Richard Werner

Richard Andreas Werner (born January 5, 1967) is a German academic, economist and professor at the University of Southampton.

Werner is a monetary and development economist. He proposed the term quantitative easing, as well as the expression "QE2" referring to the need to implement true quantitative easing as an expansion in credit creation.^[1] He also proposed the "Quantity Theory of Credit", which disaggregates credit creation used for GDP transactions on the one hand and financial transactions on the other hand.

Early life

In 1989, Werner earned a BSc at the London School of Economics (LSE). Further studies at Oxford University were interrupted by a year at the University of Tokyo.^[2] His doctorate in economics was conferred by Oxford.

In 1991, he became European Commission-sponsored Marie Curie Fellow at the Institute for Economics and Statistics at Oxford.^[2] His discussion paper at the institute warned about the imminent 'collapse' of the Japanese banking system and the threat of the "greatest recession since the Great Depression".

In Tokyo, he also became the first Shimomura Fellow at the Research Institute for Capital Formation at the Development Bank of Japan. He was a Visiting Researcher at the Institute for Monetary and Economic Studies at the Bank of Japan; and he was a Visiting Scholar at the Institute for Monetary and Fiscal Studies at the Ministry of Finance.^[2]

Career

Werner was chief economist of Jardine Fleming from 1994 to 1998 and has published many articles on the Japanese credit cycle and monetary policy, many of which are in Japanese.

In 1997, Werner joined the faculty of Sophia University in Tokyo.^[2]

Werner is currently teaching at the University of Southampton.^[2] He has developed a theory of money creation called the Quantity Theory of Credit, which is in line with Schumpeter's credit theory of money.^[3] Werner has argued since 1992 that the banking sector needs to be reflected appropriately in macroeconomic models since it is the main creator and allocator of the money supply, through the process of credit creation by individual banks.

He is the founding director of the university's Centre for Banking, Finance and Sustainable Development and organiser of the European Conference on Banking and the Economy (ECOBATE), first held on 29 September 2011 in Winchester Guildhall, with Lord Adair Turner, FSA Chairman, as keynote speaker. Since 2011, Werner has been a member of the ECB Shadow Council.

Werner's book Princes of the Yen was a number one general bestseller in Japan in 2001.^[4] The book covers the monetary policy of the Bank of Japan specifically and central bank informal guidance of bank credit in general.^[5]

Werner proposed a policy he called "quantitative easing" in Japan in 1994 and 1995. At the time working as chief economist of Jardine Fleming Securities (Asia) Ltd. in Tokyo, he used this expression during presentations to institutional investors in Tokyo. It is also, among others, in the title of an article he published on September 2, 1995, in the Nihon Keizai Shinbun (Nikkei).^[6] According to Werner, he used this phrase in order to propose a new form of monetary stimulation policy by the central bank that relied neither on interest rate reductions (which Werner claimed in his Nikkei article would be ineffective) nor on the conventional monetarist policy prescription of expanding the money supply (e.g. through "printing money", expanding high-powered money, expanding bank reserves or boosting deposit aggregates such as M2 –all of which Werner also claimed would be ineffective).^[7] Instead, Werner argued, it was necessary and sufficient for an economic recovery to boost "credit creation", through a number of measures.^[6] He also suggested direct purchases of non-performing assets from the banks by the central bank; direct lending to companies and the government by the central bank; purchases of commercial paper, other debt, and equity instruments from companies by the central bank; and stopping the issuance of government bonds to fund the public sector borrowing requirement, instead having the government borrow directly from banks through a standard loan contract.^[8][9]

Selected works

Books

• Ryan-Collins, Josh; Werner, Richard; Jackson, Andrew (2012). Where Does Money Come From?: A Guide to the UK Monetary & Banking System (2nd ed.). London: New Economics Foundation. p. 178. ISBN 978-1908506238. OCLC 816167522.
• Neue Wirtschaftspolitik, München: Vahlen Verlag (2007)
• New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance (2005)
• Princes of the Yen: Japan's central bankers and the transformation of the economy (2001)
• 『虚構の終焉』 = Towards a new macroeconomic paradigm. Tokyo: PHP. (2003)
• 『謎解き!平成大不況 : 誰も語らなかった「危機」の本質』 = The enigma of the great recession (2003)
• Three essays on Japanese macroeconomic policy in the 1980s and 1990s (2006)
• 『福井日銀・危険な素顔』 =　The Bank of Japan under Toshihiko Fukui, with M. Ishii. Tokyo: Appuru Shuppan. (2003)
• 『不景気が終わらない本当の理由』 =　Central Banking and Structural Changes in Japan and Europe. Tokyo: Soshisha. (2003)
• Dismantaling the Japanese Model, with M. Kikkawa. Tokyo: Kodansha. (2003)
• Princes of the Yen, Japan's Central Bankers and the Transformation of the Economy. New York: M.E. Sharpe.
• 『円の支配者』. Tokyo: Soshisha (2001)

