No abstract

It is widely believed that monetary aggregates have failed to predict economic performance over 1983‐87. This paper observes that the traditional definition of money (M1 lessother checkable deposits, or M1A) shows no evidence of structural change, and yields lower prediction errors for both real GNP and inflation over 1983‐87Q2 than the errors obtained using M1 or M2. If there is a mystery, it is not why MIA has done so well, but why economists abandoned it for M1 or what was once called M1B (currency, demand deposits, and other checkable deposits).

The thrift crisis has presented the federal government with a cleanup bill of unparalleled magnitude. Estimates of the present-value cost range from $90 billion to $140 billion. Most observers acknowledge that the economic cost of the crisis already has occurred in the form of lost investment opportunities and a lower capital stock. Fewer acknowledge, however, that full payment of the cost can be made only through a reduction in private sector claims to wealth so as to match the misuse of deposits and soured loans made by thrifts. Some of that reduction has occurred through equity write-downs in businesses and thrifts, but much of the necessary reduction has yet to occur. The necessary reduction constitutes an increased tax burden. Copyright 1990 Western Economic Association International.

Risk and Business Cycles: New and Old Austrian Perspectives. By Tyler Cowen. London and New York: Routledge, 1998. Pp. viii, 173. $75.00. ISBN 0–415–16919–4. JEL 98–1337