Dallas S. Batten and R. W. Hafer assess the empirical validity of the “currency substitution” hypothesis for five major industrial countries. This argument challenges the notion that flexible exchange rates insulate a domestic economy from foreign monetary shocks.
G. J. Santoni argues that the stock prices of financial institutions, particularly savings and loan associations, are more sensitive to interest rate changes than the stock prices of industrial firms. This is, in large part, due to the greater degree of leverage employed by financial institutions.
A. Steven Holland examines the effects of inflation uncertainty on the allocative efficiency of one particular market: the market for labor resources. The author shows that greater inflation uncertainty produces reduced employment and output growth, higher unemployment, and more complex wage negotiations.
R. W. Hafer explains that the recent decline in inflation is the result of declining relative prices of energy and food and a concomitant drop in the trend rate of transactions money growth. Hafer notes that inflation, a persistent rise in the general level of prices, is related directly to the average long-run rate of money growth.
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