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Journal Article
Inflation: Drivers and Dynamics 2020 Conference Summary
To provide insights into the processes that drive inflationary dynamics, the Federal Reserve Bank of Cleveland holds an annual conference on the topic of inflation: the Inflation: Drivers and Dynamics series. The 2020 installment of the conference was held on May 21-22, 2020. This Commentary summarizes the papers at the conference, which broadly fell into four categories: (1) empirical Phillips curves, (2) networks and Phillips curves, (3) expectations formation, and (4) price-setting behavior and inflation.
Working Paper
Globalization, Inflation Dynamics and the Slope of the Phillips Curve
We study how international trade has affected U.S. inflation dynamics. We develop a multi-region New Keynesian model of an open monetary union in which regional Phillips curve slopes depend on exposure to imported goods. Guided by the model, we construct state-level measures of import penetration in final consumption and exploit cross-state variation to estimate regional Phillips curves over 1976-2017. Greater import exposure leads to significantly flatter state-level Phillips curves. We estimate that rising import exposure accounts for roughly 40 percent of the flattening of the U.S. ...
Discussion Paper
Revisiting the Forecasting Potential of Futures Prices
Amid the largest global oil supply shock in history, oil futures prices moved up much less than many expected. The steep backwardation in oil futures from the Strait of Hormuz's closure sparked a spirited debate over whether futures prices were too sanguine about the risks of prolonged disruption. For institutions, including central banks, that use futures as a guide for market expectations of future commodity prices, understanding the performance of futures in forecasting is essential (Bernanke 2008, Baumeister 2023).
Discussion Paper
Which states are most exposed to tariff increases? A new measure based on the consumption channel
This note examines the heterogeneous exposure of states in terms of their consumption of direct consumer goods imports, which is an important channel through which states are exposed to increases in trade costs such as tariffs. Building on the methodology that Hottman and Monarch (2020) and Hottman and Monarch (2026) used to construct a similar measure for U.S. income deciles and other demographic groups, we construct a new state-level measure using a recent year of data.
Working Paper
Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data
Using supplier-level trade data, we estimate the effect on consumer welfare from changes in U.S. imports both in the aggregate and for different household income groups from 1998 to 2014. To do this, we use consumer preferences which feature non-homotheticity both within sectors and across sectors. After structurally estimating the parameters of the model, using the universe of U.S. goods imports, we construct import price indexes in which a variety is defined as a foreign establishment producing an HS10 product that is exported to the United States. We find that lower income households ...
Working Paper
Who's Most Exposed to International Shocks? Estimating Differences in Import Price Sensitivity across U.S. Demographic Groups
Differences in consumption patterns across demographic groups mean that international price shocks differentially affect such groups. We construct import price indexes for U.S. consumer groups that vary by age, race, sex, education, and urban status. Black consumers and college graduates experienced significantly higher import price inflation from 1996-2018 compared to other groups, such as high school dropouts, rural consumers, and consumers over 60. Sensitivity to international price shocks varies widely, implying movements in exchange rates and foreign prices, both during our sample and ...
Discussion Paper
Distributional Consequences of Trade for U.S. Consumers: Estimating Group-Specific Import Price Inflation
This note highlights the results of our project constructing import price indexes across different U.S. income deciles over the years 1998 to 2014.
Discussion Paper
What's Driving the Recent Slump in U.S. Imports?
In this post, we explore what has been driving the recent slump in U.S. imports of non-oil goods.
Discussion Paper
What’s Driving the Recent Slump in U.S. imports?
The growth in U.S. imports of goods has been stubbornly low since the second quarter of 2015, with an average annual growth rate of 0.7 percent. Growth has been even weaker for non-oil imports, which have increased at an average annual rate of only 0.1 percent. This is in sharp contrast to the pattern in the five quarters preceding the second quarter of 2015, when real non-oil imports were growing at an annualized rate of 8 percent per quarter. The timing of the weakness in import growth is particularly puzzling in light of the strong U.S. dollar, which appreciated 12 percent in 2015, ...