Economic Synopses are short essays from our economists that provide insight and commentary on timely issues in economics, finance, banking and other areas, written for the interested, but not necessarily expert, reader.
When the pandemic caused unemployment to skyrocket, the lowest earners were the hardest hit.
Geographic dispersion in the share of African Americans likely accounts for the dispersion of COVID-19-related deaths.
Recent trade policy implemented to avoid shortages of essential medical equipment amid COVID-19 has been related to the country's trade imbalances in these goods.
Fed lending to foreign central banks for them to provide emergency lending aids the U.S. economy by stabilizing international financial markets.
The St. Louis Fed's District has a lower rate of COVID-19-related deaths than the overall U.S. rate.
About half the U.S. population resides on less than 200,000 square miles; the rest is spread over more than 3 million square miles.
The CARES act provides an extra $600 per week in unemployment benefits, but the purchasing power of those dollars varies across states, raising the question of whether the equal distribution of $600 across states is an equitable distribution.
In the U.S., the weeks lost due to inaction during the early stages of the COVID-19 pandemic helped spread the virus.
The weeks lost due to inaction in the U.S. during the early stages of the COVID-19 pandemic resulted in rationing of tests and a large number of confirmed cases.
The scope and speed of the international central bank policy response to COVID-19 has met or often exceeded that of the 2007-2009 crisis.
The short-term income benefits from expanded unemployment insurance are unlikely to outweigh the long-term benefits of working.
Waived employer payroll tax increases for state unemployment insurance appear to have increased layoffs.
On March 23, the Federal Reserve established the Term Asset-Backed Securities Loan Facility (TALF) to support consumer and small business lending.
All the announced MBS purchases are designed to provide liquidity and facilitate trading of agency MBS during a period of disruption associated with the coronavirus.
The largest potential wage loss comes from the health care and social assistance industry.
Fed policy appears to have assisted the corporate credit market during a period of unusually high risk and fire-sale prices.
Sectors most likely to be heavily impacted by the COVID-19 pandemic amount to 70 percent of GDP.
Quick action by the Fed to smooth the functioning of financial markets appears to have encouraged investors and stopped the historic downturn in the stock market.
With inflation currently low, the probability that it turns negative (deflation) will likely increase over the near term.
The money from relief checks will likely not last very long, even for low-income households.
States with relatively more COVID-19 cases tend to have a workforce less likely to face unemployment.
The Federal Reserve has taken quick action to aid financial markets.
The economy is showing both positive and negative reactions to shutdown measures.
Unemployment insurance may be the most effective way to help households right now.
As the pandemic continues, financially vulnerable firms might be at greater risk of closing.
What should guide a fiscal authority in conducting macroeconomic policy in the event of a severe viral outbreak?
A mere 81 of more than 3,000 counties produced half of total U.S. GDP in 2018.
Negative rates have many of the same effects as cuts in positive rates but put pressure on banks' financial conditions, which has restrained their use.
Measuring value-added trade provides a more accurate picture of global trade.
In times of global crisis, the rest of the world gains from investing in U.S. assets.
The college wealth premium has increased threefold since the 1970s.
A decline in housing permits and supply expectations may lead to softening in the 2020 housing market.
More-reliable cars may have contributed to the slow rebound of auto sales and jobs after the past recession.
Manufacturing exports and production might decline in the near future.
The current low PCE inflation rate can largely be attributed to energy, health care, and housing.
Tax-law changes can cause firms to change their organizational structure.
The rise in venture capital investment suggests the 2017 tax cuts will increase economic growth through more-profitable investment in innovation.
Some areas of the U.S. housing market are hotter now than during the 2002-06 boom.
The liquidity of government bonds has been even more valuable since the Great Recession.
What is driving the missing economic recovery since the Great Recession?
Financial panic is a new reality that may be affecting the aggregate economy.
The Bank of Japan purchases large amounts of Japanese government bonds, enabling it to control long-term bond yields.
The auto sector continues to play an important role in understanding recessions.
Higher bank capital requirements may buffer the effects of crises.
According to an economic model, St. Louis should have grown 11% since 2000 but grew 4.7%.
U.S. trade deficits appear to follow phases of industrialization.
During the Great Recession, firms in industries with higher shares of delinquent firms were more likely to go out of business.
Longer lives and fewer babies have contributed to a lower natural rate of interest.
Expectations of housing market conditions should be considered when forecasting recessions.
Current macroeconomic indicators generally decrease before recessions, but not before yield curve inversions.
Quantitative tightening is unlikely to noticeably impede economic activity.
China's technologies are diffusing rapidly throughout the world.
Economic uncertainty is highest in recent decades.
China has significantly increased its payments for the use of U.S. intellectual property.
A low natural rate of interest in normal times may call for unconventional policy in recessions.
The Taylor rule indicates the current federal funds target rate should be higher.
