Critics of an explicit inflation target argue that it would require additional fluctuations in real output and unemployment. I argue that theory and practice have shown this alleged dilemma to be a false one. However, an inflation target would demand more communication. The Fed would need to...

The current world recession brings back the perennial debate over the role of financial instability as a cause of cyclical fluctuations in economic output and employment. The consensus that banks took on excessive risk leaves unanswered key questions. First, how should government regulate risk...