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Economic Synopses

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

2012, No. 35

Can Repatriation Taxes Explain the Recent Increase in Cash Holdings?

Repatriation taxes are unlikely to explain the rise in cash holdings of U.S. firms.


2012, No. 34

The Fiscal Cliff in Context

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.


2012, No. 33

Quantitative Easing the Swedish Way

Most central banks implement quantitative easing through asset purchases. Sweden took a different path.


2012, No. 32

Bouncing Back from the Great Recession: The United States Versus Europe

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.


2012, No. 31

How Can QE3 Affect the Housing Market?

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.


2012, No. 30

Monetary Policy and the Expected Adjustment Path of Key Variables

It is reasonable to believe that output, employment, and inflation will return to their long-run or targeted values slowly and steadily.


2012, No. 29

Prime and Subprime Hybrid Mortgages

Although similar in many ways, subprime hybrids were really different from prime hybrids.


2012, No. 28

Unemployment Insurance Fraud

Concealed Earnings fraud accounts for almost two-thirds of the total overpayments due to all fraud.


2012, No. 27

A Proposal for Improving Forward Guidance

Our approach offers several advantages over LSAPs as a financial mechanism to enhance forward guidance.


2012 No. 26

Verbal Guidance and the Efficacy of 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.


2012, No. 25

How Positive Are Recent Employment and Labor Market Trends?

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.


2012, No. 24

Can Trade Links Transmit a European Crisis?

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.


2012, No. 23

The Efficacy of the FOMC’s Zero Interest Rate Policy

If investment spending is sufficiently insensitive to interest rate changes and the effect of Fed actions on interest rates is sufficiently weak, the net effect of the persistent zero interest rate policy could be negative.


2012, No. 22

Driving to Recession and Recovery

Vehicle sales have been a bright spot during the tepid rebound of the American economy from its 2009 trough.


2012, No. 21

Commodity Futures Index Trading and Spot Oil Prices

Politicians, market participants, and economists have argued about whether the increased trading induced by the growth of index funds over the past decade is a cause of high commodity prices.


2012, No. 20

Coming to America: Covered Bonds?

Ultimately, covered bonds and ABS are complements, not substitutes.


2012, No. 19

The Effects of Wealth Bubbles on Consumption

Changes in wealth, according to our simple calculations, can account for almost all of the observed consumption fluctuations of the past two decades.


2012, No. 18

The Efficacy of Monetary Policy: A Tale from 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.


2012, No. 17

Reducing the U.S. Deficit by Recycling Capital Inflows

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.


2012, No. 16

Firm Size and Employment Dynamics in Recessions and Recoveries

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.


2012, No. 15

Okun’s Law: A Meaningful Guide for Monetary Policy?

Okun’s law can be a useful guide for monetary policy, but only if the natural rate of unemployment is properly measured.


2012, No. 14

Foreign Direct Investment in the United States During the Financial Crisis

FDI flows from overseas parent companies contracted, but intracompany debt and reinvested earnings were affected much more than equity FDI.


2012, No. 13

The Relationships Among Changes in GDP, Employment, and Unemployment: This Time, It’s Different

Recent changes in the relationships among GDP growth, the unemployment rate, and the employment-to-population ratio cast doubt on using these relationships to predict future unemployment.


2012, No. 12

Get by with a Little Help from My…Other Exports

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.


2012, No. 11

What Is Potential GDP and Why Does It Matter?

One look at recent Congressional Budget Office data shows how much estimates of the output gap can change as time passes.


2012, No. 10

Home Equity and Household Income

During 1995-2007, home equity increased more than gross income for high-, low- and middle-income groups.


2012, No. 9

The FOMC: Transparency Achieved?

Greater transparency is a means to better synchronize the public with policymakers and minimize the risks of undesirable economic outcomes.


2012, No. 8

Speculation in the Oil Market

Disentangling the true drivers of oil prices is a critical first step for allocating resources and designing good policy.


2012, No. 7

How Well Do Initial Claims Forecast Employment Growth Over the Business Cycle and Over Time?

Initial claims may now be useful for forecasting employment growth during periods of increasing economic activity.


2012, No. 6

The Mysterious Greek Yield Curve

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.


2012, No. 5

Identifying Structural and Cyclical Shocks Across U.S. Regions

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.


2012, No. 4

Quantitative Easing and Money Growth: Potential for Higher Inflation?

The enormous quantity of excess reserves can create an even greater expansion in the money supply.


2012, No. 3

Following the Fed with a News Tracker

How should one conclude whether the data have come in stronger, weaker, or as expected?


2012, No. 2

Employment Dynamics During Economic Recoveries

Employment turnover was significantly lower following the Great Recession than following the previous two recessions.


2012, No. 1

Fiscal Policy in the Great Recession and Lessons from the Past

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.


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