Editors’ Summary of the Brookings Papers on Economic Activity – 1999 No 2

George L. Perry and

George L. Perry Senior Fellow Emeritus - Economic Studies

William C. Brainard

WCB

William C. Brainard

THE BROOKINGS PANEL on Economic Activity held its sixty-eighth
conference in Washington, D.C., on September 2 and 3, 1999. This issue
of Brookings Papers on Economic Activity includes the papers, reports,
and discussions presented at that conference. The first paper uses a number
of historical tax reforms to examine the response of taxable income to
tax rates and concludes, unlike some earlier studies, that the response is
small. The second paper asks whether today’s working households are
saving enough for retirement, by using a stochastic life-cycle model to simulate
a distribution of wealth accumulation against which to compare actual
household savings. The third paper argues that Europe’s persistently high
unemployment primarily reflects a rise in the noninflationary unemployment
rate caused by prolonged tight monetary policy, and develops a model
relating wage inflation to short- and long-term unemployment to explain
this hysteresis effect. The fourth paper reviews the nineteenth-century history
of international financial crises for lessons about the need for financial
reform, the advisability of financial rescues, and the choice of exchange
rate regimes in today’s crisis-prone global economy. The issue concludes
with a report on the first months of the European Monetary Union and on
how it has so far delivered on expectations.