Search Results
Briefing
State government budgets and the Recovery Act
State and local governments, with revenues reduced sharply by the recession, are responding by cutting services, increasing tax rates, and drawing down reserves; they are also receiving some relief in the form of stimulus funds provided by the federal government. The stimulus funds legislated in the American Recovery and Reinvestment Act only partly offset the recession-induced shortfalls and are scheduled to phase out before most analysts believe state and local governments will see fiscal recovery well underway. Thus, observers are concerned that the state-local sector will create a ...
Briefing
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.
Briefing
U.S. household deleveraging: what do the aggregate and household-level data tell us?
Deleveraging is the process by which households decide that their level of debt is inconsistent with their revised economic outlook and adjust their leverage accordingly, primarily by substituting debt repayment for consumption. Household deleveraging is a commonly cited reason for the sluggish consumption growth experienced during the current economic recovery from the Great Recession. This policy brief analyzes the impact of household debt repayment on consumer spending during and after the Great Recession by using aggregate and household-level data. Overall, the data show little evidence ...
Briefing
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 ...
Briefing
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 ...
Briefing
Cliff notes: the effects of the 2013 debt-ceiling crisis
We investigate the effects of the 2013 debt-ceiling crisis on the Treasury bill market and possible spillovers to the commercial paper market and money market funds. We also compare this experience with the prior debt-ceiling crisis in 2011. We find that the 2013 debt-ceiling crisis reduced the demand for Treasury bills that were scheduled to mature right after the debt-ceiling deadline, but not for longer-term Treasury bills. Accordingly, we see that a hump formed at the shorter end of the term structure of Treasury bill yields around the debt-ceiling deadline, with the term structure ...
Briefing
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 ...
Briefing
The impact of policy uncertainty on U. S. employment: industry evidence
The anemic pace of the recovery of the U. S. economy from the Great Recession has frequently been blamed on heightened uncertainty, much of which concerns the nation?s fiscal policy. Intuition suggests that increased policy uncertainty likely has different impacts on different industries, to the extent that industries differ in their exposure to government policies. This study utilizes industry data to explore whether policy uncertainty indeed affects the dynamics of employment, and particularly its impact on industry employment, during this recovery. This analysis focuses on heterogeneity ...
Briefing
The role of expectations and output in the inflation process: an empirical assessment
This brief examines two issues of current interest concerning inflation: (1) whether "well-anchored" expectations will help to restrain inflation's decline and whether an "un-anchoring" of expectations could lead to undesirably high inflation and (2) to what extent output (or utilization) gaps are useful components of empirical models of inflation and, if they are useful, to what extent current gaps might counterbalance the effect of expectations on inflation. The goals of conducting this examination are to articulate a reasonably coherent framework for the discussion, highlight the ...
Briefing
What can we learn by disaggregating the unemployment-vacancy relationship?
This policy brief explores the nature of the recent change in the vacancy-unemployment relationship by disaggregating the data by industry, age, education, and duration of unemployment, and by examining blue- and white-collar groups separately.