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- Title
Comments and Discussion.
- Authors
Blinder, Alan S.; Romer, David
- Abstract
This article discusses and comments on the article "Institutional Change and the Efficacy of Monetary Policy," by Barry Bosworth. Author's first criticism is that spending on consumer durables, mainly automobiles, should appear in Bosworth's rogues' gallery. This component of aggregate demand is roughly twice as large as spending on residential construction and somewhat larger than that on producer durables. It is also volatile, and there has long been substantial evidence that it is sensitive to interest rates. So it seems, at least potentially, a serious omission. The question is whether recent changes in the financial system have changed the sensitivity of spending on consumer durables to monetary policy. Housing tops both in the author's list of suspects and Bosworth's. The idea here is that innovations like variable rate mortgages and the end of disintermediation may have partially insulated the housing market from tight money because there is less quantity rationing and because consumers can now practice intertemporal substitution in the mortgage market without doing the same in the housing market.
- Subjects
MONETARY policy; HOUSING; BOSWORTH, Barry; ECONOMIC policy; FISCAL policy; INTEREST rates
- Publication
Brookings Papers on Economic Activity, 1989, Issue 1, p111
- ISSN
0007-2303
- Publication type
Article