Do commodity price spikes cause long-term inflation?
This public policy brief examines the relationship between trend inflation and commodity price increases and finds that evidence from recent decades supports the notion that commodity price changes do not affect the long-run inflation rate. Evidence from earlier decades suggests that effects on inflation expectations and wages played a key role in whether commodity price movements altered trend inflation. This brief is based on a memo to the president of the Federal Reserve Bank of Boston as background to a meeting of the Federal Open Market Committee.
The estimated macroeconomic effects of the Federal Reserve's large-scale Treasury purchase program
This brief examines an issue of current importance to the conduct of U.S. economic policy: how has the Federal Open Market Committee (FOMC) plan to purchase up to $600 billion of Treasury securities by June 30, 2011 affected the movement of inflation, GDP, and employment to more desirable medium-term and long-term levels? Following the FOMC's announcement of the plan on November 3, 2010, other events that potentially influence Treasury yields have been at play. To estimate the effects that the FOMC Treasury purchases may have on the goal of achieving more desirable levels of inflation and ...
Potential effects of an increase in debit card fees
Recently announced changes to debit card interchange fees could lead to an increase in the cost of debit cards to consumers. This brief analyzes the potential effects of an increase in debit card fees or in bank account fees by using the results of the 2008 and 2009 Survey of Consumer Payment Choice (SCPC). The main findings are that: 1) consumers with the least amount of education (less than a high school diploma), the lowest annual income (below $25,000), and the youngest age (under 25 years) consider cost to be the most important payment characteristic. It is probable that these consumers ...
Using state and metropolitan area house price cycles to interpret the U. S. housing market
This brief examines the numerous house price cycles in states and metropolitan areas since the 1970s, drawing lessons that may be informative for analyzing and projecting national patterns. It finds that house sales volumes, new home construction, and mortgage delinquencies have provided leading indicators when a statewide house price boom was nearing an end, but that house prices have rarely decreased in the absence of a state recession. The median relationship suggests that the national OFHEO house price index could keep increasing well into 2007, given the sales and construction declines ...
Inflation expectations and the evolution of U. S. inflation
Much recent commentary has centered on the importance of well-anchored inflation expectations serving as the foundation of a well-behaved inflation rate. But the difficulty in relying on this principle is that inflation expectations are not directly observable, and thus it is hard to know whether expectations truly play such an anchoring role in the evolution of inflation. In the current circumstances this question is of much more than academic interest, as widely used measures suggest the coincidence of a large unemployment gap and muted production costs with fairly stable long-run inflation ...
Inflation targeting: central bank practice overseas
This policy brief, which is based on an internal memo, summarizes the institutional and operational features observed in the 27 countries that have gained experience with inflation targeting (IT). It finds considerable convergence in many IT practices across countries over the past 10 to 15 years but much variation in policymakers? choices concerning such key issues as how they treat the borders of the target range. On the whole, most IT banks have chosen to practice inflation targeting in a more flexible and, thus, resilient fashion than many analysts once feared?seemingly without much loss ...
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.
Cyclical versus secular: decomposing the recent decline in U.S. labor force participation
Since the start of the Great Recession, one of the most striking developments in the U.S. labor market has been the pronounced decline in the labor force participation rate. The crucial issue in interpreting the decline in U.S. labor force participation is how much of the decline reflects cyclical factors and how much reflects more persistent developments such as the demographic effects of an aging population. We provide a decomposition of cyclical versus trend movements in the labor force participation rate, informed by the joint dynamics of this variable with the employment-to-population ...
A decomposition of shifts of the Beveridge curve
The apparent outward shift of the Beveridge curve?the empirical relationship between job openings and unemployment?has received much attention among economists and policymakers in the recent years with many analyses pointing to extended unemployment benefits as a reason behind the shift. However, other explanations have also been proposed for this shift, including worsening structural unemployment. ; If the increased availability of unemployment insurance (UI) benefits to the long-term unemployed is responsible for the shift in the Beveridge curve, then allowing these benefits to expire ...
The federal fiscal outlook
This Public Policy Brief presents recent forecasts of the U.S. federal government deficits and publicly held federal debt, along with brief commentary by economic research staff at the Federal Reserve Bank of Boston. It is based on materials presented in an internal policy briefing on April 29, 2004. Contributors to this brief include Radoslav Raykov and Robert Triest. Views expressed in this brief do not necessarily reflect the views of the Federal Reserve System.