"Why are spreads on corporate bonds so wide relative to expected losses from default? The spread on Baa-rated bonds, for example, has been about four times the expected loss. We suggest that the most commonly cited explanations--taxes, liquidity and systematic diffusive risk--are inadequate. We...

No one in the industrial countries should now question the substantial economic benefits associated with reducing inflation from earlier, high levels. At the same time, history also teaches that the stability of consumer prices might not be sufficient to ensure macroeconomic stability. Past...