The past period's policy rate is extraordinarily important for setting the current period's policy rate in the modernized Taylor rule.
The total value of Bitcoin has declined as a share of all cryptocurrencies.
Industries most related to the construction industry were hit harder by the Great Recession.
The most likely candidates to hold multiple jobs are not who you would expect.
Identifying key suppliers and buyers could help identify the cause of certain economic downturns.
An inverted yield curve doesn't forecast recession; it forecasts conditions that make recession more likely.
Occupations with large employment and low income have a higher automation probability.
Primary deficits matter more than rising interest rates for public debt.
Fed communication eventually focused on influencing the public's expectations.
Diverse trends across countries and industries are behind the global decline in trade barriers.
So many ways to measure potential output, so little consensus…But different measurements don't necessarily alter central bank policy decisions.
Married men earn higher wages than single or married women and single men.
Cost of living explains only some of the differences in teacher pay.
Programs supporting the financial sector comprised most of the fiscal outflow during the Great Recession.
The U.S. had very low tariffs overall in 2016, but there were exceptions.
The customer capital model is consistent with Great Recession markup dynamics.
Current household-debt levels indicate little likelihood of a debt crisis.
Higher expected inflation, growth, and fiscal deficits raise U.S. long yields above foreign yields.
Small firms exhibit more countercyclical markups than large firms over the business cycle.
Both the yield curve and the unemployment rate tend to reliably predict recessions.
Rising productivity caused labor-intensive goods-producing firms to relocate abroad.
China is quickly catching up with other global leaders in innovation.
The effects from trade liberalization depend on a country's level of economic development.
Previous unilateral tariff increases have been associated with lower economic activity.
Growth in the price gaps between housing tiers appears to have reduced for-sale inventories in U.S. residential markets.
Several consecutive years of rental market strength appear to have contributed to the current housing shortage.
Homebuyers looking for lower- and middle-tier housing have been increasingly priced out of the new-home market.
The teen abortion rate in the United States has fallen over time.
Tax changes could entice firms to change their legal form of organization.
House price growth is not an accurate predictor of regional inflation.
Demand for Treasuries increased during and after the financial crisis, but may be slowing.
U.S. manufacturing's slump is largely due to the poor performance of the overall economy.
Is the United States headed for a "lost decade" similar to Japan's?
How services contribute to innovation and productivity may determine how economies develop and industrialize.
Imports increase more rapidly than exports in the short-run.
MSA real income in the early 1970s influenced population growth.
Political leaning might not play a dominant role in state and local government finances.
Financial conditions indexes can serve as a barometer of the health of financial markets.
Economics is driving energy consumption away from coal to natural gas.
There is less wage inequality in the St. Louis MSA than in the nation.
Little of the Recovery Act's highway funds were actually spent on improving highways.
The longer the unemployment duration, the larger the loss.
The impact of proposed tax code changes will vary significantly across states.
Innovation and technology transfer are significant sources of productivity growth.
The low long-term yield is likely a result of high foreign demand for Treasuries rather than a near-zero federal funds rate.
Pollution in the United States rises with economic activity, but at a noticeably lower pace.
Local minimum wages cast a wide net, reaching far beyond low-income residents.
Federal Reserve leaders must be willing to break from conventional wisdom.
Very small establishments closed at about twice the rate of larger ones.
"Soft" data suggest a much brighter economic outlook compared with the "hard" data.
Even as national unemployment has fallen, counties with persistently high unemployment also have more disability.
China has been using traditional and novel policy tools to fight speculative pressure to devalue the yuan.
An aging population may reduce wealth inequality.
Unsecured debt better predicts economic activity than secured debt.
U.S. firms have adjusted well in response to the recent appreciation of the dollar.
China's trade surplus has been dampened by an increasing deficit in services driven by tourism.
Interest rates are at historic lows due to the combined effects of policy, regulation, and financial development.
Foreign demand for U.S. Treasuries might be crucial in keeping a cap on U.S. borrowing costs.
Tax cuts for the middle class, even minor ones, would imply big declines in revenue. Closing the deficit by taxing the rich would require major tax hikes.
Little is known about the comparative quantitative importance of international versus domestic market imperfections on international capital flows.
Rising inflation rates will have larger effects on some groups than others.
Because oil-producing countries do hold public debt and do default, we must understand how oil reserves and production affect risk and economic performance.
Capacity and employment are affected by cyclical factors, but employment must also adjust to structural factors.
Deleveraging may be caused by a declining willingness by households to borrow instead of a tightening of borrowing constraints.
A decrease in the labor force and an increase in the elderly population could slow economic growth.
The widening gap between labor productivity and compensation is not unique to the current recovery.
Counties with severe declines in housing net worth during the 2007-09 recession experienced larger declines in employment.
Labor costs after 2009 grew more slowly than labor costs after 2001.
TBTF status leads to a wealth transfer from new buyers to existing holders of the debt.
