Monetary economics.

• Position: National Bureau of Economic Research forum

Members of the NBER's Program on Monetary Economics met in Cambridge on April 23. Simon Gilchrist, NBER and Boston University, and Laurence M. Ball, NBER and Johns Hopkins University, organized the meeting. The program was:

Anil K Kashyap and Raghuram Rajan, NBER and University of Chicago, and Jeremy C. Stein, NBER and MIT, "Banks as Liquidity Providers: An Explanation for the Co-existence of Lending and Deposit Taking" (NBER Working Paper No. 6962)

Discussant: Donald Morgan, Federal Reserve Bank of New York

Michael D. Bordo, NBER and Rutgers University, Ehsan U. Choudhri, Goergetown University, and Anna J. Schwartz, NBER, "Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint" (NBER Working Paper No. 7125)

Discussant: Christina D. Romer, NBER and University of California, Berkeley

Jordi Gali, Universitat Pompeu Fabra, and Mark Gertler, NBER and New York University, "Inflation Dynamics: A Structural Econometric Analysis"

Discussant: John Roberts, Federal Reserve System

Ricardo de O. Calvalcanti and Neil Wallace, Pennsylvania State University, "Inside and Outside Money as Alternative Media of Exchange"

Discussant: Randall Wright, NBER and University of Pennsylvania

Robert J. Shiller, NBER and Yale University, "Designing Indexed Units of Account" (NBER Working Paper No. 7160)

Discussant: Robert B. Barsky, NBER and University of Michigan

Adam S. Posen, Institute for International Economics, "Restoring Japan's Economic Growth"

Discussant: Kenneth D. West, NBER and University of Wisconsin

Kashyap, Rajan, and Stein ask what connects the traditional commercial banking activities of deposit-taking and lending. They observe that since banks often lend via commitments, or credit lines, their lending and deposit-taking may be two manifestations of the same primitive function: the provision of liquidity on demand. This observation leads the authors to argue that there will naturally be synergies between the two activities, to the extent that both require banks to hold large volumes of liquid assets (cash and securities) on their balance sheets: if deposit withdrawals and commitment take-downs are imperfectly correlated, the two activities can share any deadweight costs of holding the liquid assets.

The recent consensus view that the gold standard was the leading cause of the Great Depression stems from two propositions: 1) under the gold standard, deflationary shocks were transmitted...