Review

This article investigates the process by which inflation expectations are formed and the relevance of error-learning models for analyzing revisions in these expectations, using Joseph Livingston’s survey data. 

The article focuses on the magnitude of the response of gross national products, output, and the price level to changes in the money stock, defined as currency plus private checkable deposits. 

In this forward, Laurence H. Meyer outlines the articles and commentaries in this conference issue.

John B. Taylor focuses on current theoretical work on the response of output and employment to changes in aggregate demand. He distinguishes between two approaches: information—based theories in which uncertainties about economy—wide disturbances are emphasized, and contract-based theories in which temporary rigidities in wages and prices are emphasized.

Laurence H. Meyer and Robert H. Rasche begin with a survey of monetary and fiscal multipliers, which are examined both across various large-scale macroeconometric models and simple reduced forms, and over time, to assess the degree of consensus and the nature of the evolution in policy multipliers as the various macroeconometric models have been refined.

Neil Wallace discusses “Empirical Evidence on the Effects of Stabilization Policy” by Laurence H. Meyer and Robert H. Rasche and “Recent Developments in the Theory of Stabilization Policy” by John B. Taylor, included in this conference issue.

Hyman Minsky discusses “Recent Developments in the Theory of Stabilization Policy” by John B. Taylor, included in the conference issue.

Allan H. Meltzer rejects as myth the view that the current inflation has its roots in the Vietnam War era deficits. Instead, Meltzer states that the proximate source of the current inflation is the monetary policy of the early 1960s and that inflation persists because monetary policy continues to sustain anticipations of future inflation.

Michael E. Levy is critical of monetarist explanations of the persistent inflation of the last decade and a half. While recognizing the important role of monetary change in the inflation process, Levy argues that monetarist explanations, such as that provided in the previous papers by Allan Meltzer, fail to take the analysis far enough.

William Poole discusses the papers “Federal Budget Policies of the 1970s: Some Lessons for the 1980s” by Michael E. Levy and “The Case for Gradualism in Policies to Reduce Inflation” by Allan H. Meltzer, included in this conference issue.

Albert E. Burger discusses the papers “Federal Budget Policies of the 1970s: Some Lessons for the 1980s” by Michael E. Levy and “The Case for Gradualism in Policies to Reduce Inflation” by Allan H. Meltzer, included in this conference issue.

Jacob Frenkel sets forth the way in which the asset market or monetary approach to exchange rate determination helps to explain flexible exchange rates, particularly the observed volatility in exchange rates and the relation between exchange rates and both domestic and foreign interest rates and price levels.

H. Robert Heller outlines the adverse effects that the move to flexible exchange rates has had on international trade, international capital movements, and foreign investment. He takes the position that the increased uncertainty about exchange rate fluctuations has resulted in a significant increase in costs to the business sector and that the adverse effect of this uncertainty has been particularly evident in the decreased willingness of investors to undertake direct investment and long-term construction activity abroad.

David Laidler discusses the paper “Flexible Exchange Rates in the 1970s” by Jacob A. Frenkel, included in this conference issue.

Geoffrey E. Wood discusses the paper “International Stabilization Policy Under Flexible Exchange Rates” by H. Robert Heller, included in this conference issue.

Lawrence K. Roos, president of the Federal Reserve Bank of St. Louis, describes what he termed the “shortcomings” of the past monetary policy actions and announces his enthusiastic support for the Feds recently announced change in the method by which future monetary policy will be conducted.