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Teaching the Linkage Between Banks and the Fed: R.I.P. Money Multiplier
The money multiplier has been a standard concept in introductory economics classes for decades, but changes in the way the Fed implements monetary policy has made the model obsolete. This issue provides information about the linkages between the Fed and the banking system and provides teaching suggestions.
Reentering asset poverty after an exit: evidence from the PSID
In order to be successful at improving household's financial self-sufficiency and stability, asset-building policies must be designed to prevent households from falling back into asset poverty once they exit it. This paper uses the Panel Study of Income Dynamics data from 1994 to 2007 to analyze the influence of life events, demographics and financial behaviors on the duration out of asset poverty. We find evidence that suggests there are structural barriers to asset acquisition. Asset accumulation at levels equal to nine months worth of income at the income poverty level or greater is ...
Neighborhood Redlining, Racial Segregation, and Homeownership
Redlining was the practice of selectively classifying neighborhoods as most likely to default on repayment of a mortgage loan. Houses in redlined neighborhoods held little value as collateral, and lenders would only offer mortgage loans for these houses at above-average interest rates. Over time, these neighborhoods had the largest concentrations of African Americans. The September 2021 issue of Page One Economics explains how residents in redlined neighborhoods could not afford to become homeowners and accumulate wealth at the rates other groups did. It also points out how only when the ...