Monetary Economics Program.

• Position: National Bureau of Economic Research conference papers discussed - Industry Trend or Event - Critical Essay

Members and guests of the NBER's Program on Monetary Economics, directed by N. Gregory Mankiw, NBER and Harvard University; met in Cambridge on November 12. Organizers Christopher L. Foote, Harvard University, and Stephen P. Zeldes, NBER and Columbia University, chose these papers for discussion:

Michael T. Kiley, Federal Reserve Board, "Computers and Growth with Costs of Adjustment: Will the Future Look like the Past?"

Discussant: Kevin Stiroh, Federal Reserve Bank of New York

Michael S. Hanson, Wesleyan University, "On the Identification of Monetary Policy: The 'Price Puzzle' Reconsidered"

Discussant: Charles Evans, Federal Reserve Bank of Chicago

Lars E.O. Svensson and Michael Woodford, NBER and Princeton University, "Implementing Optimal Policy through Inflation-Forecast Targeting"

Discussant: Peter N. Ireland, NBER and Boston College

Fernando Alvarez, NBER and University of Chicago; and Andrew Atkeson and Patrick J. Kehoe, Federal Reserve Bank of Minneapolis, "Money and Interest Rates with Endogenously Segmented Markets" (NBER Working Paper No. 7060)

Discussant: Dean Corbae, University of Pittsburgh

Marjorie Flavin, NBER and University of California, San Diego and Takashi Yamashita, Deloitte and Touche, LLP, "Owner-Occupie Housing and the Composition of the Household Portfolio" (NBER Working Paper No. 6839)

Discussant: N. Gregory Mankiw

Discussant: David Laibson, NBER and Harvard University

Andrew Caplin, NBER and New York University, and John V. Leahy, NBER and Boston University, "The Social Discount Rate"

Kiley augments the traditional growth accounting framework by including a common specification of investment adjustment costs. He uses this framework to examine the past and likely future growth in nonfarm business output in the United States. The inclusion of adjustment costs can have large effects on the growth-accounting exercise when a new investment good is introduced, as has been the case with computers in the past 30 years. The author's framework indicates that the contribution of computers to economic growth has been held down by the large adjustment costs required to incorporate a new investment good into the economy's capital stock. These adjustment costs may have lowered measured growth in multifactor productivity since 1974 by about half a percentage point -- a nontrivial portion of the productivity slowdown. Combining the adjustments to multi-factor productivity and the impact of computers implied by Kiley's model...