Foreclosures, house-price changes, and subprime mortgages in Massachusetts cities and towns
This module shows: The changing patterns in foreclosure rates and subprime mortgage originations across Massachusetts cities and towns over time; How movements in these rates compare with movements in house prices for any user-selected city or town; The association between foreclosure rates and median income in these cities and towns.
Using Brexit to Identify the Nature of Price Rigidities
Using price quote data that underpin the official U.K. consumer price index (CPI), we analyze the effects of the unexpected passing of the Brexit referendum to the dynamics of price adjustments. The sizable depreciation of the British pound that immediately followed Brexit works as a quasi-experiment, enabling us to study the transmission of a large common marginal cost shock to inflation as well as the distribution of prices within granular product categories. A large portion of the inflationary effect is attributable to the size of price adjustments, implying that a time-dependent ...
The Evolution of the FOMC’s Explicit Inflation Target
Analyzing the narrative of historical Federal Open Market Committee meeting transcripts provides insights about how inflation target preferences of participants have evolved over time. From around 2000 until the Great Recession, there was general consensus among participants that their inflation target should be about 1%, significantly below both average inflation over the period and survey measures of longer-run inflation expectations. By the end of the recession in 2009, however, the consensus had shifted up to 2%, which became the official target announced to the public in January 2012.
Decomposing Supply and Demand Driven Inflation
The extent to which either supply or demand factors drive inflation has important implications for economic policy. I propose a framework to decompose inflation into supply- and demand-driven components. I generate two new data series, the supply and demand-driven contributions to personal consumption expenditures (PCE) inflation, which quantify the degree to which either demand or supply is driving inflation in a current month. The series show expected time-series patterns. The demand-driven contribution tends to decline during recessions, while the supply-driven contribution tends to follow ...
Can the News Drive Inflation Expectations?
How households expect inflation to evolve plays an important role in explaining overall inflation dynamics. Household expectations rose dramatically over the past year or so, much faster than professional forecasters’ inflation expectations. News coverage can explain part of this growing gap. Analyzing the volume and sentiment of daily news articles on inflation suggests that one-fourth of the increased gap between household and professional expectations can be attributed to heightened negative media coverage. These results highlight the important impact of the content and tone of economic ...
The impact of competition on technology adoption: an apples-to-PCs analysis
We study the effect of market structure on a personal computer manufacturer?s decision to adopt new technology. This industry is unusual because there exist two horizontally segmented retail markets with different degrees of competition: the IBM-compatible (or PC) platform and the Apple platform. We first document that, relative to Apple, producers of PCs typically have more frequent technology adoption, shorter product cycles, and steeper price declines over the product cycle. We then develop a parsimonious vintage-capital model that matches the prices and sales of PC and Apple products. The ...
How much do Medicare cuts reduce inflation?
Because the health sector makes up a large share of the U.S. economy, widespread price changes for medical services can impact overall inflation significantly. Cuts to public health-care spending spill over directly and indirectly to private spending. A recent estimate suggests the full effect of the Medicare payment cuts from the 2011 Budget Control Act resulted in a decline of 0.24 percentage point in the overall personal consumption expenditures price index. This is over twice the expected drop if private-sector spillovers are not included.
Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures
This paper provides the first rigorous assessment of the homeownership experiences of subprime borrowers. We consider homeowners who used subprime mortgages to buy their homes, and estimate how often these borrowers end up in foreclosure. In order to evaluate these issues, we analyze homeownership experiences in Massachusetts over the 1989?2007 period using a competing risks, proportional hazard framework. We present two main findings. First, homeownerships that begin with a subprime purchase mortgage end up in foreclosure almost 20 percent of the time, or more than 6 times as often as ...
Energy's impact on inflation expectations
Some closely watched measures of inflation expectations have been in gradual decline over the past five years. Over the same time, oil prices have fallen dramatically. Although the movements in energy prices are normally considered temporary, they appear to have played a large role in pushing down some longer-term forecasts for consumer price index inflation from professional forecasters. Analysis shows the drop in energy prices can explain about three-fourths of the decline in these professional inflation forecasts over the past five years.