Information, sticky prices and macroeconomic foundations : reply to Wright's commentary.

Macroeconomics

Monetary Transmission at Low Inflation: Some Clues from Japan in the 1990s

The paper analyzes the performance of the Japanese economy from 1985 to 1999. It compares different explanations of slow growth and prolonged recession. Using both bivariate comparisons and statistical tests, the paper concludes that the maintained growth rate fill after 1992. Also, the data suggest that the recession early in the 1990s was induced by a decline in money growth. In contrast, the recent recession was induced mainly by a fall in real exports. Failure to allow the nominal exchange rate to depreciate forced deflation and increased the costs of adjusting to reduced export demand The main policy conclusion calls on the Bank of Japan to pursue a more expansive policy to end deflation. This policy would depreciate the yen, but it would end the deflation that is costly to Japan and its neighbors.

New International Financial Arrangements

The paper addresses three related issues about monetary institutions. First, acting alone countries cannot achieve price and exchange rate stability. Large economies--the United States, Japan, the European Union--can provide the public good of price stability. Doing so would permit all countries that chose to do so to fix their exchange rates and achieve both benefits. In turn, the large economies would benefit from fixed exchange rates and domestic price stability. Second, to respond to the increased size of capital flows, the International Monetary Fund (IMF) should be changed from a command and control institution into an institution that works to stabilize international financial markets by increasing incentives for stability. Third, recent discussion of international bankruptcy, collective action clauses, and debt rescheduling proposals suggests that reform of international financial institutions has attracted new attention. The paper discusses three proposals.

Money and monetary policy: an essay in honor of Darryl Francis

Monetary policy ; Money

U.S. policy in the Bretton Woods era

Economic history ; Bretton Woods Agreements Act

Real exchange rates: some evidence from the postwar years

Foreign exchange rates

Origins of the Great Inflation

The Great Inflation from 1965 to 1984 is the climactic monetary event of the last part of the 20th century. This paper analyzes why it started and why it continued for many years. Like others, it attributes the start of inflation to analytic errors, particularly the widespread acceptance of the simple Keynesian model with its implication that monetary and fiscal policy should be coordinated. In practice, that meant that the Federal Reserve financed a large part of the fiscal deficit. This paper gives a large role to political decisionmaking. Continuation of inflation depended on political choices, analytic errors, and the entrenched belief that inflation would continue.Inflation (Finance) ; Economic history ; Monetary policy

Information, sticky prices and macroeconomic foundations.

Macroeconomics