Recent policies in China could change the structure of capital flows from China to the United States.
Individuals younger than 46 deleveraged the most after the financial crisis of 2008.
Deficits are expected to persist, debt is projected to grow.
China's very substantial foreign exchange reserves have declined precipitously and the Chinese policy corrections may impact the U.S. economy.
Gas prices in St. Louis can jump 10 percent overnight.
Financial crises affect high-income earners disproportionately because of their exposure to riskier assets.
The PMI seems to be a good, although not perfect, indicator of a country's current economic condition.
Based largely on predicted trends for labor force participation, GDP is projected to grow at an average annual rate of 2.2 percent over the next decade.
Death rates declined in the 20th century for most countries—but not Russia.
Rapid declines in house prices, negative home equity, and the number of households in default all contributed to the dramatic increase in mortgage defaults during the Great Recession.
Tightening of lending standards can account for part of the negative loan growth during the 2007-09 recession.
Unlike other components of private investment, residential investment has not yet recovered and remains well below its pre-recession level.
To assess the loss in aggregate production, unemployment and labor force participation must account for the human capital of workers.
Long-term unemployment increased disproportionately for older women after the Great Recession.
Assessing inflation's likely path matters to policymakers and those in financial markets.
Evidence suggests that the exchange rate appreciation is not to blame for China's slowdown.
Does India have a stagnant manufacturing sector or an exceptionally productive services sector?
Reduced credit creation, and not increased credit destruction, has been the key driver of the recent evolution of U.S. household debt.
Sound macroeconomic policies are key to preventing solvency crises in a currency union.
Texas accounted for 37 percent of the decline in the U.S. job market in March.
Returns on government debt bear little resemblance to returns on productive capital.
If financial engineering can distribute the pecuniary risk of medical research, then it can play a role in curing cancer.
The labor force participation rates for prime-working-age men have been falling across countries.
Changes in the aggregate price level can be traced back to changes in the underlying components.
The business cycle is more highly synchronized between countries that trade more differentiated intermediate products with each other.
The long-run trend of average wages has consistently failed to keep pace with overall economic growth.
The negative relationship between unemployment and earnings growth seems to hold across states.
The natural rate is viewed in some circles as a useful concept for the FOMC in setting the federal funds rate.
Health problems and disability claims have declined in the fastest-growing occupations.
It is puzzling why large monthly or quarterly oil price changes predict very small changes in the CPI but daily oil prices predict large changes in breakeven inflation.
Inflation expectations formed in the mid-2000s weren't very accurate"”in large part because of the shocks from the recession and financial crisis.
A standard decomposition suggests the role of oil supply (understood as the current physical availability of crude) has been small.
A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.
Reduced dynamism in the labor market is consistent not only with more stable, longer-lived jobs but also longer joblessness and less job switching.
GDP per hour (rather than GDP per capita) better measures labor productivity.
Large firms have been creatinga significantly higher fraction of jobs since the Great Recession.
As expected, falling crude oil prices lead to falling gasoline prices and lower inflation.
Countries with weaker economic fundamentals experienced higher currency volatility and capital flows.
Fear of demand-driven deflation calls for expansionary economic policies.
Overestimating how far the economy is away from its potential unnecessarily risks delaying the end of unusual monetary accommodation.
Measuring the output gap without accounting for the trend in labor force participation may lead to persistent misdiagnoses of the state of the economy.
The decline in the number of cardholders in delinquency and the number of accounts per cardholder in delinquency are primary factors affecting the fall in the delinquency rate.
FOMC statements have grown more complicated since the onset of unconventional monetary policy.
Market participants may not expect recent ECB policy to boost inflation.
Compared with previous recessions, the manufacturing sector does not show much slack. The construction sector, on the other hand, is below potential.
Job polarization has existed before, during, and since the Great Recession.
An unemployment statistic based on unemployment insurance is less useful because it does not measure unemployment itself.
Spanish and Italian government bond yields are not directly comparable to those of U.S. Treasuries because the bonds are paid in different currencies.
Market mistiming reduces profits.
Most forecasters think the surprise first-quarter contraction is not a harbinger of another recession, but history suggests caution.
Longer benefits may reduce unemployed workers' job search efforts, decreasing their likelihood of becoming reemployed.
Quits rise when the economy is good; layoffs and discharges rise when the economy isn't.
Deferment or forbearance may be masking the true student loan default rates in recent years.
Current slack in the economy may be caused primarily by the construction sector.
Student loan borrowing accelerated during the Great Recession and now outranks any non-mortgage debt, including auto loans and credit card debt.
If employment revisions are systematically biased, they could affect how policy is conducted.
Data revisions suggest that job growth has been much stronger than initially reported the past two years.
We construct a new measure of the unemployment rate based on a plausible assumption that some, but not all, of the discouraged workers reenter the labor force.
