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Newsletter
A Dollar’s Worth: Inflation Is Real
Bennett, Jeannette N. (2021-12)
Understanding the reality of inflation can help consumers make decisions in personal finance. Learn more about inflation, how it’s measured, and how the inflation rate is calculated in the December 2021 issue of Page One Economics: Focus on Finance.
Page One Economics Newsletter

Working Paper
Earnings Misperceptions and Household Distress
Sanchez, Juan M.; Song, Stefan (2025-11-03)
Households learn whether income changes are temporary or persistent from their own paychecks. This paper develops a quantitative model of financial distress that incorporates this inference and estimates the extent to which households overweight recent outcomes—diagnostic expectations—using survey data on income beliefs. The model explains distress without assuming extreme impatience and aligns with the observed relationship between income and interest rates. Learning and diagnostic expectations account for about half of delinquencies and one-third of bankruptcies. Diagnostic expectations ...
Working Papers , Paper 2025-030

Working Paper
Earnings Misperceptions and Household Distress
Sanchez, Juan M.; Song, Stefan (2025-10-24)
Households learn whether income changes are temporary or persistent from the history of their own paychecks. This paper develops a quantitative model of household financial distress that incorporates this inference and uses survey data on income expectations to estimate the extent to which households overweight recent outcomes—diagnostic expectations. The model improves on the standard full-information, rational-expectations benchmark in two key dimensions: it explains financial distress without assuming extreme impatience, and it more accurately captures the empirical correlation between ...
Working Papers , Paper 2025-030

Discussion Paper
Understanding the Racial and Income Gap in COVID-19: Public Transportation and Home Crowding
Avtar, Ruchi; Chakrabarti, Rajashri; Pinkovskiy, Maxim L. (2021-01-12)
This is the second post in a series that aims to understand the gap in COVID-19 intensity by race and income. In our first post, we looked at how comorbidities, uninsurance rates, and health resources may help to explain the race and income gap observed in COVID-19 intensity. We found that a quarter of the income gap and more than a third of the racial gap in case rates are explained by health status and system factors. In this post, we look at two factors related to indoor density—namely public transportation use and home crowding. Here, we will aim to understand whether these two factors ...
Liberty Street Economics , Paper 20210112b

Discussion Paper
(Unmet) Credit Demand of American Households
Livingston, Max; Van der Klaauw, Wilbert; Zafar, Basit (2013-11-06)
One of the direct effects of the 2008 financial crisis on U.S. households was a sharp tightening of credit. Households that had previously been able to borrow relatively freely through credit cards, home equity loans, or personal loans suddenly found those lines closed off—just when they needed them the most. In recent months, aggregate statistics such as the Federal Reserve’s Consumer Credit series and the Senior Loan Officer Opinion Survey have shown a gradual improvement in consumer credit. The former series is an indicator of interaction of credit supply and demand, while the latter ...
Liberty Street Economics , Paper 20131106

Discussion Paper
Understanding the Racial and Income Gap in Covid-19: Health Insurance, Comorbidities, and Medical Facilities
Avtar, Ruchi; Chakrabarti, Rajashri; Pinkovskiy, Maxim L. (2021-01-12)
Our previous work documents that low-income and majority-minority areas were considerably more affected by COVID-19, as captured by markedly higher case and death rates. In a four-part series starting with this post, we seek to understand the reasons behind these income and racial disparities. Do disparities in health status translate into disparities in COVID-19 intensity? Does the health system play a role through health insurance and hospital capacity? Can disparities in COVID-19 intensity be explained by high-density, crowded environments? Does social distancing, pollution, or the age ...
Liberty Street Economics , Paper 20210112a

Report
Error correction mechanisms and short-run expectations
Antzoulatos, Angelos A. (1996-02-01)
Reflecting the nature of economic decisions, the error correction mechanism (ECM) in the error-correction representation of a system of co-integrated variables may arise from forward-looking behavior. In such a case, the estimated ECM coefficients may misleadingly appear to be insignificant or to have the opposite-than-expected sign if the variables in the error-correction representation do not adequately capture short-run expectations. This paper explores the nature of this problem with a theoretical model for consumption and demonstrates how severe the problem can be with U.S. data. Because ...
Staff Reports , Paper 10

Discussion Paper
Credit, Income, and Inequality
Delis, Manthos D.; Fringuellotti, Fulvia; Ongena, Steven (2021-07-01)
Access to credit plays a central role in shaping economic opportunities of households and businesses. Access to credit also plays a crucial role in helping an economy successfully exit from the pandemic doldrums. The ability to get a loan may allow individuals to purchase a home, invest in education and training, or start and then expand a business. Hence access to credit has important implications for upward mobility and potentially also for inequality. Adverse selection and moral hazard problems due to asymmetric information between lenders and borrowers affect credit availability. Because ...
Liberty Street Economics , Paper 20210701

Discussion Paper
What Is behind the Global Jump in Personal Saving during the Pandemic?
Higgins, Matthew; Klitgaard, Thomas (2021-04-14)
Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more ...
Liberty Street Economics , Paper 20210414

Working Paper
Marriage Market Sorting in the U.S.
Restrepo-Echavarria, Paulina; Cheremukhin, Anton A.; Tutino, Antonella (2023-09)
We study the multidimensional sorting of males and females in the U.S. marriage market over the past decade using a model of targeted search. We find strong vertical sorting on income and education, and horizontal sorting on race. We find that women put significant effort into targeting men at the top of the desirability scale, while men put less effort and target women with similar characteristics. We find no improvement in quality of matching and no noticeable changes in sorting patterns or individual search behavior, despite rapid improvement in search technology. Finally, we find that ...
Working Papers , Paper 2023-023

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