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Journal Article
Making Technical Adjustments: The Difference Between “Conducting” and “Implementing” Monetary Policy
Technical adjustments to the Fed’s administered rates help to implement existing monetary policy in changing market conditions.
Working Paper
The Federal Reserve's Portfolio and its Effect on Interest Rates
We explore the historical composition of the Federal Reserve's Treasury portfolio and its effect on Treasury yields. Using data from 1985 to 2016, we show that the divergence of the composition of the Federal Reserve's portfolio from overall Treasury securities outstanding is associated with a statistically significant effect on interest rates. In aggregate, when the Federal Reserve's portfolio has shorter maturity than overall Treasury debt outstanding, measures of the term premium are higher at all horizons; likewise, when the Federal Reserve's portfolio has longer maturity, term premiums ...
Newsletter
COVID-19’s Effects on the Economy and the Fed’s Response
The U.S. economy started strong in 2020, but then the COVID-19 pandemic brought about the most abrupt economic slowdown in U.S. history. This Page One Economics describes Federal Reserve actions that stabilized financial markets and bolstered the economy.
Discussion Paper
The Federal Reserve’s responses to the post-Covid period of high inflation
In the face of the COVID-19 pandemic in March 2020, the Federal Reserve committed to using its full range of tools to support the U.S. economy. Over the next year and a half, with progress on vaccinations and strong policy support, indicators of economic activity and employment strengthened while inflation moved higher. Faced with a tight labor market and elevated inflation, the Federal Open Market Committee (FOMC) began a process of unwinding the very accommodative stance of monetary policy and moving to a restrictive policy stance to address inflation pressures. Here we review the sequence ...
Working Paper
Modeling direct investment valuation adjustments and estimating quarterly positions
This paper takes an in-depth look at U.S. direct investment valuation adjustments. We develop a methodology to generate valuation adjustments at the quarterly frequency, which can be combined with the Bureau of Economic Analysis's quarterly direct investment flows to obtain quarterly estimates of direct investment assets and liabilities. Our methodology involves two steps. First, we estimate valuation adjustment models with annual data. Our models rely on variables that reflect terms used by the Bureau of Economic Analysis in their data construction: exchange-rate changes, changes in the ...
Discussion Paper
Closing the Monetary Policy Curriculum Gap: A Primer for Educators Making the Transition to Teaching the Fed's Ample-Reserves Framework
The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. While those goals were articulated in 1977, the approach and tools used to implement those objectives have changed over time.
Journal Article
Changes in manufacturing employment in North Carolina counties, 1980-1985
Does an inappropriate industry mix and structure condemn rural areas to a competitive disadvantage with respect to urban areas? This study of employment changes from 1980-85 in North Carolina counties suggests not.
Working Paper
The dynamics of informal employment
The informal sector, which produces legal goods but does not comply with government regulations, is a functioning part of all economies, with a proportion of the labor force ranging from 17 percent in OECD countries to 60 percent in developing countries. Using a dynamic model that includes an informal sector, this paper illustrates the natural dynamics of the sector, describes how tax policy affects its size, and quantifies the costs of having it. Simulations yield movements in informal employment and output consistent with empirical observations. We find that the U.S. informal sector ...
Working Paper
Some simple tests of the globalization and inflation hypothesis
This paper evaluates the hypothesis that globalization has increased the role of international factors and decreased the role of domestic factors in the inflation process in industrial economies. Toward that end, we estimate standard Phillips curve inflation equations for 11 industrial countries and use these estimates to test several predictions of the globalization and inflation hypothesis. Our results provide little support for that hypothesis. First, the estimated effect of foreign output gaps on domestic consumer price inflation is generally insignificant and often of the wrong sign. ...
Working Paper
An empirical analysis of inflation in OECD countries
One of the most remarkable macroeconomic developments of the past decade has been the widespread decline in inflation despite declines in unemployment rates. For the United States, these seemingly contradictory developments have been reconciled in terms of three factors: (1) an acceleration in productivity, (2) structural changes in labor markets that lowered the natural unemployment rate (NAIRU), and (3) improved credibility of monetary policy. Here we ask whether comparable factors were at work in foreign industrial countries. To address this question, we empirically characterize the ...