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Working Paper
Trading down and the business cycle
Rebelo, Sergio; Wong, Arlene; Jaimovich, Nir (2015-11-01)
The authors document two facts: First, during recessions consumers trade down in the quality of the goods and services they consume. Second, the production of low-quality goods is less labor intensive than that of high-quality goods. Therefore, when households trade down, labor demand falls, increasing the severity of recessions. The authors find that the trading-down phenomenon accounts for a substantial fraction of the fall in U.S. employment in the recent recession. They study two business cycle models that embed quality choice and find that the presence of quality choice magnifies the ...
FRB Atlanta CQER Working Paper , Paper 2015-5

Working Paper
The limits of forward guidance
Campbell, Jeffrey R.; Melosi, Leonardo; Fisher, Jonas D. M.; Ferroni, Filippo (2019-03-20)
The viability of forward guidance as a monetary policy tool depends on the horizon over which it can be communicated and its influence on expectations over that horizon. We develop and estimate a model of imperfect central bank communications and use it to measure how effectively the Fed has managed expectations about future interest rates and the influence of its communications on macroeconomic outcomes. Standard models assume central banks have perfect control over expectations about the policy rate up to an arbitrarily long horizon and this is the source of the so-called ?forward guidance ...
Working Paper Series , Paper WP-2019-3

Working Paper
Is There News in Inventories?
Gortz, Christoph; Gunn, Christopher; Lubik, Thomas A. (2020-05-08)
This paper identifies total factor productivity (TFP) news shocks using standard VAR methodology and documents a new stylized fact: in response to news about future increases in TFP, inventories rise and comove positively with other major macroeconomic aggregates. The authors show that the standard theoretical model used to capture the effects of news shocks cannot replicate this fact when extended to include inventories. To explain the empirical inventory behavior, they develop a framework that relies on the presence of knowledge capital accumulated through a learning-by-doing process. The ...
Working Paper , Paper 20-03

Report
Zombies at Large? Corporate Debt Overhang and the Macroeconomy
Jordà, Òscar; Kornejew, Martin; Schularick, Moritz; Taylor, Alan M. (2020-12-01)
With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near-universe of modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when ...
Staff Reports , Paper 951

Working Paper
Does the choice of nominal anchor matter?
Gould, David M. (1999-12-01)
The conventional wisdom on nominal anchors is that exchange rate-based inflation stabilizations lead to economic booms while monetary-based stabilizations lead to recessions. This study finds strong evidence against this view. Rather than determining the path of economic growth, the choice of nominal anchor appears to be endogenously determined by the state of the economy. To peg or manage the exchange rate, a high level of international reserves is important, especially when a government?s credibility is low after a period of high inflation. After controlling for the level of international ...
Working Papers , Paper 9914

Working Paper
Adverse Selection, Risk Sharing and Business Cycles
Veracierto, Marcelo (2014-10-22)
I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since the method could be used to solve a wide class of models with heterogeneous agents and aggregate uncertainty. Calibrating the model to U.S. data I find a striking result: That the information frictions that plague the economy have no effects on business cycle fluctuations.
Working Paper Series , Paper WP-2014-10

Working Paper
Countercyclical policy and the speed of recovery after recessions
Francis, Neville; Jackson, Laura E.; Owyang, Michael T. (2013)
We consider the effect of some policies intended to shorten recessions and accelerate recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which gives us a cross-section of both state- and national-level policies. Because we study multiple recessions for the same state and multiple states for the same recession, we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies. We find that expansionary monetary policy at the national level helps to stimulate the exit of ...
Working Papers , Paper 2013-032

Journal Article
The Heterogeneous Business-Cycle Behavior of Industrial Production
Schwartzman, Felipe; Evert, Jackson (2016)
This paper collects stylized facts about the cyclical properties of industry-level data. Those can provide a window into the sources of business cycles as well as propagation mechanisms. We find (i) goods that are more durable or that have higher wealth elasticity are more cyclical, (ii) sectors tied to the government tend to lag business cycles, (iii) sectors with nominal frictions tend to lag business cycles, (iv) sectors in which financial frictions are likely to be important tend to lag business cycles, and (v) industries that are highly integrated tend to lead business cycles.
Economic Quarterly , Issue 3Q , Pages 227-260

Working Paper
Remittances, entrepreneurship, and employment dynamics over the business cycle
Shapiro, Alan Finkelstein; Mandelman, Federico S. (2014-11-01)
We incorporate remittances and microentrepreneurship (self-employment) into a small open-economy business cycle model with capital and labor market frictions. Countercyclical remittances moderate the decline of households' consumption during recessions. These remittances also are used to finance the start-up costs of microenterprises that bolster households' income during economic downturns. However, the positive income effect from countercyclical remittances also leads to a decrease in salaried labor supply, which generates offsetting upward pressure on wages during recessions and adversely ...
FRB Atlanta Working Paper , Paper 2014-19

Working Paper
Productivity and Potential Output Before, During, and After the Great Recession
Fernald, John G. (2014-06-05)
U.S. labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules explanations that focus on disruptions during or since the recession, and industry and state data rule out ?bubble economy? stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower ...
Working Paper Series , Paper 2014-15

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