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These brief essays delve into the economic issues of the day for a generally informed readership.

2010 / No. 38
Posted 2010-12-28

When Do Recessions Begin and End?

by Kristie M. Engemann and Michael T. Owyang

With the funds rate driven to levels far below its target, the FOMC had no recourse but to adjust the target accordingly.
2010 / No. 37
Posted 2010-12-27

Unemployment and the Role of Monetary Policy

by Brett W. Fawley and Luciana Juvenal

On balance, the figure suggests that structural unemployment during economic downturns has increased since 1991.
2010 / No. 36
Posted 2010-12-10

Monetary Policy and Longer-Term Rates: An Opportunity for Greater Transparency

by Daniel L. Thornton

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.
2010 / No. 35
Posted 2010-12-09

Mortality Rates and the Business Cycle

by Rubén Hernández-Murillo and Christopher J. Martinek

Mortality rates no longer rise sharply in recessions.
2010 / No. 34
Posted 2010-11-10

The Downside of Quantitative Easing

by Daniel L. Thornton

Current excess reserves could create a massive increase in the money supply if banks significantly increase their lending or investing.
2010 / No. 33
Posted 2010-11-09

Is the Fed’s Definition of Price Stability Evolving?

by Kevin L. Kliesen

The FOMC’s "mandate-consistent inflation rate" is generally judged to be "about 2 percent or a bit below."
2010 / No. 32
Posted 2010-11-04

Japan Reenters the Foreign Exchange Market

by Brett W. Fawley and Luciana Juvenal

From 1999 to 2004 Japan unilaterally sold a combined, and unprecedented, 500 billion dollars of yen.
2010 / No. 31
Posted 2010-10-28

Is More QE in Sight?

by Richard G. Anderson

Most analysts have concluded that the LSAP successfully reduced long-term market interest rates. How, exactly, do LSAP-style programs succeed?
2010 / No. 30
Posted 2010-10-19

U.S. Historical Experience with Deflation

by Christopher J. Neely

The severe contractions and deflationary episodes that followed 19th century U.S. banking crises have shaped the U.S. perception of deflation.
2010 / No. 29
Posted 2010-10-13

Would QE2 Have a Significant Effect on Economic Growth, Employment, or Inflation?

by Daniel L. Thornton

The effect of QE2 on interest rates could be small and limited to an announcement effect.
2010 / No. 28
Posted 2010-10-06

Can the FOMC Increase the Funds Rate Without Reducing Reserves?

by Daniel L. Thornton

With the funds rate driven to levels far below its target, the FOMC had no recourse but to adjust the target accordingly.
2010 / No. 27
Posted 2010-10-04

Deflation and the Fisher Equation

by William T. Gavin

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.
2010 / No. 26
Posted 2010-09-27

The Effects of Large-Scale Asset Purchases on TIPS Inflation Expectations

by Massimo Guidolin and Christopher J. Neely

Large-scale asset purchases may have limited power to raise TIPS-implied inflation expectations—something that might appeal to policymakers fighting deflation.
2010 / No. 25
Posted 2010-09-14

Which Comes First: Inflation or the FOMC's Funds Rate Target?

by Daniel L. Thornton

Must the FOMC increase its target before inflation, or will inflation increase and cause the FOMC to increase its target?
2010 / No. 24
Posted 2010-09-03

The Monetary Base and Bank Lending: You Can Lead a Horse to Water…

by David C. Wheelock

Why was the increase in the money stock so small when the increase in the monetary base was so large?
2010 / No. 23
Posted 2010-08-09

The European Debt Crisis and U.S. Economic Growth

by Chanont Banternghansa and Adrian Peralta-Alva

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.
2010 / No. 22
Posted 2010-08-04

Sovereign Debt Shadows

by Silvio Contessi

All five peripheral EU countries face burdensome public debt and budget deficits, but the causes for uncertainty in each country’s situation differ.
2010 / No. 21
Posted 2010-08-03

Business Cycle Measures

by Kristie M. Engemann and Michael T. Owyang

Business cycle measures can provide timely statistical evidence of turning points.
2010 / No. 20
Posted 2010-07-12

Using Stock Market Liquidity to Forecast Recessions

by Michael W. McCracken

Market participants rebalance their portfolios in advance of a recession.
2010 / No. 19
Posted 2010-07-09

Why Aren’t the Chinese Buying More American Goods?

by Yi Wen

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.
2010 / No. 18
Posted 2010-07-01

A Jump in Consumer Loans?

by Hoda El-Ghazaly and Yadav Gopalan

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.
2010 / No. 17
Posted 2010-06-30

The First U.S. Quantitative Easing: The 1930s

by Richard G. Anderson

During 1932, with congressional support, the Fed purchased approximately $1 billion in Treasury securities.
2010 / No. 16
Posted 2010-06-15

Recent Changes in Labor Force Participation: Trend or Cycle?

by Riccardo DiCecio and Charles S. Gascon

During a recession, the participation rate typically declines as discouraged workers exit the labor force.
2010 / No. 15
Posted 2010-06-14

Why Do People Dislike Inflation?

by Yi Wen

Inflation is seldom caused by lump-sum transfers but is often caused by higher government spending programs.
2010 / No. 14
Posted 2010-05-19

Monetizing the Debt

by Daniel L. Thornton

A more interesting and economically relevant definition of “monetizing the debt” is based on the Fed’s motivation rather than its actions.
2010 / No. 13
Posted 2010-05-18

City Growth and Industry Employment Reallocation

by Rubén Hernández-Murillo and Christopher J. Martinek

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.
2010 / No. 12
Posted 2010-05-14

Economic Growth and the Global Savings Glut

by Yi Wen

Economic theory predicts that fast growth can lead to high saving rates if people lack financial institutions that allow them to borrow.
2010 / No. 11
Posted 2010-04-28

Monetary Policy and Asset Prices

by Brett W. Fawley and Luciana Juvenal

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.
2010 / No. 10
Posted 2010-04-22

“How Central Should the Central Bank Be?” A Comment

by Christopher J. Neely

The Reserve Bank presidents are fully accountable to our democratic institutions and the decentralized structure promotes healthy debate on monetary policy and regulatory issues.
2010 / No. 9
Posted 2010-04-15

Not Your Father’s Oil Shock

by Kristie M. Engemann and Michael T. Owyang

Factors other than changes in oil supply may cause changes in oil prices.
2010 / No. 8
Posted 2010-03-30

When Will Business Lending Pick Up?

by David C. Wheelock

The recent declines in tightening of lending standards suggest that business lending may be poised for a rebound.
2010 / No. 7
Posted 2010-03-16

Why Income Per Worker Differs Worldwide

by Riccardo DiCecio

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.
2010 / No. 6
Posted 2010-03-05

Money Supply, Credit Expansion, and Housing Price Inflation

by Yi Wen

Credit and M2 may be driven simultaneously as part of a broader financial intermediation process; a common underlying factor may be the interest rate.
2010 / No. 5
Posted 2010-02-12

Using FOMC Forecasts to Forecast the Economy

by Michael W. McCracken

FOMC members have incentives to construct their forecasts strategically.
2010 / No. 4
Posted 2010-02-03

Okun’s Law: Output and Unemployment

by Christopher J. Neely

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.
2010 / No. 3
Posted 2010-02-02

Are Low Interest Rates Good for Consumers?

by William T. Gavin

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.
2010 / No. 2
Posted 2010-01-15

Measuring Financial Market Stress

by Kevin L. Kliesen and Douglas C. Smith

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.
2010 / No. 1
Posted 2010-01-11

The Evolving Size Distribution of Banks

by Silvio Contessi

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.

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