Financial Market Efficiency and the Effectiveness of Monetary Policy

Improvements in information processing technology andderegulation, among other forces, are profoundlytransforming the financial sector of the United States and otheradvanced economies. Many of these changes are likely toimprove the efficiency of financial intermediation, in the sensethat the dispersion of valuations of claims to future paymentsacross different individuals and institutions is minimized. Forfamiliar reasons, this should be generally beneficial for theallocation of resources in the economy...