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We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the United States, the United Kingdom, and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard "Taylor-type" rule or as arguments in an augmented interest rate rule. Our empirical evidence, based on measures of the output gap proxied by marginal cost calculations, suggests that monetary policy- makers may use asset prices and exchange rates not only as part of their information set for setting interest rates, but also to set interest rates to offset deviations of asset prices or exchange rates from their equilibrium levels. These results are open to several alternative interpretations. [ABSTRACT FROM AUTHOR]

The article focuses on the strategy of economic policy for less-than-total war in the Unites States. According to the author goals for readiness for economic mobilization program are to get set so that if war breaks out Americans can mobilize fully in months rather than years, and secondly to develop enough ready strength in Great Britain to guarantee the United States the necessary months in case of war. The control problems of readiness differ in kind as well as in degree from those of full mobilization. The lack of wartime patriotic fervor implies more compulsion behind economic policy. Inflation impairs efficiency by bending the measuring rod of cost accounting and by making the hoarding of scarce materials a protective to profit. Qualitative controls on installment and real estate credit will be at their most powerful when their effect is compounded with that of drastic shortages of new durable goods to buy. Building up to a plateau of readiness obviously creates an inflation problem. Inflationary pressure arising from the demand-suction process may be less intense than in full mobilization.