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Working Paper
Global tax policy and the synchronization of business cycles
Using a 30-year panel of quarterly GDP ?uctuations from of a broad set of countries, we demonstrate that the signing of a bilateral tax treaty increases the comovement of treaty partners' business cycles by 1/2 a standard deviation. This e?ect of ?scal policy is as large as the e?ect of trade linkages on comovement, and stronger than the e?ects of several other common ?nancial and investment linkages. We also show that bilateral tax treaties increase comovement in shocks to nations? GDP trends, demonstrating the permanent e?ects of coordination on ?scal policy rules. We estimate trend and ...
Journal Article
Pushing the Limit: Last-Minute Debt Limit Resolutions Have Increased Market Volatility and Uncertainty
Since reaching the debt limit in January 2023, the U.S. Treasury has used extraordinary measures to fund the government. However, the Treasury estimates those measures will be exhausted later this year. To gauge possible effects, we review economic and financial market outcomes during previous debt limit episodes. In each case, these episodes led to increased borrowing costs, financial market volatility, and uncertainty, particularly when the resolutions were prolonged.
Working Paper
The Labor Market Effects of Offshoring by U.S. Multinational Firms: Evidence from Changes in Global Tax Policies
Estimating the causal effect of offshoring on domestic employment is difficult because of the inherent simultaneity of multinational firms? domestic and foreign affiliate employment decisions. In this paper, we resolve this identification problem using variation in Bilateral Tax Treaties (BTTs), which reduce the effective cost of offshore activity by mitigating double taxation. We derive a panel difference-in-differences research design from a standard model of multinational firms, demonstrating the simultaneity problem and showing how to resolve it using BTTs as an instrument for offshore ...
Journal Article
Labor Market Improvement and the Use of Subsidized Housing Programs
The authors estimated how state-level changes in labor market conditions for particular sex, age, and race groups affect participation in a variety of subsidized housing programs.
Working Paper
The Multinational Wage Premium and Wage Dynamics
Using detailed administrative data linking French firms and workers over the years 2002-2007, we document a distinct U-shaped pattern in worker-level wages surrounding the time their employer is acquired by a foreign firm, with a dip in earnings observed in years just before domestic firms switch to MNE status. The dip in earnings is evident in both wages and in-kind payments given to workers. {{p}} To guide our empirical approach, we present a model with fair wage considerations among workers and endogenous cross-border acquisition activity among heterogeneous firms that predicts this ...
Journal Article
Regional Firms Are Disagreeing About How to React to Current Economic Conditions
There is an increased level of disagreement among firms about their respective economic outlooks in the Tenth District region. As heightened levels of disagreement are historically associated with softening employment, this could have implications for economic conditions moving forward.
Journal Article
A Regional Indicator of Commercial Real Estate Activity: The KC Fed CRE Index
Activity in the commercial real estate (CRE) sector is closely linked to broader economic conditions. However, tracking developments in the CRE sector can be challenging due to the sector’s wide span of activities. At their inception, commercial properties involve construction activity, land development, and local infrastructure investments; once constructed, commercial properties can be used for a variety of purposes. The CRE sector also often reflects the regional economic landscape more than it is shaped by national features. To understand changing conditions in their regions, community ...
Journal Article
Subsiding Headwinds from the Strong Dollar: Evidence from Producer Prices along the Supply Chain
The foreign exchange value of the U.S. dollar has stabilized, and producer prices are rising, especially at early stages of the supply chain.
Journal Article
Capital Reallocation and Capital Investment
Corporate debt levels have grown substantially during the 10-year recovery from the global financial crisis. This debt might be expected to finance investments that support firm expansion, as the U.S. economy has experienced strong growth over the last 10 years. However, much of the corporate debt has been used to reallocate capital through mergers and acquisitions rather than to fund investment activity. Perhaps as a result, some market watchers have expressed concerns that corporations are crowding out, rather than complementing, new investment. {{p}} David Rodziewicz and Nicholas Sly show ...
Journal Article
How Does a Rise in International Shipping Costs Affect U.S. Inflation?
Trenton Herriford, Elizabeth M. Johnson, Nicholas Sly, and A. Lee Smith find that an increase in ocean shipping costs leads to a modest boost in core inflation after one year.