What is MacroWeb?

This period, as stated above, was an expansionary period with the federal funds rate being cut three times from 3 ¾ in April to 3 ¼ in July on down to a final 3 percent in December. The Federal Reserve discount rate went from 3.5% in April down to 3% in July where it remained until December. Rates did not deviate much from targets and there were no unusual events occurring at the Federal Reserve during this time period. Real GDP growth was average, increasing by approximately 3% over the 3 quarters indicated. Inflation was not a major contributing factor.

Political factors seem to be key in a possible explanation for an expansionary monetary policy. In the 1992 election year, George Bush was the incumbent president and Bill Clinton, governor of Arkansas, was his opponent. The economy declined sharply in '91-'92 due, in part, to two million Americans losing their jobs in the 3 years following the Gulf War. (Unemployment for 1992 was high—around 7.5%). Bush's approval rating dropped and Clinton promised he would alleviate economic anxieties of working Americans. Therefore, in these two years, it would appear that Bush was pursuing policy to keep his presidency and Clinton was pursuing similar policy to keep his promises!

Who is Dave Tufte?

Copyright, Michelle Wilson, 2001.