The 1968 amendment to Regulation D of the Federal Reserve Code permits banks to carry forward one sequential reserve excess or deficiency into the next reserve accounting period. This was intended to reduce the weekly pressure on individual banks to adjust their reserve position. We find, instead, that the carry-forward provision gives individual banks an incentive to alternate weekly between reserve excesses and reserve deficiencies. Thus, the carry-forward provision tends to induce reserve position adjustments even in the absence of changes in the level of deposits. In addition, the carry-forward provision reduces the impact of interest-rate changes on the desired level of excess reserves.

ABSTRACT The 1968 amendment to Regulation D of the Federal Reserve Code permits banks to carry forward one sequential reserve excess or deficiency into the next reserve accounting period. This was intended to reduce the weekly pressure on individual banks to adjust their reserve position. We find, instead, that the carry‐forward provision gives individual banks an incentive to alternate weekly between reserve excesses and reserve deficiencies. Thus, the carry‐forward provision tends to induce reserve position adjustments even in the absence of changes in the level of deposits. In addition, the carry‐forward provision reduces the impact of interest‐rate changes on the desired level of excess reserves.

The fact that actual economic advance over time normally means producing and consuming different things is usually left implicit in modern models of economic growth. By contrast, qualitative change--new goods and services, and better versions of what already existed--is central to Robert Gordon's history of the improvement of American living standards since 1870. A major contribution of his fine-grained account of this experience is to make clear what this improvement has meant, and why it has mattered to ordinary citizens.

In contrast to the standard interpretation of the origins of economics out of the secular European Enlightenment of the 18th century, the transition in thinking that we rightly identify with Adam Smith and his contemporaries and followers, which gave us economics as we now know it, was powerfully influenced by then-controversial changes in religious belief in the English-speaking Protestant world in which they lived: in particular, key aspects of the movement away from orthodox Calvinism. Further, those at-the-outset influences of religious thinking not only fostered the subsequent spread of Smithian thinking, especially in America, but shaped the course of its reception. The ultimate result was a variety of fundamental resonances between economic thinking and religious thinking that continue to influence our public discussion of economic issues, and our public debate over economic policy, today.

What stands out in retrospect about U.S. monetary policy during the Greenspan Era is the ongoing movement away from mechanistic restrictions on the conduct of policy, together with a willingness on occasion to depart even from what more flexible guidelines dictated by contemporary conventional wisdom would imply, in the interest of carrying out the Federal Reserve System's dual mandate to pursue both stable prices and maximum employment. Part of this change was procedural -for example, the elimination of money growth targets. The most substantive demonstration of policy flexibility came in the latter half of the 1990s, as unemployment fell below 6% (in 1994), then below 5% (in 1997), and then remained below 5% for more than four years, yet the Federal Reserve did not tighten monetary policy. This policy stance was consistent with a view of the economy, including faster productivity growth and increased exposure to international competition, that Chairman Greenspan had articulated nearly a decade before.

ABSTRACT Individuals in the United States consistently do most of their saving through financial intermediaries, but over time there have been and continue to be major shifts in people's reliance on specific kinds of intermediary institutions. This paper assesses the potential effects on interest rates, and via interest rates (and asset prices and yields more generally) on nonfinancial economic activity, of four specific shifts in saving behavior: additional pension contributions financed by individuals, additional pension contributions financed by businesses, additional purchases of life insurance by individuals, and additional deposits in thrift institutions by individuals. The paper's results indicate that such shifts, in plausible magnitudes, would have significant effects not only on interest rates and asset‐liability flows but also on both the level and the composition of nonfinancial economic activity. In particular, although the specific effects differ from one shift to another, each would disproportionately stimulate capital formation in comparison to other forms of spending.

Individuals in the United States consistently do most of their saving through financial intermediaries, but over time there have been and continue to be major shifts in people's reliance on specific kinds of intermediary institutions. In recent years, for example, individual savers have relied progressively more on pensions and thrift institutions and progressively less on life insurance companies. Moreover, legislative and regulatory actions currently under discussion would further alter the pattern of individuals' saving flows. This paper assesses the potential effects on interest rates, and via interest rates (and asset prices and yields more generally) on nonfinancial economic activity, of four specific shifts in saving behavior: additional pension contributions financed by individuals, additional pension contributions financed by businesses, additional purchases of life insurance by individuals, and additional deposits in thrift institutions by individuals. The paper's results indicate that such shifts, in plausible magnitudes, would have significant effects not only on interest rates and asset-liability flows but also on both the level and the composition of nonfinancial economic activity. In particular, although the specific effects differ from one shift to another, each would disproportionately stimulate capital formation in comparison to other forms of spending.

11], economists have developed a substantial literature relating the forward interest rates implied by currently prevailing rates on debts of differing maturity to market participants' expectations of interest rates in the future.Hicks suggested that implied forward rates might differ from the corresponding expected future rates by a liquidity premium, or term premium, and more recently Stiglitz [19] and others have formalized how market partici- pants' risk aversion would give rise to such a premium.While in principle the premium could be either positive or negative, the usual upward slope of the yield curve suggests a positive premium that itself varies positively with the debt's term to maturity.Kessel [10] subsequently suggested that the premium for a given maturity might vary with real economic activity, and Culbertson [2] argued that relative outside debt supply quantities should als' affect the premium.More recently Nelson [16] offered an explanation for the premium even in the absence of risk aversion, and Friedman [5] related changes in the premium to shifts in wealth ownership among heterogenous investors.An accompanying empirical literature has repeatedly tested each of these various hypotheses about forward rates and expected future rates, but usually with somewhat inconclusive results.A key reason for the weakness of much of this empirical literature has been the absence of independent information about market participants' expectations.Not surprisingly, the very early attempts based on the assumption of perfect foresight were most unsuccessful and this approach quickly went out of fashion.The traditional procedure since then has been either to apply the Hicks-Lutz theory to derive expectations proxies from the same term-structure data that generate the forward rates, or to use some other device like autoregressive or 'rational' expectations proxies.In either case, any hypoth- esis submitted to statistical testing is necessarily a joint hypothesis embodying both the relation of forward rates to expectations and the formation of expecta- tions themselves.Failure of the hypothesis to conform to the data may then indicate rejection of the proposition relating forward rates to expectations, or rejection of the identifying restrictions imposed to derive the expectations proxy (or both).The object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest