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January/February 1999

Posted 1999-01-01

Eighty Years of Observations on the Adjusted Monetary Base: 1918-1997

by Richard G. Anderson and Robert H. Rasche

Recent trends in empirical macroeconomics research—embedding long-run relationships in models via cointegration, modeling the correlation between seasonal cycles and business cycles, building endogenous growth models, and the interest of policymakers in inflation targeting—have increased the importance of long-time series of macroeconomic data.

Posted 1999-01-01

The Inflation-Output Variability Tradeoff and Price-Level Targets

by Robert Dittmar, William T. Gavin, and Finn E. Kydland

The authors describe a popular monetary policy framework based on a neoclassical Phillips curve model. Here, the choice between an inflation target and a price-level target depends on characteristics of real output. If the output gap is relatively persistent, then targeting the price level results in a better set of policy options for the central bank.

Posted 1999-01-01

Using the Gravity Model to Estimate the Costs of Protection

by Howard J. Wall

Many economists expend a lot of energy decrying trade protectionism; nonetheless, their estimates of the actual burden that protectionism imposes on the economy have been surprisingly small. The author presents a method that captures some of the effects and distortions of trade protection which have not been captured by existing methods.

Posted 1999-01-01

The Welfare Cost of Inflation: A Critique of Bailey and Lucas

by Alvin L. Marty

Estimating the welfare gains from ending inflation requires taking a stand on the shape of the money demand function. A form of the money demand function that seems to describe U.S. experience—known in technical jargon as the double log form—seems to work well in countries and times where inflation was moderate.