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Discussion Paper
Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization
In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.
Journal Article
Oil prices and inflation
This Economic Letter examines the impact of rising oil prices on core inflation over the last decade for four economies: the U.S., the euro area, Canada, and the U.K.
Journal Article
To float or not to float? exchange rate regimes and shocks
Recent research has reconsidered the stabilization properties of a flexible exchange rate regime when exchange rate movements affect financial conditions, and these, in turn, influence economic activity. This Economic Letter summarizes some of the findings of these studies and their policy prescriptions for the choice of the exchange rate regime.
Working Paper
Government consumption expenditures and the current account
This paper distinguishes between two components of government consumption, expenditure on final goods and expenditure on hours, and compares the effects of changes in these two on the current account. I find that changes in government expenditure on hours do not directly affect the current account and that their impact is considerably smaller than the impact produced by changes in government expenditure on final goods. These findings indicate that considering government consumption as entirely expenditure on final goods leads to overestimating its role in accounting for movements in the ...
Working Paper
Exchange rate overshooting and the costs of floating
Currency crises are usually associated with large nominal and real depreciations. In some countries depreciations are perceived to be very costly (?fear of floating?). In this paper we try to understand the reasons behind this fear. We first look at episodes of currency crises in the 1990s and establish that countries entering a crisis with high levels of foreign debt tend to experience large real exchange rate overshooting (devaluation in excess of the long-run equilibrium level) and large output contractions. We then develop a model of a small open economy that helps to explain this ...
Discussion Paper
Did the West Coast Port Dispute Contribute to the First-Quarter GDP Slowdown?
The decline in U.S. GDP of 0.2 percent in the first quarter of 2015 was much larger than market analysts expected, with net exports subtracting a staggering 1.9 percentage points (seasonally adjusted annualized rate). A range of factors is being discussed in policy circles to try to understand what contributed to this decline. Factors such as the strong U.S. dollar and weak foreign demand are usually incorporated in forecasters' models. However, the effects of unusual events such as extremely cold weather and labor disputes are more difficult to quantify in standard models. In this post, we ...