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Economic Review

Economic Review
July/August 1995, Volume 80, Number 4

Reducing Our Ignorance about Monetary Policy Effects
Eric M. Leeper

Business news often gives the impression that the effects of monetary policy on the macroeconomy are well understood and predictable. The author of this article, however, believes that, far from sharing such certainty, policymakers and economists alike have knowledge limited by difficulties in sorting out causal factors in economic data. He holds that monetary policy effects are neither well understood nor easily predicted.

The article presents five models of private and monetary policy behavior in the United States. Identical policy experiments--an unanticipated one-time monetary policy contraction--performed in each model show different qualitative and quantitative effects of policy from one model to the next. The author considers a variety of methods for ranking the models according to their plausibility and suggests that because each model has its limitations, it would be wise for policy advisors to be eclectic in formulating advice.

FYl--Testing the Informativeness of Regional and Local Retail Sales Data
Gustavo A. Uceda

A large collection of published and unpublished retail sales estimates produced by the U.S. Department of Commerce provides potentially valuable current and historical estimates and industry detail for several regions of the country dating back to 1978. Analysts may find these data particularly useful as supplements to published data in monitoring retail spending in some states and metropolitan statistical areas.

This article examines whether the breadth of detail the data offer can offset such limitations as small sample size and volatility. The author analyzes the information provided by augmenting published data with unpublished data for its usefulness in predicting regional employment. The research suggests that regional and metro retail sales data can aid researchers as well as others in the business of local economic analysis.

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