Editors’ Summary of the Brookings Papers on Economic Activity – 2000 No 1

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-ninth
conference in Washington, D.C., on March 30 and 31, 2000. This issue of
Brookings Papers includes the papers and discussions presented at the
conference. The first paper presents and tests a new model of inflation
that rejects the conventional theory of a natural rate of unemployment. It
shows that a rate of inflation that is above zero but too low to factor into the
decisionmaking of most workers and employers will permit unemployment
to be sustained well below its so-called natural rate. The second
paper examines “new economy” explanations for the recent spectacular
rise in stock prices by comparing the ability of stock values and professional
forecasts of U.S. firms’ earnings to predict firms’ investment behavior.
The third paper applies growth accounting methods to recently revised
official U.S. productivity data to analyze the sources of the recent surge
in productivity and to offer informed judgments about whether it is likely
to continue. The fourth paper investigates the possibility of a link between
share prices, interpreted as an indicator of future profitability, and unemployment
across a sample of industrial countries whose unemployment
rates diverged during the 1990s.