The continued use of a currency depends on the stability of its value and the existence of alternatives for achieving final settlement.
There has been a significant and steady drop in the unemployment rate since late 2009, but unemployment duration remains high and employment as a percentage of the working-age population has not recovered.
The number of discouraged workers is small relative to the rest of the working-age population, and most discouraged workers do not stay in that category too long.
While households decreased credit card debt between 2007 and 2010, the process varied by education level between the extensive margin (how many households borrowed) and the intensive margin (how much households borrowed).
The volume and volatility of international capital flows have motivated recent interest in the optimal use of capital controls and the communication and coordination among central banks.
Longer-term yields declined by relatively large amounts on days when the FOMC made specific QE announcements. However, the objective of QE has been to reduce long-term yields beyond the levels they would have reached without QE.
The evidence from last summer suggests that QE programs have had the desired effect on asset prices.
Inflation expectations in Japan have recently risen above their historical average.
The diverging paths of total hours worked account for most of the difference in GDP growth between Japan and the United States.
The short-term volatility of the price of nondurable goods, especially energy, may explain why inflation occasionally appears off target. The recent decline in average inflation may be partially attributable to the ongoing reduction in the cost of durable goods and a significant deceleration in the inflation rate of services expenditures.
The current housing boom is the first nationwide boom since the postwar era not driven by increased demand for owner-occupied housing.
While bank lending contracts during the typical recession, liquidity in bond markets may not.
Firms started during recessions, especially those started in 2008, have grown less during the first 3 years of their life than those started in non-recession years.
The economy is too complex to be summarized by a single rule. Economies are constantly changing in ways difficult to explain after the fact and nearly impossible to predict. Consequently, policymakers seem destined to rely on discretion rather than rules.
The Federal Reserve is just one of several central banks that have adopted forward guidance since the beginning of the financial crisis and in an environment of near-zero policy rates (zero lower bound).
One of the most interesting features of the Great Recession is that"”contrary to other global recessions"”it was mostly a rich-country phenomenon.
Consistent with national data, foreign sales of affiliates of U.S. multinational firms headquartered in the Eighth Federal Reserve District are larger for Europe and the Asia Pacific region"”not Mexico and Canada, the major U.S. trading partners.
Forward guidance consists of communicating to the public the stance of monetary policy that is expected to prevail in the future.
Economic growth requires more labor, more and better capital, and up-to date technology—what might be collectively referred to as social infrastructure— to support entrepreneurship and efficient markets. It is hardly surprising that periods of more-rapid economic growth include invention, innovation, new methods of production (e.g., the assembly line, robotics), and entrepreneurship.
The relationship between unemployment and output growth changes during recoveries.
This national outlook masks significant variation among states in their paths to recovery.
As the IOER rate increases, less money will be given to the Treasury and more will be given to banks for the sole purpose of holding excess reserves (i.e., idle deposits at Federal Reserve Banks).
Manufacturing jobs as a percentageof private employment has fallen by half"”from about 21 percent in 1987 to less than 11 percent today. Yet, manufacturing output as a percentage of private output is cyclical with a fairly flat trend averaging about 14 percent.
Some analysts, noting Japan's continued slow deflation, assert that Japan is trapped in a slow-growth, deflationary equilibrium. Former Governor Shirakawa argued that Japan had "gotten out""”at least when judged by the growth of real GDP.
Not all who are eligible to receive unemployment benefits actually collect them.
With more research and given the limits of conventional fiscal and monetary policies in addressing the consequences of jobless recoveries, a U.S. version of Kurzarbeit may provide another option in the policymaker's toolkit.
Adjusting for inflation, population growth, and a risk-free real interest rate shows there is still a substantial gap between the peak of household wealth in 2007 and the level today.
Weak lending may still be the culprit behind low inflation, but monetary aggregates may no longer closely track credit conditions.
Over their working lifetimes, college graduates who entered the workforce many decades ago experienced a greater increase in wages than more-recent college graduates.
Significant store-of-value demand for housing suggests a bubble that could burst, especially when both the household income growth rate and the savings rate start to decline and capital controls in China start to relax.
For a significant number of industries - representing roughly a quarter of the U.S. economy - the most recent recession has been business as usual when judged by pre-recession trends. For a slightly larger group of industries, mostly related to construction, manufacturing, and trade, the contractions have been severe, reinforcing a preexisting process of steady relative decline.
Despite the recent recovery in house prices, most state economies have yet to recover from the Great Recession.
U.S. gross domestic product (GDP) contracted significantly and persistently during the recent financial crisis and recession. Lessons can be learned from comparing the U.S. experience with that of other industrialized countries.
Home equity did not increase much for households younger than 35 years of age between 1998 and 2007 because the increase in house prices was offset by an equivalent increase in mortgage debt.
Although we can't be certain of the size of the effect, the ECB's recent experience suggests that eliminating interest paid on reserves held with the Federal Reserve would not substantially increase bank lending and money growth.
