Money, cycles, and exchange rates: Essays in honor of Allan H. Meltzer

Carnegie-Rochester Conference Series on Public Policy 29 f 1988) 7-2 North-Holland

Carnegie Mellon University

The

1987 meeting

November

of

the

Carnegie-Rochester

Conference

,sn

Public Policy, held in Pittsburgh, was specially arranged in honor of the 60th birthday of Allan H. Meltzer.

Given the nature of this occasion,

Allan could not gracefully fill his usual role as co-organizer meeting,

the

SO

Advisory

planning the program.

Co

ittee asked

me

to

help

Karl

of

the

BrJnner

in

Our agreed-upon strategy was to ask economists who

had been associated with Allan, in one :day or another, to write on topics w?'th which he had been professionally concerned. Allan's remarkable career, the

Because of the scope of

second of these guidelines was

not very

Our problem was to manage to cover, cr at least touch upon,

restrictive.

the following major areas of interest: monetary theory and poTicy', business cycle analysis, political economy, and international finance. As events transpired, seven authors were commissioned to write papers, with the precise Cnn'-L LqJIL3 determined by the authors in consultation with the One of these papers was presented at the conference but does

organizers. not

appear

Cukierman,

in this Marvin

The

volume-l

Goodfriend,

Parkin, and Alan Stockman.

remaining

Robert

six

Lucas,

are

Bennett

by

authored

Alex

ichael

McCallum,

Very brief descriptions of the subject matter

of these papers are as follows. Cukierman's paper is concerned with political-economy aspects of the German hyperinflation of 1921-1923. The paper marshals evidence indicating that,

in

contrast

positive

and

with

‘The contribute final

author,

conference

a spirit&

revision

contribution

Scott was to

to

the

Richard,

held.

occasion,

money

creation

yielded revenues

Thus support is provided for the vie

that the

took

levels

he His

own satisfaction. and also

of

a posi t ion

Remarkably,

presentation. Scott’s

impressions,

inflation-tax

nondiminishing

throughout the episode.

the

prevailing

was

at

real

Goldman

able

duties

at

to

Goldman,

The organizers

to Andv Abel

for

~ Sachs

find

time Sachs are

an excellent

I!%Co. to

a few

complete

did

not,

grateful dismssion.

weeks a

however, to

Scott

before

draft

and permit

for

his

German hyperinflation was, at least in part, the consequence of deliberate In a contrasting paper, Goodfriend develops a theoretical

policy choices.

analysis of operating procedures by a central bank that is constrained by a gold

standard (or an alternative co

odity-money standart).

T

which is "short run" in the sense of a postulated unchanging total stock of gold, is applied to various issues of historical concernThe

second pair of papers are concerned with topics

monetary economics,

In

in mainstream

his contribution, Lucas reconsiders the form of

money demand function utilized by Meltzer in his pioneering JPE study of 1963. Lucas provides theoretical justification for a related specification, explicates +,he relationship, and provides evidence suggesting structural stability over an extended span of

McCallum's paper

time (1900-1985).

explores the robustness of an operational rule for monetary policy, related to one proposed by Meltzer, and finds that it would result (despite shocks) in smooth and noninflationary grotih of nominal GNP according to a variety of models. The last two papers relate, in different ways, to the real business cycle theory of macroeconomic fluctuations. develops

a

variables various

In his contribution, Parkin

novel empirical approach whereby movements are

attributed

aspects

of

entirely

tastes

and

to

shifts

in

technology.

He

in key aggregate

parameters studies

reflecting the

implied

variability of these parameters and also their hypothesized independence from monetary shock: behavior.

Stockman, by contrast, focuses on real exchange rate

His objective

is to develop

an explanation of the evidence,

indicating greater variability under a regime with floating nominal rates, that is consistent with an "equilibrium!'theory that excludes all types of nominal price stickiness. ents on the Robert Flood,

six papers--some

sharply critical--are provided by

ichael Bordo, Robert King, Benjamin Friedman, John Taylor,

ax Corden (respectively).

Brief replies by Cukierman and McCallum are

also included. Previous volumes in this series included more extensive descriptions entaries by the editors on the various contributions. special volume, however,

it seems preferable

For this

to provide only the brief

sketches given above and to devote the freed space to an alternative use. In particular,

arl Brunner has agreed to compose a biographic4 He and I hope that readers iTT join us in

2

sketch of

ill be pleased

ishing Allan many happy