We argue that there are sound theoretical reasons for believing that an inflation targeting central bank might improve macroeconomic performance by reacting to asset price misalignments over and above the deviation of, say, a two-year ahead inflation forecast from target. In this paper, we first...

Over the past twenty years, macroeconomic performance has improved markedly in industrialized and developing countries alike. Both inflation and real growth are more stable now than they were in the 1980s. This stability has been accompanied by dramatic changes in financial structure. We examine...

In much of the world, growth is more stable than it once was. Looking at a sample of twentyfive countries, we find that in sixteen, real GDP growth is less volatile today than it was twenty years ago. And these declines are large, averaging more than fifty per cent. What accounts for the fact...

Over the four years beginning in the summer of 1929, financial markets, labor markets and goods markets all virtually ceased to function. Throughout this, the government policymaking apparatus seemed helpless. Since the end of the Great Depression, macroeconomists have labored diligently in an...

Several explanations for the depth of the Great Depression presume that the -30% deflation of 1930-32 was unanticipated. For example, the debt-deflation hypothesis originally put forth by Irving Fisher is based on the notion that unanticipated deflation increases the burden of nominal debt,...

Central bankers and financial supervisors often have different goals. While monetary policymakers want to ensure that there are always sufficient lending activities to maintain high and stable economic growth, supervisors work to limit banks. lending capacities in order to prevent excessive...

Countries around the world differ substantially in the relative importance of their banks and capital markets in providing investment financing. This paper examines one potential explanation for the cross-country differences in the importance of banks and capital market financing of investment....

We study the output costs of 40 systemic banking crises since 1980. Most, but not all, crises in our sample coincide with a sharp contraction in output from which it took several years to recover. Our main findings are as follows. First, the current financial crisis is unlike any others in terms...

This paper decomposes output fluctuations during the 1913 to 1940 period into components resulting from aggregate supply and aggregate demand shocks. We estimates a number of different models, all of which yield qualitatively similar results. While identification is normally achieved by assuming...

Using disaggregated production data we show that the size of seasonal cycles changes significantly over the course of the business cycle. In particular, during periods of high economy-wide activity, some industries smooth seasonal fluctuations while others exaggerate them. We interpret this...