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Why has the cyclicality of productivity changed?: what does it mean?
Historically, U.S. labor productivity (output per hour) and total factor productivity (TFP) rose in booms and fell in recessions. Different models of business cycles explain this procyclicality differently. Traditional Keynesian models relied on "factor hoarding," that is, variations in how intensively labor and capital were utilized over the business cycle. Real business cycle (RBC) models instead posit that procyclical technology shocks drive the business cycle. Since the mid-1980s, however, the procyclicality of productivity has waned. TFP has been roughly acyclical with respect to ...
Working Paper
A general-equilibrium asset-pricing approach to the measurement of nominal and real bank output
This paper addresses the proper measurement of financial service output that is not priced explicitly. It shows how to impute nominal service output from financial intermediaries? interest income and how to construct price indices for those financial services. We present an optimizing model with financial intermediaries that provide financial services to resolve asymmetric information between borrowers and lenders. We embed these intermediaries in a dynamic, stochastic, general-equilibrium model where assets are priced competitively according to their systematic risk, as in the standard ...
Journal Article
What Is the New Normal for U.S. Growth?
Estimates suggest the new normal for U.S. GDP growth has dropped to between 1 and 1%, noticeably slower than the typical postwar pace. The slowdown stems mainly from demographics and educational attainment. As baby boomers retire, employment growth shrinks. And educational attainment of the workforce has plateaued, reducing its contribution to productivity growth through labor quality. The GDP growth forecast assumes that, apart from these effects, the modest productivity growth is relatively ?normal??in line with its pace for most of the period since 1973.
Journal Article
The recent rise and fall of rapid productivity growth
Information technology fueled a surge in U.S. productivity growth in the late 1990s and early 2000s. However, this rapid pace proved to be temporary, as productivity growth slowed before the Great Recession. Furthermore, looking through the effects of the economic downturn on productivity, the reduced pace of productivity gains has continued and suggests that average future output growth will likely be relatively slow.
Journal Article
Does Growing Mismeasurement Explain Disappointing Growth?
Slowing growth in U.S. productivity after 2004 is sometimes blamed on measurement problems, particularly in assessing the gains from innovation in IT-related goods and services. However, mismeasurement also occurred before the slowdown and, on balance, there is no evidence that it has worsened. Some innovations?such as free Internet services?have grown increasingly important, but they mainly affect leisure time. Moreover, the non-market benefits do not appear large enough to offset the effects of the business-sector slowdown.
Journal Article
Shifting data: a challenge for monetary policymakers
A familiar old saw about the conduct of monetary policy is that it's like trying to drive a car while looking only in the rearview mirror. The idea is that policymakers are trying to steer a course that will keep the economy close to full employment with low, stable inflation, while their only knowledge of the road ahead is based on data about the past. ; As if this situation weren't challenging enough, the rearview mirror sometimes gives a distorted reflection, in the sense that the data policymakers see at any one point in time are often later revised. This Economic Letter discusses a ...
Journal Article
Has the Dollar Become More Sensitive to Interest Rates?
Interest rates in the United States have diverged from the rates of other countries over the past few years. Some commentators have voiced concerns that, as a result, exchange rates might be more sensitive to unanticipated changes in U.S. interest rates now than they were historically. However, an examination of market-based measures of policy expectations finds no convincing evidence that the U.S. dollar has become more sensitive since 2014.
Journal Article
Why hasn't the jump in oil prices led to a recession?
Oil prices have increased substantially over the last several years. When oil price increases of this magnitude occurred during the 1970s, they were associated with severe recessions. Why hasn't that happened this time around? This Letter explores some answers to that question.
Journal Article
Financial innovations and the real economy: conference summary
This Economic Letter summarizes the papers presented at the conference ?Financial Innovations and the Real Economy? held at the Federal Reserve Bank of San Francisco by the Bank?s Center for the Study of Innovation and Productivity on November 16?17, 2006.
Journal Article
The Disappointing Recovery in U.S. Output after 2009
U.S. output has expanded only slowly since the recession trough in 2009, counter to normal expectations of a rapid cyclical recovery. Removing cyclical effects reveals that the deep recession was superimposed on a sharply slowing trend in underlying growth. The slowing trend reflects two factors: slow growth of innovation and declining labor force participation. Both of these powerful adverse forces were in place before the recession and, thus, were not the result of the financial crisis or policy changes since 2009.