BPEA | 1978 No. 1

Editors’ Summary of the Brookings Papers on Economic Activity – 1978 No 1

1978, No. 1

THE BROOKINGS PANEL on Economic Activity held its twenty-fourth
conferencei n WashingtonD, .C., on January1 2 and 13, 1978. The papers
presented then are published in this issue, which launches the 1978 volume
of Brookings Papers on Economic Activity. (The 1977 volume contains
two issues instead of the traditional three.) The three articles below reflect
important challenges to professional thinking arising out of the economicd
evelopments of recenty ears. One reaffirms the potential constructive
contribution of stabilization policy, despite the disappointing record
of the past decade. The second underlines concern about the distorting
effect of inflation on interest rates (and hence on investment and saving
decisions) under our current tax system. The third analyzes theoretically
the causes and consequences of changes in exchange rates under the new
regime of flexible rates.
Three reports in this issue try to clear up some empirical puzzles-the
emergence of a huge U.S. trade deficit, the recent jump in the budget surpluses
of state and local governments, and the factors underlying sharp
shifts in the demand for consumer-durable goods.