Chapters

• 1998 – "Bank of Japan window guidance and the creation of the bubble," in: Rodao, F. and A. Lopez Santos (eds.), El Japon Contemporaneo, Salamanca: University of Salamanca Press
• 2002 – "Macroeconomic Management in Thailand: The Policy-induced Crisis," in: Rhee, G.S. (eds.), Rising to the Challenge in Aisa: A Study of Financial Markets, Vol. II, Thailand, Manila: Asian Development Bank
• 2006 – "The relationship between interest rates and economic activity: How the conventional literature has dealt with the Japanese experience," in: Batten, J.A., Fetherston, T.A. and Szilagyi, P.G. (eds.), Japanese Fixed Income Markets: Money, Bond and Interest Rate Derivatives, Amsterdam: Elsevier (pp. 135–170)
• 2007 – "Europe’s choice and lessons from Japan: supply vs. demand policy, fiscal vs. monetary policy," in: Terzi, A. and J. Bibow (eds.), Euroland and the World Economy: Global Player or Global Drag, Basingstoke: Palgrave Macmillan
• 2007 – "The cause of Japan’s recession and the lessons for the world," in: Bailey, Coffey and Tomlinson (eds), Crisis or Recovery: Industry and State in Japan. Cheltenham: Edward Elgar
• 2008 – "Was sind die Voraussetzungen fuer ein gesundes Wirtschaftswachstum ohne Bankenprobleme?," in: Carl Spaengler KAG (ed.), 20 Fragen zur Geldanlage. Salzburg: Carl Spaengler Kapitalanlagegesellschaft mbH.

Journals

• 1994 – "Japanese Foreign Investment and the 'Land Bubble’," Review of International Economics, Vol. 2, Issue 2, June 1994, Oxford: Blackwell, pp. 166-178
• 1997 – "Towards a New Monetary Paradigm: A Quantity Theorem of Disaggregated Credit, with Evidence from Japan," Kredit und Kapital, Vol. 30, No. 2, July 1997, Berlin: Duncker & Humblot, pp. 276–309.
• 2002 – "Monetary Policy Implementation in Japan: What They Say vs. What they Do," Asian Economic Journal, Vol. 16, No.2, Oxford: Blackwell, pp. 111–151.
• 2003 – "Post-Crisis Banking Sector Restructuring and its Impact on Economic Growth," The Japanese Economy, vol. 30, no. 4, New York: M. E. Sharpe
• 2003 – "Aspects of Career Development and Information Management Policies at the Bank of Japan – a Frank Interview with a Former Central Banker," The Japanese Economy, vol. 30, no. 4, New York: M. E. Sharpe.
• 2003 – "A Reconsideration of the Rationale for Bank-Centred Economic Systems and the Effectiveness of Directed Credit Policies in the Light of Japanese Evidence," The Japanese Economy, vol. 30, no. 3, New York: M. E. Sharpe, pp. 3–45
• 2004 – "No Recovery without Reform? An Empirical Evaluation of the Structural Reform Argument in Japan," Asian Business and Management, vol. 3, no. 1, 2004, London: Palgrave Macmillan.
• 2009 – "Financial Crises in Japan during the 20th Century". Bankhistorisches Archiv, Beiheft 47, pp. 98–123
• 2011 – "Credit Supply and Corporate Capital Structure: Evidence from Japan", International Review of Financial Analysis, 20, pp. 320–334, DOI information: 10.1016/j.irfa.2011.05.002, with Kostas Voutsinas
• 2011 – "The Role of Monetary Aggregates in Chinese Monetary Policy Implementation", Journal of the Asia-Pacific Economy, 16, 3, pp. 464–488, with Yuanquan Chen
• 2011 – "Economics as if Banks Mattered – A Contribution Based on the Inductive Methodology", Manchester School, vol. 79, September, pp. 25–35. doi:10.1111/j.1467-9957.2011.02265_5.x
• 2012 - "Lessons from the Bank of England on ‘quantitative easing’ and other ‘unconventional’ monetary policies", with Victor Lyonnet, International Review of Financial Analysis, 25, pp. 1–17, doi: 10.1016/j.irfa.2012.08.001
• 2012 - "Towards a New Research Programme on ‘Banking and the Economy’ – Implications of the Quantity Theory of Credit for the Prevention and Resolution of Banking and Debt Crises, International Review of Financial Analysis, 25, pp. 94–105, doi: 10.1016/j.irfa.2012.06.002
• 2013 - "Towards a More Stable and Sustainable Financial Architecture - A Discussion and Application of the Quantity Theory of Credit", Kredit und Kapital, 46 (3), pp. 353–389

