Skip to main content

Third Quarter 2021

View Full Issue
Posted 2021-07-01

Global Value Chains and U.S. Economic Activity During COVID-19

by Ana Maria Santacreu, Fernando Leibovici, and Jesse LaBelle

We investigate the role of global value chains in the declines of manufacturing employment and output in the U.S. during COVID-19. Specifically, we identify the role of global value chains by exploiting heterogeneity across industries in cross-country sourcing patterns and its interaction with exogenous cross-country variation in the containment policies introduced to combat the virus.

Posted 2021-07-01

Regional Gasoline Price Dynamics

by Julie Bennett, Michael T. Owyang, and E. Katarina Vermann

A large literature has argued that gasoline prices respond more rapidly to increases in oil prices than to decreases in oil prices. Moreover, some of this literature has found heterogeneous asymmetry in gas price responses across cities. Here, we reconsider the causes of heterogeneous asymmetric pass-through.

Posted 2021-07-01

Is It Time for Some Unpleasant Monetarist Arithmetic?

by David Andolfatto

Sargent and Wallace (1981) published "Some Unpleasant Monetarist Arithmetic" 40 years ago. Their central message was that a central bank may not have the power to determine the long-run rate of inflation without fiscal support.

Posted 2021-07-01

Optimal Capital Taxation and Precautionary Savings

by Yunmin Chen, YiLi Chien, and C.C. Yang

There are multiple reasons to motivate the role of capital taxation in the heterogenous-agent incomplete-markets (HAIM) model. One is the production inefficiency caused by precautionary savings. The other is the wealth redistribution role played by capital taxation.

Posted 2021-07-01

Convergence to Rational Expectations in Learning Models: A Note of Caution

by YiLi Chien, In-Koo Cho, and B. Ravikumar

We show in a simple monetary model that the learning dynamics do not converge to the rational expectations monetary steady state. We then show it is necessary to restrict the learning rule to obtain convergence.