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May/June 2007

Posted 2007-05-01

The GSEs: Where Do We Stand?

by William Poole

This article was originally presented as a speech to the Chartered Financial Analysts of St. Louis, St. Louis, Missouri, January 17, 2007.

Posted 2007-05-01

Milton Friedman and U.S. Monetary History: 1961-2006

by Edward Nelson

This article uses extensive archival material from several countries to bring together scattered information about Milton Friedman’s views and predictions regarding U.S. monetary policy developments after 1960 (i.e., the period beyond that covered by his and Anna Schwartz’s Monetary History of the United States). The author evaluates these interpretations and predictions in light of subsequent events.

Posted 2007-05-01

The Lower and Upper Bounds of the Federal Open Market Committee’s Long-Run Inflation Objective

by Daniel L. Thornton

It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee’s (FOMC’s) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)—lower and upper bounds to the long-run inflation rate. 

Posted 2007-05-01

Granger Causality and Equilibrium Business Cycle Theory

by Yi Wen

Postwar U.S. data show that consumption growth “Granger-causes” output and investment growth, which is puzzling if technology is the driving force of the business cycle. The author asks whether general equilibrium models with information frictions and non-technology shocks can rationalize the observed causal relationships. His conclusion is they cannot.