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Jel Classification:D31 

Report
Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level data set that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, ...
Staff Reports , Paper 924

Report
Worker Betas: Five Facts about Systematic Earnings Risk

The magnitude of and heterogeneity in systematic earnings risk has important implications for various theories in macro, labor, and ?nancial economics. Using administrative data, we document how the aggregate risk exposure of individual earnings to GDP and stock returns varies across gender, age, the worker?s earnings level, and industry. Aggregate risk exposure is U-shaped with respect to the earnings level. In the middle of the earnings distribution, aggregate risk exposure is higher for males, younger workers, and those in construction and durable manufacturing. At the top of the earnings ...
Staff Report , Paper 546

Journal Article
Recent Changes in U.S. Family Finances: Results from the 1998 Survey of Consumer Finances

Using data from the Federal Reserve Board's two most recent Surveys of Consumer Finances, this article provides a detailed picture of changes in the financial condition of U.S. families between 1995 and 1998. The financial situation of families changed notably in the three-year period. While income continued a moderate upward trend, net worth grew strongly, and the increase in net worth was broadly shared by different demographic groups. A booming stock market accounts for a substantial part of the rise in net worth, but the data also suggest that improvements in financial circumstances ...
Federal Reserve Bulletin , Volume 86 , Issue 1 , Pages pp. 1-29

Working Paper
Household Financial Distress and the Burden of ‘Aggregate’ Shocks

In this paper we show that household-level financial distress (FD) varies greatly and can increase vulnerability to economic shocks. To do this, we establish three facts: (i) regions in the United States vary significantly in their “FD-intensity,” measured either by how much additional credit households can access or how delinquent they are on debts, (ii) shocks that are typically viewed as “aggregate” in nature hit geographic areas quite differently, and (iii) FD is an economic “pre-existing condition”: the share of an aggregate shock borne by a region is positively correlated ...
Research Working Paper , Paper RWP 20-13

Working Paper
Updating the Racial Wealth Gap

Using newly available data from the Survey of Consumer Finances, this paper updates and extends the literature exploring the racial wealth gap. We examine several hypotheses proposed by previous researchers, including the importance of inherited wealth and other family support and that of trends in local real estate markets, and also extend the literature by exploring the gap across the distribution of wealth and simultaneously considering white, African American and Hispanic households. The findings indicate that observable factors account for all of wealth gap between white and Hispanic ...
Finance and Economics Discussion Series , Paper 2015-76

Working Paper
Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada

Using data from the United States and Canada, we quantify consumers’ net pecuniary cost of using cash, credit cards, and debit cards for purchases across income cohorts. The net cost includes fees paid to financial institutions, rewards received from credit or debit card issuers, and the merchant cost of accepting payments that is passed on to consumers as higher retail prices. Even though credit cards are more expensive for merchants to accept compared with other payment methods, merchants typically do not differentiate prices at checkout, but instead pass through their costs to all ...
Working Papers , Paper 20-13

Working Paper
Household Financial Distress and the Burden of 'Aggregate' Shocks

The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing ...
Working Paper , Paper 20-12

Working Paper
Household Financial Distress and the Burden of “Aggregate” Shocks

The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "preexisting ...
Working Papers , Paper 2019-025

Working Paper
Money, liquidity and welfare

This paper develops an analytically tractable Bewley model of money demand to shed light on some important questions in monetary theory, such as the welfare cost of inflation. It is shown that when money is a vital form of liquidity to meet uncertain consumption needs, the welfare costs of inflation can be extremely large. With log utility and parameter values that best match both the aggregate money demand curve suggested by Lucas (2000) and the variance of household consumption, agents in our model are willing to reduce consumption by 3% ~ 4% to avoid 10% annual inflation. The astonishingly ...
Working Papers , Paper 2014-3

Working Paper
Distributional Considerations for Monetary Policy Strategy

We show that makeup strategies, such as average inflation targeting and price-level targeting, can be more effective than a flexible inflation targeting strategy in overcoming the obstacles created by the effective lower bound in a heterogeneous agent New Keynesian (HANK) model. We also show that the macroeconomic stabilization benefits from such alternative strategies can be substantially larger in a HANK environment than in a representative agent New Keynesian model. We argue that gains in employment outcomes from switching to an alternative strategy would generate disproportionate ...
Finance and Economics Discussion Series , Paper 2020-073

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