To head off inflation before it gets started, central banks must use forecasts to determine monetary policy actions. But doing so introduces the possibility that inflation will increase just because the public expects it to. This Economic Commentary explains how random events (sunspots) can...

Many analysts believe that the United States should subsidize training to increase its workers' skills because employers don't provide enough. This Commentary asks whether the present level of training is truly insufficient, or whether firms' incentives may already be in synch with the social...

A study of how war-related temporary increases in government expenditures affect real interest rates and output, with particular emphasis on the probable fiscal effects of the Persian Gulf War.

A discussion of the relationship between money and output, with emphasis on the possibility that changes in output precede changes in money.

A look at some of the reasons behind the ascent in health care costs over the last few decades and an analysis of how government policy has both contributed to and tried to rein in these costs.

An Auerbach-Kotlikoff (AK) overlapping-generations model is used to examine how changes in marginal income-tax rate structures affect the distribution of income, drawing on actual changes to the U.S. tax code. This approach builds on AK by allowing for many different cohort types, and hence for...

A demonstration that optimal monetary policy can be either procyclical or countercyclical in a model where wages are "sticky" because of a nominal contracting constraint.

A model of bank asset sales in which information asymmetries create the incentive for unregulated banks to originate and sell loans to other banks, rather than fund them with deposit liabilities. Private information implies that bankers can fund local loans only to the extent that their capital...

An examination of the inflation-indexing provisions contained in the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986.

Using the well-known dynamic fiscal policy framework pioneered by Auerbach and Kotlikoff, we examine the efficiency and welfare implications of shifting from a linear marginal tax rate structure to a discrete rate structure characterized by two regions of flat tax rates of 15 and 28 percent. For...