Markets have come to believe that the Bank of Japan can and will raise Japan's inflation rate to meet its new target.
Recovery of the construction sector seems a necessary ingredient for a strong and sustained recovery of economic activity and a reduction in the unemployment rate.
Under this latter scenario, the Fed is not monetizing government debt"”it is simply managing the supply of the monetary base in accordance with the goals set by its dual mandate.
The excess supply of commercial and residential real estate might explain why the historically low nominal and real interest rates have had relatively little effect on stimulating investment.
The male labor force was hit harder during the recent recession because more jobs were lost in occupations and sectors that traditionally employ more men.
The residential real estate market showed additional signs of improvement in 2012, though the recovery has been quite different for single-family compared with multifamily markets.
The November 2012 unemployment rate would have been 1.6 percent higher had the labor force participation rate declined as it did following the 2001 recession.
Repatriation taxes are unlikely to explain the rise in cash holdings of U.S. firms.
Federal revenue is currently well below its postwar, pre-crisis average, while expenditure is well above, with both factors contributing to a large and persistent deficit. Under current law, the deficit situation would be quickly, if painfully, resolved, with the lion's share resulting from increased tax revenue.
Most central banks implement quantitative easing through asset purchases. Sweden took a different path.
When the economic shocks that cause recessions in different economies have large common components, there may be lessons to be learned by studying how different economies respond.
The Fed's concern for housing is a relatively new phenomenon. Historically, house price bubbles have been localized and affected only areas with rapid growth. The latest housing bust, however, was a nationwide problem with important ramifications for employment and economic activity.
It is reasonable to believe that output, employment, and inflation will return to their long-run or targeted values slowly and steadily.
Although similar in many ways, subprime hybrids were really different from prime hybrids.
Concealed Earnings fraud accounts for almost two-thirds of the total overpayments due to all fraud.
Our approach offers several advantages over LSAPs as a financial mechanism to enhance forward guidance.
The behavior of term OIS rates following the three instances of FOMC verbal guidance provides no support for the efficacy of the FOMC's forward guidance monetary policy.
Assessing the state of the economy requires estimates of trends in employment and the labor force. Large monthly fluctuations make it difficult to infer these from monthly data.
A GIIPS crisis wouldn't have too strong an effect on the U.S. economy, but an EU-wide crisis may be a serious concern.
If investment spending is sufficiently insensitive to interest rate changesand the effect of Fed actions on interest rates is sufficiently weak, the net effect of the persistent zero interest rate policy could be negative.
Vehicle sales have been a bright spot during the tepid rebound of the American economy from its 2009 trough.
Politicians, market participants, and economists have argued aboutwhether the increased trading induced by the growth of index funds overthe past decade is a cause of high commodity prices.
Ultimately, covered bonds and ABS are complements, not substitutes.
Changes in wealth, according to our simple calculations, can account for almost all of the observed consumption fluctuations of the past two decades.
Little difference in economic performance during the past two decades"¦is consistent with the theoretical and empirical evidence that monetary policy has no permanent effect on real variables.
The United States can simply recycle the financial capital inflows from China and re-export them back to China in the form of FDI. In so doing, the United States gains a substantially larger rate of return from FDI than China does from owning U.S. government bonds.
Gross job losses for large firms were 60 percent higher in 2009:Q2 than in 2006:Q1, while those for medium and small firms were 42 percent and 12 percent higher, respectively.
Okun's law can be a useful guide for monetary policy, but only if the natural rate of unemployment is properly measured.
FDI flows from overseas parent companies contracted, but intracompany debt and reinvested earnings were affected much more than equity FDI.
Recent changes in the relationshipsamong GDP growth, the unemploymentrate, and the employment-to-populationratio cast doubt on using these relationshipsto predict future unemployment.
The European debt crisis could certainly affect the U.S. economy through other channels"¦but its direct impact on U.S. exports is likely to be small.
One look at recent Congressional Budget Office data shows how much estimates of the output gap can change as time passes.
During 1995-2007, home equity increased more than gross income for high-, low- and middle-income groups.
Greater transparency is a means to better synchronize the public with policymakers and minimize the risks of undesirable economic outcomes.
Disentangling the true drivers of oil prices is a critical first step for allocating resources and designing good policy.
Initial claims may now be useful for forecasting employment growth during periods of increasing economic activity.
The hump in the Greek yield curve exists because the calculated yields assume that the bonds will pay off at their full value but market prices incorporate expectations that the payoff will be much lower.
It is not clear how monetary policy might be used to reduce local unemployment rates where recruiting intensity is high but the right kind of worker is hard to find.
The enormous quantity of excess reserves can create an even greater expansion in the money supply.
How should one conclude whether the data have come in stronger, weaker, or as expected?
Employment turnover was significantly lower following the Great Recession than following the previous two recessions.
