THIS ISSUE of Brookings Papers on Economic Activity contains papers
and discussions presented at the forty-eighth conference of the Brookings
Panel on Economic Activity, which was held in Washington, D.C., on
September 14 and 15, 1989. The first major paper, by William D.
Nordhaus, examines theories of the political business cycle that model
how political administrations may manipulate the economy to enhance
their reelection prospects. The second major paper, by Steven N.
Durlauf, analyzes the persistence of shocks to aggregate output, and
discusses the implications of persistence for stabilization policy. The
first report, by Benjamin M. Friedman and David I. Laibson, looks at
the extreme movements in prices on the U.S. stock market and presents
a statistical model for characterizing them. Two reports, by Daniel J. B.
Mitchell and by Michael L. Wachter and William H. Carter, assess
current wage and labor market conditions in an attempt to forecast
whether inflation is likely to accelerate over the next few years. Finally,
a symposium of four reports, by Richard N. Cooper, Rudiger Dornbusch,
Vittorio Grilli, and Merton J . Peck, examines issues surrounding Europe