Foreign-exchange-market intervention is generally ineffective when undertaken independent of monetary policy. But when undertaken as a goal of monetary policy, exchange-rate management can compromise price stability. This Economic Commentary explains the difficulties of implementing an...

Do hedge funds help or hurt the financial markets in which they operate? The highly publicized troubles of Long Term Capital Management have once again focused the attention of policymakers and the press on the hedge fund industry and the cry for its regulation. This Economic Commentary refutes...

The increasingly controversial Exchange Stabilization Fund is used to influence the international value of the U.S. dollar and to provide aid to foreign countries. The debate surrounding the Fund will become more informed, the authors suggest, when observers understand how to calculate the total...

An assessment of banks' changing involvement in highly leveraged transactions through the use of regulatory data collected in 1991 and 1992, which reveal that overall bank exposure to highly leveraged activities currently poses little threat to bank capital or to the bank insurance fund.

An analysis of the relationship between stock-market gyrations and business fixed investment, using the q theory (the ratio of the market value of financial liabilities to the replacement value of physical assets).

Like the bank notes that circulated in this country from 1863 to 1913, stored-value cards substitute the liabilities of private banks for government and central-bank liabilities. This shift may have important implications for the federal budget, the money supply, and monetary policy.

An investigation of one of the reasons why electronic payments have not yet supplanted cash and checks in retail transactions: Consumers willingness to use an innovation depends on the number of merchants who have already adopted it, and merchants willingness to invest in the innovation depends...

An analysis of the often-understated role of capital flows from the United States to Mexico following passage of the North American Free Trade Agreement in late 1993, examining their implications for the Mexican economy.

A discussion of the use of municipal debt issues to fund publicly supported stadiums, focusing on the role of federal tax exemption as a hidden subsidy in reducing local funding costs and on the rationale for seeking public subsidies of private, local facilities.

An examination of the banking reform efforts under way in Mexico, emphasizing how incentive effects can drive up the cost of these efforts and ultimately boost the cost of resolving the nation's debt problem.