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Discussion Paper
Balance Sheet Policies in an Evolving Economy: Some Modelling Advances and Illustrative Simulations
Once considered "unconventional," balance sheet policies have become an integral part of the toolkit of many central banks. Increased reliance on balance sheet policies reflects in part a decline in the neutral level of interest rates, which limits central banks' ability to cut their policy rates to support the economy during downturns, and many observers expect that neutral level to remain low relative to its historical average in the coming decades.
Working Paper
Household Debt, the Labor Share, and Earnings Inequality
We show that the secular decline in real interest rates in the United States, which began in the early 1980s and persisted for nearly four decades, reduced the labor’s share of output and the unemployment rate, and increased earnings inequality. We establish this link using a model of frictional labor markets, estimated from household-level data, in which unemployment risk is only partially insurable. Rising debt resulting from lower interest rates reduces the value of unemployment, leading to lower equilibrium wages relative to productivity and a lower unemployment rate. Wage dispersion ...
Journal Article
Remittances and COVID-19: A Tale of Two Countries
Looking at the effects of the COVID-19 pandemic on workers’ remittances flowing from the United States, this article focuses on the experiences of two countries, El Salvador and Mexico, which account for approximately 30 percent of all immigrants currently residing in the United States. Following the second quarter’s economic lockdown, transfers to these countries experienced perplexing dynamics.Specifically, remittances to El Salvador witnessed a record 40 percent sudden drop, while Mexico recorded an unexpected 35 percent increase. We discuss some of the narratives proposed to explain ...
Discussion Paper
Remittances and COVID-19: A Tale of Two Countries
Looking at the effects of the COVID-19 pandemic on workers’ remittances flowing from the United States, this article focuses on the experiences of two countries, El Salvador and Mexico, which account for approximately 30 percent of all immigrants currently residing in the United States. Following the second quarter’s economic lockdown, transfers to these countries experienced perplexing dynamics. Specifically, remittances to El Salvador witnessed a record 40 percent sudden drop, while Mexico recorded an unexpected 35 percent increase. We discuss some of the narratives proposed to explain ...
Discussion Paper
A New Procedure for Generating the Stochastic Simulations in FRB/US
This note summarizes a new procedure for generating stochastic simulations in FRB/US, a large-scale estimated general equilibrium macroeconomic model of the U.S. economy, which has been in use at the Federal Reserve Board since 1996. In the first part of this note, we contrast some features of the original stochastic simulations procedure with those of the data. In the second part, we offer an alternative to the original procedure that fits the data better along core dimensions of interest.
Discussion Paper
Global Remittances Cycle
Workers' remittances, the earnings sent home by migrant workers abroad, play a crucial role in supporting the economies of developing countries. Remittances enable lower-income households in developing nations to secure access to essential needs such as food, housing, education and healthcare services.