The recent behavior of key fiscal policy variables draws some parallels with the U.S. experience in the Civil War and the two world wars. A specific concern is the possibility of high inflation to finance the accumulated debt.
One common threshold is that labor market conditions are improving when weekly unemployment claims fall below 400,000.
Jobless recoveries since 2000 may be attributed to a slowdown in the long-term employment trend.
The slow economic recovery may be, at least in part, the natural result of the real estate bubble.
In order to maintain its credibility, however, the FOMC will have to take actions consistent with achieving its stated inflation objective.
Anemic investment in residential and commercial real estate has been a significant factor contributing to slow growth in employment.
The spot prices of West Texas Intermediate and Brent crude oil recently diverged. If this divergence persists, economists and energy analysts may want to focus on Brent prices when predicting the level of gasoline prices.
The boom in real estate prices during the early 2000s and the subsequent bust were key factors underlying the recessions in the United States and Europe.
Federal Reserve programs during the recent financial crisis sought to provide liquidity to individual firms or industries. An interesting additional question is whether the aggregate amount of liquidity in the economy was appropriate before and during the recent financial crisis.
Balanced-budget rules alone are not sufficient to ensure states' long-term fiscal health.
Households are the sector that the financial accelerator appears to have hit hardest, according to the data.
According to economists, in the 1980s and 1990s, immigration of low-skilled workers may have increased the labor supply of highly skilled women, and immigration of highly skilled workers may have increased the rate of innovation in the United States.
Firms started repaying their debts during 2008-2009, and they did so while simultaneously accumulating highly liquid assets. These two observations are puzzling if one believes firms are purportedly starving for credit but cannot obtain it.
The only outcome consistent with the Fisher equation holding and the FOMC's zero interest rate policy is that the "long run" is considerably longer than 4.5 years.
The greater a component's SNR, the more useful the component should be in forecasting headline CPI.
The embrace of ad hoc capital controls to address temporary market inefficiencies on a case-by-case basis, while pragmatic, perpetuates the view that each capital crisis is an isolated example of failed financial institutions.
It appears that mortgage origination and securitization is currently "in limbo": Private securitization has all but disappeared and is being absorbed by government- sponsored enterprises.
The actual gender wage disparity (which compares the wages of male and female workers with similar labor-force characteristics) is lower than the raw gender earnings gap.
Before 2000, the tax burden shifted from the lowest 80% of earners to the highest 20%; since 2000, the burden has shrunk for all groups, but more so for the highest earners.
In response to volatile market conditions, the G-7 financial authorities announced late on March 17 that they would jointly intervene the next day to reduce the value of the yen, citing concerns about "excess volatility and disorderly movements." The yen immediately depreciated and traded with much less volatility in the subsequent week.
Contrary to popular perception, the foreclosure process can be very costly for a lender"¦it remains a puzzle as to why such large numbers of mortgages in default enter into foreclosure in the first place.
The government increased payments to individuals without reducing spending elsewhere in the budget.
The rise in the national debt... is entirely a consequence of the federal government's increase of expenditures without an offsetting increase in revenues.
Oil price shocks appear to have only transitory effects on headline inflation and virtually no impact on measures of underlying trend inflation.
Keeping the policy rate significantly and persistently below "long-run equilibrium rates" may inflate asset prices.
If oil prices continue to rise and the RMB continues to appreciate, the U.S. inflation rate may increase at a faster pace in the near future. And this would have an unwelcome impact on consumers' wallets.
Neither core nor headline inflation measures can consistently and reliably predict medium-term inflation well enough to be of much use to policymakers.
Income inequality statistics ignore temporal changes in household income.
The experience of the past decade illustrates the sensitivity of inflation in emerging markets to rapidly rising food prices.
Fluctuations in the price of motor fuel (mainly gasoline) have caused most of the monthly noise and year-over-year fluctuations of headline CPI inflation over the past four years.
In the United States, wide disparity exists in the health of individuals with different levels of education.
Permanent increases in the monetary base foreshadow eventual increases in inflation that can increase, rather than reduce, unemployment.
The evidence suggests that the combination of a slowdown in trade finance and inventory adjustments likely explain the recent trade dynamics.
Despite U.S. fiscal problems, the Fed appears to still retain excellent inflation credibility with financial markets"¦ Although confidence in the Fed might explain the quiescence of inflation expectations, the structure of U.S. government debt may be more important"¦ [I]nflating away the U.S. debt simply would not work because a high proportion of the debt is in short-term or inflation-protected securities.
The average relationship between changes in the 10-year Treasury yield and changes in the funds rate over the 1987-2007 sample period is not indicative of the relationship between changes in the funds rate and changes in the 10-year Treasury yield that existed for more than a decade prior to the financial crisis.
Housing tends to contribute significantly to an economic recovery.
