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Content Type:Briefing 

Relative Price Changes Are Unlikely to Account for Recent High Inflation

March 2021 marked the first month of the ongoing high inflation episode in the U.S. Last September, I analyzed the first five months of this episode through the lens of the distribution of price changes for all PCE components. A small fraction of expenditures accounted for much of the high inflation in those months. In this Economic Brief, I provide a related analysis and incorporate a new summary statistic for the distribution of relative price changes. In the last four months, high inflation has not been concentrated in a small fraction of expenditures, deviating from the relationship we ...
Richmond Fed Economic Brief , Volume 22 , Issue 10

Calculating the Natural Rate of Interest: A Comparison of Two Alternative Approaches

The natural rate of interest is a key concept in monetary economics because its level relative to the real rate of interest allows economists to assess the stance of monetary policy. However, the natural rate of interest cannot be observed; it must be calculated using identifying assumptions. This Economic Brief compares the popular Laubach-Williams approach to calculating the natural rate with an alternative method that imposes fewer theoretical restrictions. Both approaches indicate that the natural rate has been above the real rate for a long time.
Richmond Fed Economic Brief , Issue Oct

Macroeconomic Effects of Household Pessimism and Optimism

Survey data on households' expectations about macroeconomic outcomes reveal systematic differences from statistical (or rational) forecasts. We construct an empirical measure of these differences, which we refer to as "belief wedges." Across economic variables, such as inflation and unemployment, these belief wedges are significant and move in parallel with the business cycle. We present a theory of time-varying belief wedges that accounts for these empirical facts. Our theory provides a formal interpretation of these wedges as pessimism and optimism. Embedding the theory into a quantitative ...
Richmond Fed Economic Brief , Volume 21 , Issue 03

Evictions in New England and the Impact of Public Policy during the COVID-19 Pandemic

To stave off a flood of evictions during the COVID-19 pandemic, which was the feared outcome when millions of renting households were suddenly unemployed, Congress and many states implemented policies that included eviction moratoriums and federally funded rental-assistance programs. These programs succeeded in keeping millions of renters housed and driving eviction rates down in the early months of the pandemic. The number of evictions filed in New England declined 56 percent in 2020 and 39 percent in 2021 compared with the average number of evictions filed annually from 2017 through ...
New England Public Policy Center Regional Brief , Paper 2022-2

A Rate Cycle Unlike Any Other

Since the Federal Open Market Committee began raising the federal funds rate in March 2022, people have speculated on the trajectory of both monetary policy and the economy. By looking at previous rate cycles, this article compares historical monetary policy cycles with the current period. We find the current cycle to be unique in terms of both the speed at which interest rates rose and the movement of inflation during the series of rate hikes.
Richmond Fed Economic Brief , Volume 23 , Issue 26

The Michigan Surveys of Consumers and consumer spending

We provide summary measures for a broad set of questions from the Michigan Surveys of Consumers. These measures summarize consumers' attitudes and expectations with respect to income, wealth, prices, and interest rates. They contain information that goes beyond the information captured by the Michigan Index of Consumer Sentiment, which is constructed from five questions in the same survey. We show that the summary measures have some explanatory power for aggregate consumption behavior over the period from 1987 to the present, even when controlling for economic fundamentals. The explanatory ...
Public Policy Brief

How Do Employers Recruit New Workers?

Richmond Fed Economic Brief , Volume 21 , Issue 28

Expanding the Scope of Workforce Development

Workforce development efforts often are geared toward adult workers. But examining workforce development from the perspective of human capital theory suggests that earlier interventions may yield high returns.
Richmond Fed Economic Brief , Issue May

Implications of Risks and Rewards in College Decisions

Despite a large and growing earnings premium for college graduates, growth in college enrollment and especially college attainment in the United States has been quite slow. The labor market's apparent lack of responsiveness to the earnings premium may be driven in part by the risks that marginally prepared students face when they go to college. Failing or dropping out could leave them with low wealth, high debt, and low earnings. Recent research indicates that neither further increases in the earnings premium nor reductions in college costs are likely to produce large increases in the college ...
Richmond Fed Economic Brief , Issue June

Measurement of unemployment

Measures of unemployment tally people without a job who are looking for one. For measurement purposes, the critical question is what constitutes ?looking.? This article summarizes how unemployment is measured in the United States and Europe, and describes recent research investigating the permeability of the dividing line between the unemployed and ?marginally attached? subgroups of those out of the labor market. A continuum between unemployed and entirely inactive individuals indicates that measures beyond unemployment may be useful in judging the state of the labor market.
Public Policy Brief


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