This paper argues that the key deep underlying fundamental for the growing international imbalances leading to the collapse of the Bretton Woods system between 1971 and 1973 was rising U.S. inflation since 1965. It was driven in turn by expansionary fiscal and monetary policies--the elephant in...

For over two centuries, the municipal bond market has been a source of systemic risk, which returned early in the Covid-19 downturn when borrowing from securities markets became costly for many private and public entities, and some found it difficult to borrow at all. Indeed, just before the Fed...

The dollar's depreciation during the early floating rate period, 1973 - 1981, was a symptom of the Great Inflation. In that environment, sterilized foreign exchange interventions were ineffective in halting the dollar's decline, but showed a limited ability to smooth dollar movements. Only after...

The Federal Reserve abandoned foreign-exchange-market intervention because it conflicted with the System's commitment to price stability. By the early 1980s, economists generally concluded that, absent a portfolio-balance channel, sterilized foreign-exchange-market intervention did not provide...

Recent data present a puzzle: the ratio of corporate tax losses to positive income was much higher around 2001 than in earlier recessions. Using a comprehensive 1982-2005 sample of U.S. corporation tax returns, we explore a variety of potential explanations for this surge in tax losses, taking...

This paper examines the economic environments in which past U.S. stock market booms occurred as a first step toward understanding how asset price booms come about and whether monetary policy should be used to defuse booms. We identify several episodes of sustained rapid rise in equity prices in...

This paper derives and estimates models of nonresidential investment behavior in which current and future tax conditions directly affect the incentive to invest. The estimates suggest that taxes have played an independent role in affecting postwar U.S. investment behavior, particularly for...

In comparing Canada with the U.S., we first simulate the U.S. demographic transition, treating the U.S. as a closed economy. The time path of interest rates obtained from the U.S. simulations are then used in the Canadian simulations. In the Canada simulations, Canada is assumed to be an open...

The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based...