The U.S. current account deficit was at a record level in 1999 and is expected to increase further in 2000. How large can this deficit get? Will an eventual adjustment in the deficit place the U.S. economy at risk? This article examines three arguments often put forth to explain the increase in...

The optimal inflation tax is computed in monetary models where money is costly to supply. The models are simple general equilibrium models with money in the utility function or a transactions technology. The inflation tax is a means of raising taxes to finance exogenous government expenditures....

This article describes and defends the authors' corrections to the federal government's flawed measure of its cost of funds. Further, it examines how the maturity structure of the debt influences the way inflation risk and interest rate risk are shared by the government and its creditors.

Inflation in the U.S. rose in the 1970s and fell in the 1980s and 1990s. The conventional story attributes this pattern to changes in monetary policy. Policymakers made errors and learned from them. This article presents the story and existing alternatives that emphasize instead changes beyond...

This article characterizes the change in the nature of the money growth-inflation and unemployment-inflation relationships between the first and second halves of the twentieth century. The changes are substantial, and the authors discuss some of the implications for modeling inflation dynamics,...

It is difficult to consistently improve upon forecasts of inflation based solely on the most recent data on inflation. In this article, we show how to do so. Our main finding is that the most robust forecasts combine information from several different forecasting models, each of which...

This article explores a hypothesis about the take-off in inflation in the early 1970s. According to the expectations trap hypothesis, the Fed was driven to high money growth by a fear of violating the expectations of high inflation that existed at the time. The authors argue that this hypothesis...

This article shows how the recovery of inflation in 2009-10 occurred precisely at the only time (since 1985) the models would predict disinflation, i.e., inflation went up when the models said it should go down.

This article reassesses recent work that has challenged the usefulness of inflation forecasts. The authors find that inflation forecasts were informative in 1977-84 and 1993-2000, but less informative in 1985-92. They also find that standard forecasting models, while generally poor at...