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Allan Meltzer:
Leadership and Progress
Tim O'Neill:
Globalization: Fads, Fictions, and Facts
Douglas Lamdin:
Corporate Bond Yield Spreads in Recent Decades
Christopher Mills
and Eleonora Omarova: Predicting Currency Crises—A Practical
Application for Risk Managers
Ray Fair: Testing
for the New Economy in the 1990s
Stephen G. Cecchetti:
Monetary Policy in a Low Inflation Environment
Robert Eisenbeis,
Daniel Waggoner and Tao Zha: Evaluating Wall Street Journal Survey
Forecasters
Rajeev Dhawan:
Georgia State University’s Economic Forecasting Center
Book Reviews
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Testing for a New
Economy in the 1990s
The Stock Market Accounted For A Major Part Of The Boom.
 By Ray C. Fair
Ray C. Fair is a Professor of
Economics at Yale University.
The macroeconometric model
that is used in this paper can be
worked with on his website,
http://fairmodel.econ.yale.edu,
and various stock market
experiments can be performed.
This paper examines how much structural change there
was in the U.S. economy in the last half of the 1990s.
The results are consistent with the hypothesis that there
was only one major structural change, namely the huge
increase in stock prices relative to earnings. All other
large changes can be explained by this change. There is
no obvious reason for the large increase in stock prices
relative to earnings. Increased productivity growth does
not appear to be an answer since the data show that
there was only a modest increase in long run productivity
growth in the last half of the 1990s. Also, earnings
growth and the share of earnings in the economy were
not unusually large.
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