Interest sensitivity and volatility reductions: cross-section evidence
As has been widely observed, the volatility of GDP has declined since the mid-1980s compared with prior years. One leading explanation for this decline is that monetary policy improved significantly in the later period. We utilize a cross-section of 2-digit manufacturing and trade industries to further investigate this explanation. Since a major channel through which monetary policy operates is variation in the federal funds rate, we hypothesized that industries that are more interest sensitive should have experienced larger declines in the variance of their outputs in the post-1983 period. ...
Productivity and U.S. macroeconomic performance: interpreting the past and predicting the future with a two-sector real business cycle model
A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods- producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as ...
The 2015 Survey of Consumer Payment Choice: summary results
The 2015 Survey of Consumer Payment Choice (SCPC) was implemented using a new longitudinal panel, the Understanding America Study (UAS), and results are not yet comparable to the 2008?2014 SCPC. In 2015, U.S. consumers made 68.9 payments per month. Debit cards remained the most popular payment instrument among U.S. consumers in 2015, accounting for 32.5 percent of their monthly payments, followed by cash (27.1 percent) and credit or charge cards (21.3 percent). For nonbills, consumers used cash and debit equally?about one-third of the time for each. For bills, consumers used payment cards for ...
The Boston Fed study of consumer behavior and payment choice: a survey of Federal Reserve System employees
The way people pay for goods and services is changing dramatically, but little data and research on consumer behavior and payment choice are publicly available. This paper describes the results of a survey of payment behavior and attitudes taken by Federal Reserve employees in 2004. Major contributions of the survey are that it asks: 1) why payment choices are made; 2) why individual payment behavior has changed; and 3) why individual-specific payment characteristics matter for payment choice. Although the survey is not statistically representative of U.S. consumers, and thus may not provide ...
Input and output inventories in general equilibrium
We build and estimate a two-sector (goods and services) dynamic stochastic general equilibrium model with two types of inventories: materials (input) inventories facilitate the production of finished goods, while finished goods (output) inventories yield utility services. The model is estimated using Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-to-target ratios. Although inventories are an important element of the model's propagation mechanism, shocks to inventory efficiency or management are not an important source of ...
Summary of the workshop on Consumer Behavior and Payment Choice
This paper summarizes and outlines some interesting issues that arose during a recent workshop on Consumer Behavior and Payment Choice, hosted by the Federal Reserve Bank of Boston?s Emerging Payments Research Group (EPRG) on July 25, 2008. Topics addressed are the consumer adoption of new payment technologies, credit card debt management, payment card surcharges, and involuntary bank account closures.
Role of firms in job creation and destruction in U.S. manufacturing
Research in recent years has documented extensively the fact that labor markets are characterized by large and pervasive flows of jobs among places of employment. However, virtually none of this research pertains to the role of the firm and its decisions in determining job creation and destruction. Previous research and data-gathering efforts have focused on employment at individual physical locations called establishments, or plants. This neglect leaves fundamental questions regarding the role of firms unanswered. Job reallocation occurring within firms may have very different causes and ...
Inventory investment and output volatility
This paper reports the results of a detailed examination of the hypothesis that improved inventory management and production techniques are responsible for the decline in the volatility of U.S. GDP growth. Our innovations are to look at the data at a finer level of disaggregation than previous studies, to exploit cross-sectional heterogeneity to obtain clearer identification of this hypothesis, and to provide a complete accounting of the change in GDP volatility. Changes in inventory behavior can account directly for only up to half of the total reduction in GDP volatility. Cross-section ...
The roles of comovement and inventory investment in the reduction of output volatility
More than 80 percent of the decline in the variance of aggregate output since 1984 is accounted for by a decline in the covariance (and correlation) of output among industries that hold inventories. Using a HAVAR macro model (Fratantoni and Schuh 2003) with only two sectors, manufacturing and trade, we show that this decline in comovement ? and thus much of the Great Moderation in aggregate and industry-level output ? is explained largely by changes in the structural relationships between sectors? sales and inventory investment, rather than by ?good luck.? A small part of the Moderation is ...
Input and output inventories
This paper builds and estimates a new model of firm behavior that includes decisions to order, use, and stock input materials in a stage-of-fabrication environment with either gross production or value added technology. The model extends the traditional linear-quadratic model of output (finished goods) inventories by incorporating delivery and usage of input materials plus input inventory investment - features which largely have been ignored in the literature. Stylized facts indicate that input inventories are empirically more important than output inventories, especially in business cycle ...