Editor's introduction

We have been wrestling with one of the most severe recessions in the post-World War II era; moreover, it has been accompanied by a widespread financial crisis. After unprecedented policy responses, there are signs of recovery on both fronts. So, it is not too early to take stock of our actions and attempt to learn lessons from our recent past - lessons for monetary policy, financial regulation, and other aspects of the crisis. My objective here is to focus on lessons for monetary policy alone and leave discussion of regulatory issues and financial markets for another day.Monetary policy ; Debt ; Financial markets

Deflation and the Fisher equation

So, according to Irving Fisher, one reason to worry about deflation is that the federal funds rate is expected to be held near zero as the economy grows out of this recession.Deflation (Finance) ; Equilibrium (Economics)

Trends in home ownership

Home ownership

FOMC forecast: is all the information in the central tendency?

Federal Reserve policymakers began reporting their economic forecasts to Congress in 1979. These forecasts are important because they indicate what the Federal Open Market Committee members think will be the likely consequence of their policies. The Fed reports both the range (high and low) of the individual policymaker’s forecasts and a truncated central tendency. The central tendency range omits outliers from both the top and the bottom of the full range. The author finds, generally, that the forecasts derived from the full range are at least as good as those derived from the central tendency and, in a few cases, significantly better.Federal Open Market Committee ; Forecasting

How money matters

Money supply

Payroll jobs and GDP

Employment (Economic theory) ; Unemployment ; Labor market

Forecasting CPI inflation

Consumer price indexes ; Inflation (Finance)

In defense of zero inflation

An argument supporting zero inflation as the sole objective of monetary policy, with particular emphasis on the Bank of Canada's commitment to an explicit, low inflation target.Inflation (Finance) ; Monetary policy

CPI inflation: running on motor fuel

Fluctuations in the price of motor fuel (mainly gasoline) have caused most of the monthly noise and year-over-year fluctuations of headline CPI inflation over the past four years.Inflation (Finance) ; Petroleum products - Prices

More money: understanding recent changes in the monetary base

The financial crisis that began in the summer of 2007 took a turn for the worse in September 2008. Until then, Federal Reserve actions taken to improve the functioning financial markets did not affect the monetary base. The unusual lending and purchase of private debt was offset by the sale of Treasury securities so that the total size of the balance sheet of the Fed remained relatively unchanged. In September, however, the Fed stopped selling securities as it made massive purchases of private debt and issued hundreds of billions of dollars in short-term loans. The result was a doubling of the size of the monetary base in the final four months of 2008. This article discusses the details of the programs that the Fed has initiated since the crisis began, shows which programs have grown as the monetary base grew, and discusses some factors that will determine whether this rapid increase in the monetary base will lead to rapid inflation.Money supply ; Financial crises