Search Results
Journal Article
What investment patterns across equipment and industries tell us about the recent investment boom and bust
A study of capital expenditure trends identifies investment in information technology as a major factor in the 1990s boom and subsequent bust. Spending on computers and software, fueled by Y2K preparations and the rise of the Internet, drove investment growth in the late 1990s but slowed in 2000, while overly optimistic profit expectations by communications industries likely prompted an unsustainable investment surge in 2000.
Report
Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies
This paper examines the impact of exchange rates and import prices on the domestic producer price index and consumer price index in selected industrialized economies. The empirical model is a vector autoregression incorporating a distribution chain of pricing. When the model is estimated over the post-Bretton Woods era, impulse responses indicate that exchange rates have a modest effect on domestic price inflation while import prices have a stronger effect. Pass-through is larger in countries with a larger import share and more persistent exchange rates and import prices. Over 1996-98, these ...
Discussion Paper
Differences in Rent Inflation by Cost of Housing
We know that different people experience different inflation rates because the bundle of goods and services that they consume is different from that of the "typical" household. This phenomenon is discussed in this publication from the Bureau of Labor Statistics (BLS), and this article from the New York Fed. But did you know that there are substantial differences in inflation experience depending on the level of one's housing costs? In this post, which is based upon our updated staff report on ?The Measurement of Rent Inflation,? we present evidence that price changes for rent, which ...
Discussion Paper
Discretionary Services Spending Has Finally Made It Back (to 2007)
The current economic expansion is now the third-longest expansion in U.S. history (based on National Bureau of Economic Research [NBER] dating of U.S. business cycles). Even so, average growth in this expansion—a 2.1 percent annual rate—has been extraordinarily weak. In this post, I return to previous analysis on a specific portion of consumer spending—household discretionary services expenditures—that has displayed unusual weakness in the current expansion (see this post for the definition of discretionary versus nondiscretionary services expenditures, and these posts from 2012 and ...
Discussion Paper
The SOMA Portfolio through Time
The System Open Market Account (SOMA) is a portfolio held by the Federal Reserve to support monetary policy implementation and reflects assets and liabilities (domestic, and some foreign) acquired through open market operations. The SOMA has attracted greater attention in recent years as, with the federal funds rate near its lower bound, the size and composition of the domestic portfolio has been used as an active monetary policy instrument. Earnings on the SOMA portfolio represent a significant amount of the Fed?s income and, given the substantial increase in the size of the portfolio and ...
Discussion Paper
What About Spending on Consumer Goods?
In a recent Liberty Street Economics post, I showed that one major category of consumer spending?spending on discretionary services such as recreation, transportation, and household utilities?behaved very differently in the 2007-09 recession and subsequent recovery than in previous business cycles: specifically, it fell more steeply and has recovered much more slowly. This finding prompted one of the editors of this blog to inquire whether consumer goods spending has also departed markedly from its behavior in past cycles. To answer that question, I examined the decline of expenditures on ...
Conference Paper
Housing activity, home values, and consumer spending
The current expansion has seen record-high levels of transactions in housing, extraordinary growth in the aggregate value of owner-occupied housing, and large increases in the amount of funds realized from the refinancing of mortgage debt. Many analysts thus have pointed to the strong housing market and rising home prices as a major pillar supporting recent economic growth and have expressed concern that a contraction in housing activity and values could pose a significant risk to consumer spending and real economic growth. This paper explores the channels by which the housing market may ...
Journal Article
Equipment expenditures since 1995: the boom and the bust
Business investment in equipment surged in the 1990s, then fell back sharply after mid-2000. A popular explanation of these trends holds that the soaring stock market and declining computer prices of the last decade encouraged excess investment, setting the stage for the retrenchment that followed. Yet an analysis of the factors underlying investment suggests that capital spending patterns in the late 1990s would have been quite similar had stock values and equipment prices remained near their recent historical averages.
Discussion Paper
Discretionary Services Expenditures in This Business Cycle
The pronounced weakness in personal consumption expenditures (PCE) for services has been an unusual feature of the 2007-09 recession and the slow recovery from it. Even in 2010:Q4, when real PCE increased at a relatively robust 4.1 percent annual rate, real PCE on services rose at only a 1.4 percent rate. This weakness has been especially evident in “discretionary” services (to be defined below), which fell more in the recent recession than in previous recessions and since have rebounded more sluggishly. In this post, I suggest that the continued sluggishness in these expenditures lends a ...