NBER Working Papers by Robert H. Rasche

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Working Papers

March 2011The Great Inflation: Did the Shadow Know Better?
with William Poole, David C. Wheelock: w16910
The Shadow Open Market Committee was formed in 1973 in response to rising inflation and the apparent unwillingness of U.S. policymakers to implement policies necessary to maintain price stability. This paper describes how the Committee's policy views differed from those of most Federal Reserve officials and many academic economists at the time. The Shadow argued that price stability should be the primary goal of monetary policy and favored gradual adjustment of monetary growth to a rate consistent with price stability. This paper evaluates the Shadow's policy rule in the context of the New Keynesian macroeconomic model of Clarida, Gali, and Gertler (1999). Simulations of the model suggest that the gradual stabilization of monetary growth favored by the Shadow would have lowered inflation...

Published: The Great Inflation: Did The Shadow Know Better?, William Poole, Robert H. Rasche, David C. Wheelock. in The Great Inflation: The Rebirth of Modern Central Banking, Bordo and Orphanides. 2013

August 1990P* Type Models: Evaluation and Forecasts
with R.A. Pecchenino: w3406
This paper critically evaluates the Federal Reserve's p* model of inflation, and develops a model of national income determination implicit in the p* formulation. We use this model to forecast the future paths of key macroeconomic variables and investigate its behavior under a variety of deterministic monetary policy rules. These forecasts and policy simulations suggest a dynamic economic behavior inconsistent with stylized facts, and lead us to question the underlying structure of the p* formulation.

Published: International Journal of Forecasting. Volume 6, pp. 421-440, 1990. citation courtesy of

December 1989The Demand For Money in the U.S. During the Great Depression: Estimates and Comparison with the Post War Experience
with Dennis Hoffman: w3217
This study investigates the equilibrium demand for narrowly defined monetary aggregate during the Great Depression. We find evidence in support of a stable demand for real balance, but no evidence in support of stable demand functions for real currency and real monetary base. This is consistent with the Friedman-Schwartz interpretation of this period.

We do not reject the hypothesis that the equilibrium demand for real Ml is stable between the pre and post WWII sample periods. We find that the "shift in the drift" of Ml velocity after 1945 and at the end of 1981 as well as the "shift in the drift" of currency and base velocities in 1981 is the image of corresponding "shift in the drift" of short-term interest rates. We interpret this as consistent with the hypothesis that t...
April 1989Long-run Income and Interest Elasticities of Money Demand in the United States
with Dennis Hoffman: w2949
This study investigates the stability of long-run log-linear demand functions for narrowly defined monetary aggregates (M1, Monetary Base) in the U.S. during the post World War II period. The hypotheses that the individual time series which appear in such equations (real M1, real Monetary Base, real Personal Income and short-term and long-term nominal interest rates) all have unit roots cannot be rejected. The primary conclusion of this study is that with proper attention to the time series properties of the available data, there exists strong evidence in support of a stable equilibrium demand function for real balances in the post-World War II U.S. economy. The hypothesis of a unitary equilibrium real income elasticity (a velocity function) cannot be rejected. Further, the estimates of eq...

Published: Review of Economics and Statistics, November 1991. citation courtesy of

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