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Conference Paper
The macroeconomic transition to high household debt
Aggressive deregulation of the household debt market in the early 1980s triggered innovations that greatly reduced the required home equity of U.S. households, allowing them to cash-out a large part of accumulated equity. In 1982, home equity equaled 71 percent of GDP; so this generated a borrowing shock of huge macroeconomic proportions. The combination of increasing household debt from 43 to 56 percent of GDP with high interest rates during the 1982-1990 period is consistent with such a shock to households? demand for funds. This paper uses a quantitative general equilibrium model of ...
Working Paper
Issues Regarding the Use of the Policy Rate Tool
We review two nonstandard uses of the policy rate tool, which provide additional stimulus when interest rates are close to or at the effective lower bound—forward guidance and negative interest rate policy. In particular, we survey the use of these tools since the star otf the Great Recession, review evidence of their effectiveness, and discuss key considerations that confront monetary policymakers while using them.
Journal Article
How the U.S. economy resembles a (very) big business
This article presents basic tools for measuring different business lines? contributions to the U.S. economy?s business cycles, and it applies these to measure the exposure of a large conglomerate to macroeconomic risks.
Journal Article
The Macroeconomic Effects of the 2018 Bipartisan Budget Act
The 2018 Bipartisan Budget Act raised government spending caps by $300 billion for fiscal years 2018 and 2019. While spending does not increase immediately, private sector investment and consumption may respond ahead of an anticipated fiscal stimulus. This Economic Perspectives article assesses the strength of this mechanism based on the private sector?s expectations.
Journal Article
Understanding aggregate job flows
The authors describe how evidence on aggregate job flows challenges standard business cycle theory and discuss recent developments in business cycle theory aimed at accounting for the evidence.
Journal Article
Creative destruction in local markets
This article uses a panel of Texas restaurants' and bars' alcohol to measure the pace of creative destruction--the ongoing replacement of unproductive competitors with the new firms--and it investigates whether producers in more concentrated markets might use their market power to stabilize the industry structure. The authors find the opposite to be true: Local markets with more concentrated alcohol sales display more creative destruction.
Journal Article
Consumption-based macroeconomic forecasting
The authors build a small-scale econometric model based on the permanent income theory of consumption and balanced economic growth in order to study the influence of permanent and transitory factors on the level of economic activity.
Journal Article
Long-run labor market dynamics and short-run inflation
Journal Article
Interest rates following financial re-regulation
This article uses a calibrated general-equilibrium model of lending from the wealthy to the middle class to evaluate the effects of tightening household lending standards. The authors simulate a rise in down payment and amortization rates from their average values in the late 1990s and early 2000s to levels more typical of the era before the financial deregulation of the early 1980s. Their results show a drop in loan demand. This substantially lowers interest rates for an extended period. Counterintuitively, tightening lending standards makes borrowers better off.
Journal Article
Odyssean Forward Guidance in Monetary Policy: A Primer
This article shows how central bank forward guidance can improve macroeconomic outcomes by altering current expectations of future inflation and output.