Economic Synopses

Short essays on the economic issues of the day written for a generally informed readership.

2011, No. 41

Initial Claims and Employment Growth: Are We at the Threshold?

One common threshold is that labor market conditions are improving when weekly unemployment claims fall below 400,000.


2011, No. 40

Jobless Recoveries or Jobless Growth?

Jobless recoveries since 2000 may be attributed to a slowdown in the long-term employment trend.


2011, No. 39

Real Estate Bubbles and Weak Recoveries

The slow economic recovery may be, at least in part, the natural result of the real estate bubble.


2011, No. 38

Inflation Objective and Policy Credibility: A Potential Problem for the FOMC

In order to maintain its credibility, however, the FOMC will have to take actions consistent with achieving its stated inflation objective.


2011, No. 37

Why Is Employment Growth So Low?

Anemic investment in residential and commercial real estate has been a significant factor contributing to slow growth in employment.


2011, No. 36

Using Brent and WTI Oil Prices to Predict Gasoline Prices

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.


2011, No. 35

Construction and the Great Recession

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.


2011, No. 34

Liquidity Crises in the Small and Large

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.


2011, No. 33

State Balanced-Budget and Debt Rules

Balanced-budget rules alone are not sufficient to ensure states’ long-term fiscal health.


2011, No. 31

Immigration at the Extremes of the Skill Distribution

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.


2011, No. 32

Households During the Great Recession: The Financial Accelerator in Action?

Households are the sector that the financial accelerator appears to have hit hardest, according to the data.


2011, No. 30

Searching for the Financial Accelerator: How Credit Affects the Business Cycle

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.


2011, No. 29

The FOMC’s Interest Rate Policy: How Long Is the Long Run?

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.


2011, No. 28

Should Food Be Excluded from Core CPI?

The greater a component’s SNR, the more useful the component should be in forecasting headline CPI.


2011, No. 27

Capital Controls by Any Other Name

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.


2011, No. 26

Changes in the Mortgage Market Since the Crisis

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.


2011, No. 25

The Gender Wage Gap

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.


2011, No. 24

Tax Rates and Revenue Since the 1970s

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.


2011, No. 23

The Great Foreign Exchange Intervention of 2011

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.


2011,No. 22

Some Closure on Foreclosures?

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.


2011, No. 21

The Federal Debt: What’s the Source of the Increase in Spending?

The government increased payments to individuals without reducing spending elsewhere in the budget.


2011, No. 20

The Federal Debt: Too Little Revenue or Too Much Spending

The rise in the national debt... is entirely a consequence of the federal government’s increase of expenditures without an offsetting increase in revenues.


2011, No. 19

Oil Price Shocks and Inflation Risk

Oil price shocks appear to have only transitory effects on headline inflation and virtually no impact on measures of underlying trend inflation.


2011, No. 18

Is the FOMC’s Policy Inflating Asset Prices?

Keeping the policy rate significantly and persistently below "long-run equilibrium rates" may inflate asset prices.


2011, No. 17

RMB Appreciation and U.S. Inflation Risk

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.


2011, No. 16

Core Versus Headline Inflation Again

Neither core nor headline inflation measures can consistently and reliably predict medium-term inflation well enough to be of much use to policymakers.


2011, No. 15

Income Mobility

Income inequality statistics ignore temporal changes in household income.


2011, No. 14

Food Prices and Inflation in Emerging Markets

The experience of the past decade illustrates the sensitivity of inflation in emerging markets to rapidly rising food prices.


2011, No. 13

CPI Inflation: Running on Motor Fuel

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.


2011, No. 12


2011, No. 11

The Effects of Education on Health

In the United States, wide disparity exists in the health of individuals with different levels of education.


2011, No. 10

Monetary Policy's Effects on Unemployment

Permanent increases in the monetary base foreshadow eventual increases in inflation that can increase, rather than reduce, unemployment.


2011 No. 9

U.S. Trade Springs Back

The evidence suggests that the combination of a slowdown in trade finance and inventory adjustments likely explain the recent trade dynamics.


2011, No. 8

Fiscal Policy and Expected Inflation

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.


2011, No. 7

Monetary Policy at the Zero Bound

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.


2011, No. 6

Housing's Role in a Recovery

Housing tends to contribute significantly to an economic recovery.


2011, No. 5

The Difference Between Currency Manipulation and Monetary Policy

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.


2011, No. 04

Are Bank Reserves and Bank Lending Connected?

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.


2011, No. 3

Location and the Return to Education

The return to a college education varies widely across U.S. cities.


2011, No. 2

Monetary Policy, Bubbles, and Goldilocks

Monitoring of prices is essential lest future adjustments be misunderstood by the public as part of the dynamics of aggressive monetary policy.


2011, No. 1

What Does the Change in the FOMC's Statement of Objectives Mean?

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.


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