Methanol As an Alternative Fuel
Mine Yücel
Abstract: Methanol, because of its low pollution characteristics, is a possible alternative to gasoline as a motor fuel. In this article, Mine Yücel calculates the economic, pollution, and health effects of switching from gasoline to methanol fuels. ; Yucel finds that use of methanol would lower oil demand and oil prices, while increased demand for methanol's natural gas feedstock would increase natural gas prices. Fuel prices would increase because methanol is more costly than gasoline. However, methanol use would reduce ozone pollution and some of the health risks associated with gasoline.


Fisher Effects and Central Bank Independence
Kenneth M. Emery


Is Increased Price Flexibility Stabilizing? The Role of the Permanent Income Hypothesis
Evan F. Koenig


The Impact of Differential Human Capital Stocks on Club Allocations
Lori L. Taylor


Does It Matter How Monetary Policy Is Implemented?
Joseph H. Haslag and Scott E. Hein
Published as: Haslag, Joseph H. and Scott E. Hein (1995), "Does It Matter How Monetary Policy Is Implemented?" Journal of Monetary Economics 35 (2): 359-386.
Abstract: In the U.S., existing monetary base measures add an adjustment factor for changes in reserve requirement ratios to high powered money. Implicitly, the monetary base assumes that the economic effects of changes in reserve requirements are identical to those due to changes in high-powered money. Theory, however, does not generally support the prediction that the two policy tools will have the same economic effects. Structural VARs are estimated to compare the short-run paths of inflation and output growth under two different types of policy shocks. In doing so, this analysis gives one a measure of the costs associated with this implicit equivalence assumption. The evidence is consistent with the hypothesis that the Federal Reserve at least partially offsets reserve requirement changes with open market operations and the hypothesis that dynamic explanations of macroeconomic variables are improved by separating reserve requirement changes from other monetary policy moves.


Lender of Last Resort: A Contemporary Perspective
George G. Kaufman
Published as: Kaufman, George G. (1991), "Lender of Last Resort: A Contemporary Perspective," Journal of Financial Services Research 5 (2): 95-110.
Abstract: This article re-examines the role of the central bank's lender of last resort (LLR) function in the current economic environment. It argues that the traditional role of protecting the money supply from collapse is no longer valid. LLR intervention is appropriate to offset temporary liquidity strains that are likely to depress asset prices and aggregate real income below their equilibrium levels. However, such support should be provided only rarely and through open market operations rather than the discount window.


The Aggregate Effects of Temporary Government Purchases
Mark A. Wynne
Abstract: How do changes in the level of government purchases affect the macroeconomy? This paper looks at the effects of temporary government purchases in the context of a simple dynamic general equilibrium model. The model is parameterised in a parsimonious manner and perturbed by a spending shock that captures the temporary component of government spending in the US during World War II. There is a remarkable correspondence between the movements in output, consumption and effort predicted by the model and those observed in reality.


Are Net Discount Ratios Stationary? The Implications for Present Value Calculations
Joseph H. Haslag, Michael Nieswiadomy and D.J. Slottje
Published as: Haslag, Jospeh H., Michael Nieswiadomy and D.J. Slottje (1991), "Are Net Discount Ratios Stationary? The Implications for Present Value Calculations," Journal of Risk and Insurance 58 (3): 505-512.
Abstract: This article analyzes the relationship between real interest rates and real growth rates in wages. The stationarity of these time series has been discussed in the literature. However, since the net discount ratio, (1 + g1)/(l + r1), is a nonlinear transformation, it is not necessarily stationary even if the interest rate and growth rate in wages series are each stationary. On the other hand, the net discount ratio may be stationary even if the interest rate and growth rate series are both non- stationary. The significant finding of this article is that this ratio is stationary. This conclusion appears robust since it holds for at least four different Treasury securities analyzed: three month, six month, one year, and three year. Therefore, a real net discount ratio, (1 + g1)/(1 + r1), can be used with confidence in constructing present value forecasts of expected earnings.


U.S. Oil Demand and Conservation
S.P.A. Brown and Keith R. Phillips
Published as: Brown, S.P.A. and Keith R. Phillips (1991), "U.S. Oil Demand and Conservation," Contemporary Economic Policy 9 (1): 67-72.
Abstract: Recent history has lent casual support to three popular theories about U.S. oil demand: U.S. oil consumption is very insensitive to changing oil prices; non-price conservation has reduced U.S. oil demand; and U.S. oil consumption falls more when oil prices rise than it rises when prices fall. Together these theories suggest that oil consumption could be held constant without much economic sacrifice. Our econonetric evidence does not support these theories. We find that U.S. oil consumption is fairly responsive to changes in price over the long run, but with a considerable lag. The lag accounts for the data that seems to support the popular theories. Sharp oil price increases (or their equivalent) will be required to hold oil consumption constant during the I990s.


Banking Reform
Gerald P. O'Driscoll, Jr.


Inflation, Real Interest Rates and the Fisher Equation Since 1983
Kenneth H. Emery
Abstract: This paper demonstrates that the time series properties of inflation have changed dramatically since 1983. Specifically, the inflation rate can now best be described as a stationary white-noise process with strong mean-reverting tendencies. These findings contrast sharply with the nonstationary and highly persistant characteristics of inflation for the rest of the post-Accord period. The most recent behavior of inflation has important implications for the perceived anti-inflation credibility of the Federal Reserve, for empirical models of inflation, and for the formation of inflation expectations.


Demographics and the Foreign Indebtedness of the United States
John K. Hill


Another Look at the Credit-Output Link
Cara S. Lown and Donald W. Hayes