But because this [Chinese] exchange rate policy is externally focused and relies heavily on regulations, which restrain normal market forces, it is reasonable to say that the policy constitutes currency manipulation for purposes of gaining an advantage in trade.
As long as the strength of the recovery remains uncertain, there are few other investment opportunities, after adjusting for risk and taxes, with anticipated returns greater than the near-zero interest the Federal Reserve pays on deposits.
The return to a college education varies widely across U.S. cities.
Monitoring of prices is essential lest future adjustments be misunderstood by the public as part of the dynamics of aggressive monetary policy.
In contrast, most economists believe that central banks have little or no ability to directly affect employment. The effect of monetary policy actions on employment is indirect and stems from central banks' ability to affect output growth in the short run and achieve price stability in the long run.
With the funds rate driven to levels far below its target, the FOMC had no recourse but to adjust the target accordingly.
On balance, the figure suggests that structural unemployment during economic downturns has increased since 1991.
The FOMC's two-pronged approach involves a potential conflict: forward guidance assumes a high degree of substitutability across the maturity structure, while quantitative easing assumes a low degree.
Mortality rates no longer rise sharply in recessions.
Current excess reserves could create a massive increase in the money supply if banks significantly increase their lending or investing.
The FOMC's "mandate-consistent inflation rate" is generally judged to be "about 2 percent or a bit below."
From 1999 to 2004 Japan unilaterally sold a combined, and unprecedented, 500 billion dollars of yen.
Most analysts have concluded that the LSAP successfully reduced long-term market interest rates. How, exactly, do LSAP-style programs succeed?
The severe contractions and deflationary episodes that followed 19th century U.S. banking crises have shaped the U.S. perception of deflation.
The effect of QE2 on interest rates could be small and limited to an announcement effect.
With the funds rate driven to levels far below its target, the FOMC had no recourse but to adjust the target accordingly.
So, according to Irving Fisher, one reason to worry about deflation is that the federal funds rate is expected to be held near zero as the economy grows out of this recession.
Large-scale asset purchases may have limited power to raise TIPS-implied inflation expectations"”something that might appeal to policymakers fighting deflation.
Must the FOMC increase its target before inflation, or will inflation increase and cause the FOMC to increase its target?
Why was the increase in the money stock so small when the increase in the monetary base was so large?
The recent strengthening of the correlations between U.S. GDP growth and that of Mexico, Canada, and Euro-19 validates further consideration of the performance of U.S. trade partners for growth.
All five peripheral EU countries face burdensome public debt and budget deficits, but the causes for uncertainty in each country's situation differ.
Business cycle measures can provide timely statistical evidence of turning points.
Market participants rebalance their portfolios in advance of a recession.
The important point is that both the Chinese trade surplus with the United States and the amassed foreign reserves result from the savings decisions of Chinese consumers.
The dramatic increases [in consumer loans] over the past few months have been caused by a new reporting requirement issued by the Financial Accounting Standards Board.
During 1932, with congressional support, the Fed purchased approximately $1 billion in Treasury securities.
During a recession, the participation rate typically declines as discouraged workers exit the labor force.
Inflation is seldom caused by lump-sum transfers but is often caused by higher government spending programs.
A more interesting and economically relevant definition of "monetizing the debt" is based on the Fed's motivation rather than its actions.
Cities initially more specialized in older technologies may have had more difficulty adapting to newer technologies because skills in initially dominant industries were not useful to new industries.
Economic theory predicts that fast growth can lead to high saving rates if people lack financial institutions that allow them to borrow.
The housing market crisis is the latest reminder that asset prices can and do run wild at rates capable of negative effects on real economic activity. Not surprisingly, this has reinvigorated debate over whether central banks should respond to asset price bubbles.
The Reserve Bank presidents are fully accountable to our democratic institutions and the decentralized structure promotes healthy debate on monetary policy and regulatory issues.
Factors other than changes in oil supply may cause changes in oil prices.
The recent declines in tightening of lending standards suggest that business lending may be poised for a rebound.
A higher entry cost distorts the industry structure and the allocation of productive factors across firms, which results in lower total factor productivity and output per worker.
Credit and M2 may be driven simultaneously as part of a broader financial intermediation process; a common underlying factor may be the interest rate.
FOMC members have incentives to construct their forecasts strategically.
U.S. output growth declined less than in most other industrialized countries while U.S. unemployment rose higher and faster than it did in most other major industrialized countries.
Although banks' cost of funds has dropped dramatically with the federal funds rate target, households' cost of funds has remained high, especially if we look at their cost of borrowing relative to their rate of return on saving.
Although the STLFSI suggests the level of financial stress in the markets has declined significantly since September 2008, the stress level remains modestly higher than average.
If limiting the size of large banks were considered appropriate to reduce systemic risk, it would be a clear change of direction relative to the long-term evolution of the industry.
Policymakers should not think of price stability and economic stability as competing objectives but as complements"”the best way to achieve the latter is to be firmly committed to achieving the former.
