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Why do consumer prices and wages adjust so slowly to changes in market conditions? The rigidity or stickiness of price setting in business is central to Keynesian economic theory and a key to understanding how monetary policy works, yet economists have made little headway in determining why it occurs. Asking About Prices offers a groundbreaking empirical approach to a puzzle for which theories abound but facts are scarce. Leading economist Alan Blinder, along with co-authors Elie Canetti, David Lebow, and Jeremy B. Rudd, interviewed a national, multi-industry sample of 200 CEOs, company heads, and other corporate price setters to test the validity of twelve prominent theories of price stickiness. Using everyday language and pertinent scenarios, the carefully designed survey asked decisionmakers how prominently these theoretical concerns entered into their own attitudes and thought processes. Do businesses tend to view the costs of changing prices as prohibitive? Do they worry that lower prices will be equated with poorer quality goods? Are firms more likely to try alternate strategies to changing prices, such as warehousing excess inventory or improving their quality of service? To what extent are prices held in place by contractual agreements, or by invisible handshakes? Asking About Prices offers a gold mine of previously unavailable information. It affirms the widespread presence of price stickiness in American industry, and offers the only available guide to such business details as what fraction of goods are sold by fixed price contract, how often transactions involve repeat customers, and how and when firms review their prices. Some results are surprising: contrary to popular wisdom, prices do not increase more easily than they decrease, and firms do not appear to practice anticipatory pricing, even when they can foresee cost increases. Asking About Prices also offers a chapter-by-chapter review of the survey findings for each of the twelve theories of price stickiness. The authors determine which theories are most popular with actual price setters, how practices vary within different business sectors, across firms of different sizes, and so on. They also direct economists' attention toward a rationale for price stickiness that does not stem from conventional theory, namely a strong reluctance by firms to antagonize or inconvenience their customers. By illuminating how company executives actually think about price setting, Asking About Prices provides an elegant model of a valuable new approach to conducting economic research.
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Price controls across many sectors are currently being hotly debated. New controls in the housing market, more onerous minimum wages, minimum prices for alcohol, and freezes on energy prices are very high up the agenda of most politicians at the moment. Even without any further controls, wages, university fees, railway fares and many financial products already have their prices at least partly determined by politicians rather than by supply and demand in the market. Indeed, barely a sector of the UK economy is unaffected in one way or another by government controls on prices. This book demonstrates why economists do not like price controls and shows why they are widely regarded as being amongst the most damaging political interventions in markets. The authors analyse, in a very readable fashion, the damage they cause. Crucially, the authors also explain why, despite universal criticism from economists, price controls are so popular amongst politicians.
The phrase "work smarter, not harder" has been repeatedly ridiculed in the Dilbert comic strip and elsewhere, not because it is a bad idea, but because it is thrown like a brick lifesaver to drowning employees. To tell someone to work smarter is like telling someone to be happier, healthier, and richer. It's not much help to merely repeat the objective; what people need is a plan for achieving the objective.In Making Great Decisions, we show our readers how to achieve their objectives. We write to help those in business and those in the business of life--i.e., everyone--to work smarter. Our ideas are both simple and powerful. We offer a better way to look at problems so that the solutions are easier to find. We help supplement our readers' clear thinking by summarizing some of the most powerful techniques we have discovered.Have you ever driven through corn country? From a distance, all you see are corn stalks and more corn stalks in a jumbled mess. Then suddenly, when you get closer, your perspective changes, and you can see down the rows and realize that the corn was planted perfectly in straight lines. Your perception of the crop changes from a messy jumble to a clear picture simply because you're in the right spot. This book puts readers in that ideal spot. So many problems seem like hopeless jumbles but then, when you start using the techniques we discuss here, they start to look as straightforward as the straightest line in an Iowa cornfield.What motivated us to write this book is that, over the years, both of us have regularly come across people in organizations--often bright people with MBAs or other graduate degrees--who don't think they have time, energy, or skills to make good decisions. They have many clues but don't know how to put them together. They regularly face situations that they could analyze with some of the tools they learned in their courses, but they don't realize that. We don't hold ourselves apart from this group, and stories of our successes and failures are sprinkled throughout Making Great Decisions in Business and Life.
From Nobel Prize–winning economist and New York Times bestselling author Robert Shiller, a groundbreaking account of how stories help drive economic events—and why financial panics can spread like epidemic viruses Stories people tell—about financial confidence or panic, housing booms, or Bitcoin—can go viral and powerfully affect economies, but such narratives have traditionally been ignored in economics and finance because they seem anecdotal and unscientific. In this groundbreaking book, Robert Shiller explains why we ignore these stories at our peril—and how we can begin to take them seriously. Using a rich array of examples and data, Shiller argues that studying popular stories that influence individual and collective economic behavior—what he calls "narrative economics"—may vastly improve our ability to predict, prepare for, and lessen the damage of financial crises and other major economic events. The result is nothing less than a new way to think about the economy, economic change, and economics. In a new preface, Shiller reflects on some of the challenges facing narrative economics, discusses the connection between disease epidemics and economic epidemics, and suggests why epidemiology may hold lessons for fighting economic contagions.
Why are house prices in many advanced economies rising faster than incomes? Why isn’t land and location taught or seen as important in modern economics? What is the relationship between the financial system and land? In this accessible but provocative guide to the economics of land and housing, the authors reveal how many of the key challenges facing modern economies - including housing crises, financial instability and growing inequalities - are intimately tied to the land economy. Looking at the ways in which discussions of land have been routinely excluded from both housing policy and economic theory, the authors show that in order to tackle these increasingly pressing issues a major rethink by both politicians and economists is required.
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
The global financial crisis of recent years and the associated large fiscal deficits and debt levels that have impacted many countries underscores the importance of reliable and timely government statistics and, more broadly, public sector debt as a critical element in countries fiscal and external sustainability. Public Sector Debt Statistics is the first international guide of its kind, and its primary objectives are to improve the quality and timeliness of key debt statistics and promote a convergence of recording practices to foster international comparability and as a reference for national compilers and users for compiling and disseminating these data. Like other statistical guides published by the IMF, this one was prepared in consultation with countries and international agencies, including the nine organizations of the Inter-Agency Task Force on Finance Statistics (TFFS). The guide's preparation was based on the broad range of experience of our institutions and benefitted from consultation with national compilers of government finance and public sector debt statistics. The guide's concepts are harmonized with those of the System of National Accounts (2008) and the Balance of Payments and International Investment Position Manual, Sixth Edition.