Papers

• 1991 – "The Great Yen Illusion: Japanese Capital Flows and the Role of Land," Oxford Applied Economics Discussion Paper Series, Oxford: Institute of Economics and Statistics, University of Oxford, No. 129, December
• 1993 – "Towards a quantity theorem of disaggregated credit and international capital flows," Paper presented at the Royal Economic Society Annual Conference, York, April 1993
• 2010 – Comment on Range of Methodologies for Risk and Performance Alignment of Remuneration [in the banking sector], official submission to public call for comments on ‘Range of Methodologies for Risk and Performance Alignment of Remuneration, Consultative Document’ by the Basel Committee on Banking Supervision, 14 October 2010, submitted 31 December 2010.^[10]
• 2010 – Towards Stable and Competitive Banking in the UK - Evidence for the ICB, submitted to the Independent Commission on Banking, UK (Chair: Professor Sir John Vickers), submitted 19 November 2010^[11]
• 2010 – Towards a Twenty-First Century Banking and Monetary System, Joint Submission to the Independent Commission on Banking, UK (Chair: Professor Sir John Vickers), with Ben Dyson, Tony Greenham, Josh Ryan-Collins, by the Centre for Banking, Finance and Sustainable Development, the new economics foundation, and Positive Money, submitted 19 November 2010 PDF
• 2010 – Comment on Strengthening the Resilience of the Banking Sector, official submission to public call for comments on ‘Strengthening the Resilience of the Banking Sector, Consultative Document’ by the Basel Committee on Banking Supervision, September 2009.^[12] Submitted 16 April 2010; published by the Bank for International Settlements, Basel.^[13]

Honours

• 2003 – World Economic Forum in Davos, "Global Leader for Tomorrow" ^[14]

References

1. Richard Werner, Keizai Kyoshitsu: Keiki kaifuku, ryoteiki kinyu kanwa kara, Nikkei, 2 September 1995. ‘QE2’ was first used publicly by Richard Werner live on CNBC on 22 September 2009. He argued that 'true quantitative easing' was needed, namely an expansion in productive credit creation. This required a second attempt by central banks, "a kind of QE2". Squawkbox, CNBC, live studio panel, 18:00-21:00 hrs London time, 22 September 2009 Meanwhile, the expression is today mainly used to refer to a second round of what Prof. Werner would consider the 'wrong type' of QE.
2. University of Southampton, Richard Werner; retrieved 2011-08-20
3. Richard A. Werner (1992), ‘Towards a quantity theory of disaggregated credit and international capital flows’, Paper presented at the Royal Economic Society Annual Conference, York, April 1993 and at the 5th Annual PACAP Conference on Pacific-Asian Capital Markets in Kuala Lumpur, June 1993
4. Yamagawa, Hiroshi. "BOJ planned bubble, decade of misery," The Japan Times, 27 July 2001; retrieved 2011-08-20
5. "Book exposes BOJ 'rulers'," Asahi Shimbun. May 10, 2001; retrieved 2011-08-20
6. Richard Werner, Keizai Kyoshitsu: Keiki kaifuku, ryoteiki kinyu kanwa kara, Nikkei, 2 September 1995.
7. Nikkei 2 Sept. 1995, op. cit; see also Lyonnet and Werner (2012), Lessons from QE and other ‘unconventional’ monetary policies – Evidence from the Bank of England, Centre for Banking, Finance and Sustainable Development Discussion Paper, University of Southampton
8. Richard Werner, Keizai Kyoshitsu: Keiki kaifuku, ryoteiki kinyu kanwa kara, Nikkei, 2 September 1995. But also other publications, e.g. Japanese Economist, 14 July 1998 ; Financial Times, 9 February 2000
9. Richard A. Werner, New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance, Basingstoke: Palgrave Macmillan
10. http://www.bis.org/publ/bcbs178/richardwerner.pdf
11. http://www.management.soton.ac.uk/research/Towards-Stable-Banking-2010.pdf
12. http://www.bis.org/publ/bcbs164.htm
13. http://www.bis.org/publ/bcbs165/universityofsou.pdf
14. Press Release: "The World Economic Forum Designated 100 New Global Leaders for Tomorrow: Richard A Werner Selected for Class of 2003"; retrieved 2011-08-20

External links