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First Quarter 2015

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Posted 2015-03-20

Three Scenarios for Interest Rates in the Transition to Normalcy

by Diana A. Cooke and William T. Gavin

In this article, time-series models are developed to represent three alternative, potential monetary policy regimes as monetary policy returns to normal. The first regime is a return to the high and volatile inflation rate of the 1970s.

Posted 2015-03-20

A Measure of Price Pressures

by Laura E. Jackson, Kevin L. Kliesen, and Michael T. Owyang

The Federal Reserve devotes significant resources to forecasting key economic variables such as real gross domestic product growth, employment, and inflation. The outlook for these variables also matters a great deal to businesses and financial market participants.

Posted 2015-03-20

Risk Aversion at the Country Level

by Néstor Gándelman and Rubén Hernández-Murillo

This article estimates the coefficient of relative risk aversion for 75 countries using data on self-reports of personal well-being from the 2006 Gallup World Poll. The analysis suggests that the coefficient of relative risk aversion varies closely around 1, which corresponds to a logarithmic utility function.

Posted 2015-03-20

The Welfare Cost of Business Cycles with Heterogeneous Trading Technologies

by YiLi Chien

The author investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in equilibrium, while this source of inequality vanishes in an economy without business cycles.