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Report
Identifying shocks via time-varying volatility
Lewis, Daniel J. (2018-10-01)
An n-variable structural vector auto-regression (SVAR) can be identified (up to shock order) from the evolution of the residual covariance across time if the structural shocks exhibit heteroskedasticity (Rigobon (2003), Sentana and Fiorentini (2001)). However, the path of residual covariances can only be recovered from the data under specific parametric assumptions on the variance process. I propose a new identification argument that identifies the SVAR up to shock orderings using the autocovariance structure of second moments of the residuals, implied by an arbitrary stochastic process for ...
Staff Reports , Paper 871

Working Paper
Capital Flows, Asset Prices, and the Real Economy: A "China Shock" in the U.S. Real Estate Market
Zhang, Calvin; Li, Zhimin; Shen, Leslie Sheng (2020-06-30)
We study the effects of foreign real estate capital flows on local asset prices and employment using detailed housing transactions data. We document (i) a "China shock" in the U.S. real estate market after 2007 driven by the Chinese government's house purchase restrictions and (ii) "home bias" in foreign Chinese housing purchases in the United States as they are concentrated in ZIP codes historically populated by ethnic Chinese. Exploiting the quasi-random temporal and spatial variation of real estate capital inflows from China, we find that foreign Chinese housing purchases have a positive ...
International Finance Discussion Papers , Paper 1286

Report
How Should Tax Progressivity Respond to Rising Income Inequality?
Violante, Giovanni L.; Heathcote, Jonathan; Storesletten, Kjetil (2020-10-19)
We address this question in a heterogeneous-agent incomplete-markets model featuring exogenous idiosyncratic risk, endogenous skill investment, and flexible labor supply. The tax and transfer schedule is restricted to be log-linear in income, a good description of the US system. Rising inequality is modeled as a combination of skill-biased technical change and growth in residual wage dispersion. When facing shifts in the income distribution like those observed in the US, a utilitarian planner chooses higher progressivity in response to larger residual inequality but lower progressivity in ...
Staff Report , Paper 615

Working Paper
Is China Fudging Its GDP Figures? Evidence from Trading Partner Data
Spiegel, Mark M.; Fernald, John G.; Hsu, Eric (2019-09-04)
We propose using imports, measured as reported exports of trading partners, as an alternative benchmark to gauge the accuracy of alternative Chinese indicators (including GDP) of fluctuations in economic activity. Externally-reported imports are likely to be relatively well measured, as well as free from domestic manipulation. Using principal components, we derive activity indices from a wide range of indicators and examine their fit to (trading-partner reported) imports. We choose a preferred index of eight non-GDP indicators (which we call the China Cyclical Activity Tracker, or C-CAT). ...
Working Paper Series , Paper 2019-19

Speech
Remarks at the fifth Data Management Strategies and Technologies Workshop
McAndrews, James J. (2014-02-04)
Remarks at the Fifth Data Management Strategies and Technologies Workshop, Federal Reserve Bank of New York, New York City
Speech , Paper 129

Speech
U.S. macroeconomic and regulatory developments and emerging market economies
Musalem, Alberto G. (2015-03-09)
Remarks at the International Financial Conference Annual Meeting, Cartagena, Colombia.
Speech , Paper 159

Journal Article
Why Are Life-Cycle Earnings Profiles Getting Flatter?
Vandenbroucke, Guillaume; Ravikumar, B. (2017)
The authors present a simple, two-period model of human capital accumulation on the job and through college attainment. They use a calibrated version of the model to explain the observed flattening of the life-cycle earnings profiles of two cohorts of workers. The model accounts for more than 55 percent of the observed flattening for high school-educated and for college-educated workers. Two channels generate the flattening in the model: selection (or higher college attainment) and a higher skill price for the more recent cohort. Absent selection, the model would have accounted for no ...
Review , Volume 99 , Issue 3 , Pages 245-57

Report
Optimal Progressivity with Age-Dependent Taxation
Violante, Giovanni L.; Heathcote, Jonathan; Storesletten, Kjetil (2017-08-04)
This paper studies optimal taxation of labor earnings when the degree of tax progressivity is allowed to vary with age. We analyze this question in a tractable equilibrium overlapping-generations model that incorporates a number of salient trade-offs in tax design. Tax progressivity provides insurance against ex-ante heterogeneity and earnings uncertainty that missing markets fail to deliver. However, taxes distort labor supply and human capital investments. Uninsurable risk cumulates over the life cycle, and thus the welfare gains from income compression via progressive taxation increase ...
Staff Report , Paper 551

Journal Article
China's Growth Outlook: Is High-Income Status in Reach?
Higgins, Matthew (2020-10-01)
Can China build on its development success to achieve high-income status in the decades ahead? To shed light on this question, we examine the past and prospective future sources of growth in China through the lens of the neoclassical growth model. Our key finding is that China would need to sustain total factor productivity growth at the top end of the range achieved by its high-income Pacific Rim neighbors in order to match their success in raising living standards. While fast-growing working-age populations boosted per capita income growth elsewhere in the Pacific Rim, a rapidly aging ...
Economic Policy Review , Volume 26 , Issue 4 , Pages 69-97

Report
Optimal Tax Progressivity: An Analytical Framework
Violante, Giovanni L.; Heathcote, Jonathan; Storesletten, Kjetil (2014-01-31)
What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces incentives to work and to invest in skills, and aggravates the externality associated with valued public expenditures. We develop a tractable equilibrium model that features all of these trade-offs. The analytical expressions we derive for social welfare deliver a transparent understanding of how ...
Staff Report , Paper 496

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