Although national income inequality is a subject of great concern in the popular press and in political rhetoric, income inequality at the local level is more evident because inequality tends to be much higher in densely populated areas.
Paying interest on reserves should allow us to better control the federal funds rate.
The new Treasury voluntary recapitalization program is simply the latest policy action of its kind, implemented to respond to recent changes in market perceptions of the risks facing the U.S. banking sector.
This essay plots the approximated (second-month) and actual growth rates of PCE since 1991 using real-time data and examines the differences.
Walter Bagehot—a 19th century English intellectual—summarized the lender of last resort function with the dictum “lend freely at a high rate, on good collateral.” In response to the mortgage-related distress in financial markets, the Fed has implemented a number of new lending programs. Prominent among these is the Term Auction Facility (TAF).
GDP in the second quarter of 2008 surprised many professional forecasters, who expected a much lower figure because of continuing difficulties in the housing sector and mounting job losses. What accounts for this surprisingly strong performance? The short answer is contributions from international trade, but this answer leads to two more questions.
The LIBOR-OIS spread has been the summary indicator showing the “illiquidity waves” that severely impaired money markets in 2007 and 2008.
The U.S. economy has experienced sustained trend growth of GDP and a decline in the volatility of macroeconomic variables since the mid-1980s, but has individual real income shared these same trends?
Why, with a high and rising overall U.S. and global inflation rate, has the nominal yield on the 10-year U.S. Treasury security remained below 4 percent for most of the past year?
Although some economists are concerned about the viability of corporate social responsibility in a competitive environment, recent studies suggest that engaging in it can be consistent with profit-maximization behavior.
Maintaining expectations of a low, stable inflation rate is essential to achieving the goals of monetary policy. But how, exactly, do households and firms form inflation expectations?
The relatively rapid decline in house prices since 2006 in the West and East Coast regions, and the relatively greater weight given these regions in the S&P/Case-Shiller National Home Price Index help explain why the index shows a more rapid decline in house prices for the United States as a whole.
Chinese households may improve their welfare by consuming more now because they can reasonably expect to be much richer in the future. Despite this fact, China’s saving rate is one of the highest in the world. This essay discusses three reasons why: uncertainty about the future, the need for retirement income, and an underdeveloped financial market and banking system.
If the recent growth in mortgage originations reflects the decline in the interest rate, then mortgage originations might be expected to decline when the contract rate increases. Indeed, mortgage originations did decline when contract rates rose after 2003. However, the level of originations continued to remain higher on average than pre-2003 levels.
The recent increase in commodity futures prices has been accompanied by a large increase in volatility that has raised the cost of maintaining margin accounts.
Globalization has helped spur China’s and India’s economic growth over the past 25 years, significantly increasing economic well-being in these populous countries. Although many people enjoy higher incomes, poverty remains a major problem.
The implementation of monetary policy in developed economies, in addition to a policy target rate and one or more discount rates, features a third, less-discussed interest rate—the “remuneration rate,” which is the rate of interest the central bank pays on the deposits that banks hold at the central bank. The Federal Reserve's current prohibition from paying explicit interest on deposits held at the Federal Reserve will end in 2011.
The lower relative prices paid by foreigners for U.S. goods and services are expanding exports and helping reduce the current account deficit. However, there is concern over a potential “firesale” of U.S. firms.
United States Treasury bill rates have declined to below 1 percent, and the spread between those rates and the federal funds rate has widened.
The effect that housing has on the economy has received increased attention in recent years—first for the record high boom in house prices and homeownership and then for the decline in house prices and the subprime market meltdown.
Sovereign Wealth Funds enable governments to save high current income for future spending when income may be lower.
Financial institutions have found it increasingly difficult to borrow money against collateral. The Federal Reserve has intervened repeatedly to ease liquidity pressures in financial markets.
As energy costs have risen, so have fears that these higher costs will derail economic activity.
The recent disassociation between the term spread and the real growth rate can be explained in part by the finance fundamentals behind the concept of the term spread.
The BLS began publishing an experimental series in April 2006 that measures average hourly earnings and average weekly hours of all nonfarm private-sector employees.
Although the Term Auction Facility is a temporary program, the Fed announced that it is considering a permanent facility for auctioning term credit.
Any recessionary effect on the economy caused by housing will be a consequence of its effect on consumption.
Since the early 1980s, oil-rich Gulf states have pegged their currencies to the U.S. dollar, benefiting from the relative stability of U.S. monetary policy.
In November 2007, the Federal Open Market Committee announced several changes to the process that it uses to make and report economic projections.
Income inequality has been and continues to be a major public policy topic.
In November 2007, the Federal Open Market Committee announced several changes designed to “improve the accountability and public understanding of monetary policy making."
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