Monetary Economics.

• Position: National Bureau of Economic Research Program on Monetary Economics meeting on April 11, 2003

The NBER's Program on Monetary Economics met in Cambridge on April 11. Susanto Basu, NBER and University of Michigan, and Michael Woodford, NBER and Princeton University, organized this program:

Paul Beaudry, NBER and University of British Columbia, and Franck Portier, University of Toulouse, "Stock Prices, News, and Economic Fluctuations"

Discussant: Julio J. Rotemberg, NBER and Harvard University

Christina D. Romer and David H. Romer, NBER and University of California, Berkeley, "A New Measure of Monetary Shocks: Derivation and Implications" Discussant: Jeffrey Fuhrer, Federal Reserve Bank of Boston

Andreas Beyer, European Central Bank, and Roger E. A. Farmer, University of California, Los Angeles, "Identifying the Monetary Transmission Mechanism using Structural Breaks"

Discussant: Mark W. Watson, NBER and Princeton University

Thomas J. Sargent, NBER and New York University, and Noah Williams, NBER and Princeton University, "Impacts of Priors on Convergence and Escapes from Nash Inflation"

Discussant: Tao Zha, Federal Reserve Bank of Atlanta

Sylvain Leduc, Keith Sill, and Tom Stark, Federal Reserve Bank of Philadelphia, "Self-Fulfilling Expectations and the Inflation of the 1970s: Evidence from the Livingston Survey"

Discussant: Athanasios Orphanides, Federal Reserve Board

Michelle Alexopoulos, University of Toronto, "A Monetary Business Cycle Model with Unemployment"

Discussant: Garey Ramey, University of California, San Diego

A common view in macroeconomics is that business cycles can be decomposed meaningfully into fluctuations driven by demand shocks--shocks that have no short- or long-run effects on productivity--and fluctuations driven by unexpected changes in technology. Beaudry and Pottier propose a means of evaluating this view and show that it is strongly at odds with the data. They show instead that the data favor a view of business cycles driven primarily by a shock that does not affect productivity in the long run. The structural interpretation they suggest for this shock is that it represents news about future technological opportunities. They show that this shock explains about 50 percent of business cycle fluctuations and therefore deserves to be acknowledged and further understood by macroeconomists.

Conventional measures of monetary policy, such as the federal funds rate, are surely influenced by forces other than monetary policy. More importantly, central banks adjust policy in response to a wide range of information...