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Price stability and financial stability: the historical record

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  • Michael D. Bordo
  • David C. Wheelock

Abstract

Although the economic performance of the U.S. economy in 1997 was very good, it was troubling in at least one respect for the Federal Open Market Committee. Traditional signals of inflation - rapid money growth and high levels of economic activity - were not accompanied by higher inflation. Rather, inflation fell steadily throughout the year. The committee put forth several hypotheses for the subdued inflation but found the situation puzzling, nevertheless. Compounding the problem, members did not know how long such dampening factors might last. In the end the FOMC changed the intended federal funds target once and searched anxiously for the answers to the conundrum it faced in 1997.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1998)
Issue (Month): Sep ()
Pages: 41-62

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Handle: RePEc:fip:fedlrv:y:1998:i:sep:p:41-62:n:5

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Keywords: Economic policy;

References

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  1. Barsky, Robert B., 1987. "The Fisher hypothesis and the forecastability and persistence of inflation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 3-24, January.
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Citations

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Cited by:
  1. VAN OVERFELT, Wouter & ANNAERT, Jan & DE CEUSTER, Marc & DELOOF, Marc, 2007. "Do universal banks create value? Universal bank affiliation and company performance in Belgium, 1905-1909," Working Papers 2007001, University of Antwerp, Faculty of Applied Economics.
  2. Michael D. Bordo & Antu P. Murshid, 2000. "Are Financial Crises Becoming Increasingly More Contagious? What is the Historical Evidence on Contagion?," NBER Working Papers 7900, National Bureau of Economic Research, Inc.
  3. Christophe Blot & Jérôme Creel & Fabien Labondance & Francesco Saraceno & Paul Hubert, 2014. "Assessing the link between Price and Financial Stability," Sciences Po publications 2014-02, Sciences Po.
  4. Kenneth Kuttner, 2011. "Monetary Policy and Asset Price Volatility: Should We Refill the Bernanke-Gertler Prescription?," Department of Economics Working Papers 2011-04, Department of Economics, Williams College, revised Jun 2011.
  5. Goetz von Peter, 2004. "Asset Prices and Banking Distress: A Macroeconomic Approach," Finance 0411034, EconWPA.
  6. Angela Roman & Irina Bilan, 2009. "The monetary policy and the financial stability in the context of globalization," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 56, pages 143-156, November.
  7. Alexandros Kontonikas & Alberto Montagnoli & Nicola Spagnolo, 2006. "Stock Returns and Inflation: The Impact of Inflation Targeting," Working Papers 2005_11, Business School - Economics, University of Glasgow.
  8. Rockoff, Hugh & White, Eugene N., 2012. "Monetary Regimes and Policy on a Global Scale: The Oeuvre of Michael D. Bordo," MPRA Paper 49672, University Library of Munich, Germany, revised May 2013.
  9. repec:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p4oqi4ibn is not listed on IDEAS
  10. Yilmaz Akyüz, 2009. "Mananging Financial Instability: Why Prudence is not Enough?," Working Papers 86, United Nations, Department of Economics and Social Affairs.
  11. Goetz von Peter, 2005. "Debt-Deflation: Concepts, and a Stylised Model," Macroeconomics 0505001, EconWPA.
  12. Goetz von Peter, 2003. "A Unified Approach to Credit Crunches, Financial Instability, and Banking Crises," Macroeconomics 0312006, EconWPA.
  13. Robert L. Hetzel, 2009. "Should increased regulation of bank risk-taking come from regulators or from the market?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 161-200.
  14. Marius Constantin Apostoaie, 2010. "Consideration on the price stability – financial stability relationship in the context of financial globalization," Studies and Scientific Researches. Economics Edition, "Vasile Alecsandri" University of Bacau, Faculty of Economic Sciences, issue 15.
  15. Yilmaz Akyuz, 2008. "Managing Financial Instability in Emerging Markets: A Keynesian Perspective," Working Papers 2008/4, Turkish Economic Association.
  16. Eric Tymoigne, 2006. "Asset Prices, Financial Fragility, and Central Banking," Economics Working Paper Archive wp_456, Levy Economics Institute.
  17. Bergman, U. Michael & Hansen, Jan, 2002. "Financial Instability and Monetary Policy: The Swedish Evidence," Working Paper Series 137, Sveriges Riksbank (Central Bank of Sweden).
  18. Frappa, S. & Mésonnier, J-S., 2009. "The housing price boom of the late ’90s: did inflation targeting matter?," Working papers 255, Banque de France.
  19. Michael Bordo, 2000. "Sound Money and Sound Financial Policy," Journal of Financial Services Research, Springer, vol. 18(2), pages 129-155, December.

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