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Journal Article
The effect of tax changes on consumer spending
Many supporters of the tax cut enacted this summer viewed it as an important stimulus to consumer spending. But an analysis of the effects of earlier income tax cuts suggests that the consumer response to such initiatives is, in fact, quite variable. Two conclusions stand out: First, consumers will be more likely to boost spending if the change in tax liabilities is permanent. Second, consumers will wait to increase spending until a tax change affects their take-home pay.
Journal Article
A comparison of measures of core inflation
The ability of central banks to differentiate between permanent and transitory price movements is critical for the conduct of monetary policy. The importance of gauging the persistence of price changes in a timely manner has led to the development of measures of underlying, or ?core,? inflation that are designed to remove transitory price changes from aggregate inflation data. Given the usefulness of this information to policymakers, there is a surprising lack of consensus on a preferred measure of U.S. core inflation. This article examines several proposed measures of core inflation?the ...
Report
Industry restructuring measures and productivity: evidence from the 1980s
This paper analyzes the empirical relationship between corporate restructuring and productivity. We estimate neoclassical production functions and factor demand functions to analyze the importance of restructuring in improving resource allocation and productivity. We find, at most, restructuring may have spurred the substitution of capital for labor in some industries, helping to set the stage for increased labor productivity. However, there is little evidence that restructurings, themselves, aided in the improvement of true technological progress.
Report
Measuring economic activity and economic welfare: what are we missing?
Major U.S. economic data, most notably GDP and Industrial Production, are undergoing major changes. Proposals have been made for significant alterations in the CPI. The revision process has helped to spur debate on such topics as the proper method of accounting for high technology's role in the economy, the reported sluggishness of productivity growth in many service industries, and the overstatement of price increases for numerous products. This paper attempts to assess the potential impact of some of these problems on our understanding of basic trends in the economy. It is found that with ...
Journal Article
The decline in U.S. saving and its implications for economic growth
The authors document the trends in U.S. saving during the 1980s, giving particular attention to those measures of saving that gauge the growth of productive assets. They go on to assess the effects of these developments on capital formation and the nation's long-term economic potential.
Report
Industrial capacity and industrial investment
This paper examines the relationship between capacity growth and the growth and composition of investment. Because capacity is an index of the maximum sustainable output of an industry, capacity growth is unlikely to be determined solely by the growth of an industry's fixed capital stock. Statistical analysis of two-digit manufacturing industries finds that labor force growth, as well as capital stock growth, also helps explain the growth of capacity over the 5-year periods between Censuses of manufacturing. There is evidence that changes in the composition of an industry's capital stock are ...
Journal Article
Are there good alternatives to the CPI?
Critics of the consumer price index--the most widely watched inflation measure--contend that it overstates inflation by as much as 1 percentage point a year. Some have argued that alternative indexes eliminate the CPI's upward bias and offer a more accurate reading of inflation levels. A closer look at these alternatives, however, reveals that they have substantive problems of their own, suggesting that the CPI, though flawed, is still our most reliable indicator of changes in inflation.