If a central bank adopted a zero inflation target, it would, in practice, occasionally deviate up and down from that rate, and the economy would experience episodes of mild inflation and deflation. Is deflation-a decrease in the level of prices-a cause for concern? Deflation can cause output to...

We document increased central bank independence within the set of industrialized nations. This increased independence can account for nearly two thirds of the improved inflation performance of these nations over the last two decades.

An examination of contagious bank runs and a discussion of how private clearinghouses have protected against widespread bank failures, with the determination that federal deposit insurance may not be necessary to protect against runs; conclusion of February 1 issue.

An argument that the Federal Reserve System's current approach to seasonal cycles--pegging the nominal interest rate--could successfully be applied to the business cycle as well.

An analysis of the costs and benefits of providing federal deposit insurance as a means of preventing widespread bank failures, and the role of bank regulators in assuring bank solvency; article concludes with February 15 issue.

This paper addresses the positive implications of indexing risky debt to observable aggregate conditions. These issues are pursued within the context of the celebrated financial accelerator model of Bernanke, Gertler and Gilchrist (1999). The principal conclusions include: (1) the estimated...

This paper derives the privately optimal lending contract in the celebrated financial accelerator model of Bernanke, Gertler and Gilchrist (1999). The privately optimal contract includes indexation to the aggregate return on capital, household consumption, and the return to internal funds....