Economic Letter

The world has experienced three waves of speculative attacks on fixed exchange rate regimes recently: the European Monetary System (EMS) crisis of 1992-93, the Mexican meltdown and “Tequila Hangover” of 1994-95, and the “Asian Flu” of 1997-98. These currency crises generally involved countries in the same region. Why?

The collapse of the Thai baht in July 1997 was followed by an unprecedented financial crisis in East Asia, from which these economies are still struggling to recover. A great deal of effort has been devoted to trying to understand its causes.

Consolidation has dramatically altered the structure of banking in the U.S. Since the mid-1980s, the number of banks has plummeted, and larger banks spanning ever wider geographic areas have become more prevalent.

The greater integration of emerging market countries with international capital markets has brought problems as well as benefits for recipients. On the one hand, access to foreign funds has helped finance economic development.

On May 13, the House of Representatives passed H.R.10 and took the nation one step further towards financial service reform. If passed by the Senate and signed by the President, this bill would dismantle part of the Depression-era Glass-Steagall Act by bringing down the barriers preventing unions between banks, securities firms, and insurance firms.

In about 10 to 15 years, the first wave of post-war baby boomers will begin to retire, and we will start to see a large generational shift from young to old. This generational shift is illustrated in Figure 1, which shows the expected path of the so-called “old-age dependency ratio,” which is defined as the number of people aged 65 and older divided by the working population (those aged 20 to 64).

There’s an old adage that a Republican in the White House means higher stock market returns. This adage derives from the generally held view that policies promoted by Republicans are more favorable to stock markets and capital formation.

In recent years, monetary economists and central bankers have expressed growing interest in inflation targeting as a framework for implementing monetary policy. Explicit inflation targeting has been adopted by a number of central banks around the world, including those in Australia, Canada, Finland, Israel, New Zealand, Spain, Sweden, and the U.K.

The five conference papers (listed at the end) were centered around measuring or evaluating the degree to which inflation should be the focus of the operating framework used to implement monetary policy. Explicit inflation targeting has been adopted by a number of central banks around the world.

Federal funding for research and development has ebbed and flowed since the end of World War II (Figure 1). During the 1950s it generally averaged less than ½% of U.S. GDP; in the early 1960s–during the “space race” with the Soviets–it picked up sharply to more than 2% of GDP; and since the mid-1960s, it generally has grown less quickly than the overall economy, drifting back down to less than 1% of GDP currently.