235
304
59
9
"0IES: The
1,162
226
232
253
70
15
« ^ S K ^ states.
^ i l S i S M S ? —« -
southeast data represents the total of the six
APR
1986
t
CHG
96,859
96,641
87,135
+11
1,082.6
610.0
1,088.8
626.8
992.9
783.0
+9
-22
144,149
143,661
150,022
-4
15,797
15,763
15,537
+2
206.2
123.8
207.2
126.1
203.1
162.3
+1
-23
23,663
23,628
678
671
595
+14
11.2
6.7
11.5
6.5
9.9
8.5
+13
-21
1,239
1,259
1,244
-0
8,733
8,630
8,711
+0
108.0
80.0
107.7
80.9
106.6
97.1
+1
-18
12,585
12,484
14,167
-11
3,682
3,724
3,480
+6
50.7
20.6
51.2
21.7
49.6
28.3
+?
-27
5,434
5,485
5,488
-1
493
521
728
-32
7.5
7.8
11.0
-32
1.8
2.0
5.3
323
328
352
-8
5.4
1.6
5.4
1.8
5.8
2.7
-7
-41
563
561
659
-15
1,889
1,889
1,672
+13
23.4
13.1
23.5
13.2
20.1
20.4
+16
-36
2,901
2,859
2,834
+2
h — .
F E D E R A L RESERVE B A N K O F ATLANTA
ANN.
MAR
1987
47
Federal Reserve Bank of Atlanta
104 Marietta S t , N.W.
Atlanta, Georgia 30303-2713
Address Correction Requested
Bulk Rate
U.S. Postage
PAID
Atlanta, Ga.
Permit 292
@FedFRASER