Kenneth M. Emery

The information content of the paper-bill spread

Abstract In a series of articles, Benjamin M. Friedman and Kenneth N. Kuttner maintain that the difference between the commercial paper rate and the Treasury bill rate has highly significant predictive value for real output even in the presence of money and regardless of sample. The results presented in this paper do not support Friedman and Kuttners claims.

The algebra of price stability

Abstract In this paper, we propose two definitions of price stability that encompass the interpretations of price stability found in the economic literature. To determine the conditions under which monetary policy can achieve price stability, we examine several well-known classes of monetary rules including the targeting of monetary aggregates, nominal GNP, prices, and interest rates. In addition, we use a linear rational expectations model to explore the degree to which price stability constrains short-term stabilization policy. We find that price stability does not necessarily prevent the monetary authority from pursuing short-term stabilization goals.

Inflation persistence and Fisher effects: Evidence of a regime change

Abstract This paper demonstrates that the time-series properties of inflation can best be described as white noise during the 1980s. This result contrasts sharply with the highly persistent characteristics of inflation during the earlier post-World War II period. Instead, recent movements in inflation closely resemble the behavior of inflation during the U.S. gold standard. Coinciding with the change in inflation behavior, this study also shows that the relationship between interest rates and inflation changed, offering further support for the contention that the measurement of traditional Fisher effects is dependent on the time-series properties of inflation.