Many analysts fear that a rising saving rate could hamper the economic recovery.
We offer a word of caution to policymakers: Policies based on point estimates of the output gap may not rest on solid ground.
Expansions are usually associated with plentiful vacancies and a low number of unemployed workers. During recessions the unemployment pool swells while employers seek to fill fewer job openings.
The changes in international trade and finance are linked to the changes in business cycle correlations.
Many analysts are cautiously optimistic that the house price decline has ended, citing that house prices increased in June and July. There are several reasons for being cautious.
We should expect a third business cycle in succession in which the real federal funds rate reaches its trough well after the economy begins to recover.
Our finding is consistent with some recent, substantial volatility in the U.S. corporate bond market and leaves open a possibility that additional, future shocks to default premia may have long-lived effects.
The fluctuations in home construction (and prices) have been widely discussed, but swings in the financial services sector also are important elements of economic activity within U.S. states.
Experience demonstrates that raising reserve requirements is surely not the best way to eliminate excess reserves.
Would financial markets and the economy have been better off if the Fed pursued a policy of quantitative easing sooner?
Caution is necessary when making inferences based solely on aggregate loans data.
A post-World War II record decline in world trade is likely in 2009.
When broken down by price level"”high-priced, mid-priced, and lower-priced homes"”the housing boom and subsequent implosion affected each tier differently.
Migration incentives for working-age and retired individuals are quite different and are sensitive to the level of human capital within the family.
The marked rise in longer-term rates is reflected in a rise in both real rates and expectations for inflation.
Pronounced cycles and booms in asset prices have usually accompanied widening trade deficits.
The sale of typical securities would force the Fed to contract its lending programs, whereas the sale of Fed bills would not.
It's hard to make a firm prediction as to when the Fed will raise interest rates.
Economists focus on certain indicators that might signal when one business expansion ends and the next one begins.
The U.S. financial growth between 1995 and 2006 certainly translated into record-high shareholder returns. Labor compensation returns were also dramatically high at the onset of the current crisis.
Given the size of the underlying markets, cutting the cost of capital to firms and households by reducing the yields required on long-term corporate bonds and mortgages is a key policy objective.
Chairman Bernanke seems to suggest that the purchase of a large quantity of longer-term government securities might reduce longer-term rates.
"Libor-OIS remains a barometer of fears of bank insolvency."
While the data seem to suggest that lenders did the right thing by tightening standards and increasing denials...the ongoing financial crisis suggests that they did not tighten them enough.
...an unusually high percentage of the world's large countries and major U.S. trading partners are currently experiencing a recession.
We merely want to see whether, historically, fast growth of the monetary base has been associated with faster growth of real output.
The Financial Stability Plan, initiated under the belief that "[t]here is more risk and greater cost in gradualism than in aggressive action," has several features.
"The economic performance during the current recession is sharply different from the 1929-33 episode in most key respects, but not in all..."
"The CPFF is regarded as a hallmark of success among credit-easing policies."
"Economic misfortunes have caused many to reassess their finances, triggering sharp reversals in borrowing and spending habits."
"The root of the problems of the British banks is the same as that of American banks: shaky mortgage-backed securities."
"Although the current recession may"¦ be the longest in the postwar period, it is by no means certain that it will be the deepest, but it's increasingly looking that way."
"Here, I answer selected questions asked by readers of my earlier essay."
"One way to examine the composition of assets on the Fed's balance sheet is to group them according to the objectives of the programs used to acquire them."
"The BDI can be viewed as the equilibrium price of shipping raw materials, determined by the supply of cargo ships and the demand for transporting raw materials by ship."
"Banks typically tighten credit standards and/or loan terms as the economy weakens and nonperforming loans increase. But an adverse shock from outside the financial sector can be just as important"”such as a sharp increase in oil prices or a plunge in house prices."
"The Nordic bank resolution is widely regarded as among the most successful in history."
"On average, professional forecasters have tended to be less accurate when the U.S. economy was in recession."
"Market perceptions of sovereign default risk have risen recently."
"Bagehot's principal message is that the first task of a central bank during a financial panic is to end the panic."
"The Federal Reserve Board has used Section 13(3) of the Federal Reserve Act to create several new lending facilities to address the ongoing strains in the credit market."
"A bankers' acceptance is created when a bank agrees to "˜accept,' or guarantee, a future payment between two firms."
"In a recession, the severity of the decline is just as relevant as the duration of the recession."
"The first two quarters of 2008 show sharply decreased expansion and increased contraction, followed by a third-quarter rebound."
"The current recession actually looks relatively mild, so far, when we look at the decline in industrial production."
"Agreement about current-year CPI inflation for 2008 began to deteriorate about midyear."
"Paying interest on reserves should allow us to better control the federal funds rate."
"Lend freely at a high rate, on good collateral."