St. Louis Fed's Review: 1918 Influenza Pandemic and Its Modern-Day Implications; A Comparison of Monetary Policy Rules; A Primer on the Empirical Identification of Government Spending Shocks; In Memoriam: Anatol

ST. LOUIS — The March/April issue of Review, the Federal Reserve Bank of St. Louis' journal of economic and business issues, features the following articles. The publication is also available on the St. Louis Fed's web site: https://research.stlouisfed.org/publications/review/.)

• "Pandemic Economics: The 1918 Influenza and Its Modern-Day Implications." The 1918 flu epidemic in the United States killed 675,000 people, more than the U.S. troops killed in both world wars combined. What would happen today if the nation were hit by an influenza pandemic? Surveying the economic literature as well as newspaper accounts of the time, economist Thomas A. Garrett compares the economic and human impact of the 1918 event with the potential impact on U.S. business and society today. Accounting for differences in race, income and place of residence, he concludes that an influenza pandemic today would likely have the most dramatic effect on the diverse populations living in America's urban areas.
• "Friedman and Taylor on Monetary Policy Rules: A Comparison." Milton Friedman and John Taylor are associated with different monetary policy rules, but economist Edward Nelson explores how the difference between the two economists' perceptions of how the economy works is not that large. Friedman and Taylor both emphasized Phillips curve specifications that impose temporary nominal price rigidity and the long-run natural-rate restriction. Also, they both agreed on the specification of shocks, policymakers' objectives, and trade-offs. Nelson found that where they differed was on the extent to which structural models should enter into the monetary policy decision-making process. He concludes that this difference helps account for the differences in their preferred monetary policy rules.
• "A Primer on the Empirical Identification of Government Spending Shocks."The literature on the effects of government-spending shocks lacks widespread agreement about the responses of consumption and wages. Proponents of shocks identified by structural vector autoregressions (VARs) show that consumption and wages increase. Proponents of the narrative approach, on the other hand, find that consumption and wages decrease. Researcher Kristie M. Engemann, economist Michael T. Owyang and PhD economics candidate Sarah Zubairy review these two identifications. Using alternative measures of government spending, output and the labor market, they show that although there are minor fluctuations within each identification, the disparate results between the two are robust to the alternative measures. Under the structural VAR approach, however, they find some differences between the responses to federal and state/local government spending.
• "In Memoriam: Anatol 'Ted' Balbach, 1927-2007." St. Louis Fed President William Poole shares his thoughts on the man who served as director of research for the Reserve Bank from 1975 to 1992, who died Dec. 1, 2007. As Poole notes, Balbach was the principal economic advisor to the St. Louis Fed's president when the "Great Inflation" took place, providing key support while the Fed brought inflation under control.
• "Market Bailouts and the 'Fed Put'." This is a reprint of a speech by William Poole, the president of the Federal Reserve Bank of St. Louis, to the Cato Institute in Washington, D.C., on Nov. 30, 2007.

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