The Decline of the U.S. Labor Share
Over the past quarter century, labor?s share of income in the United States has trended downwards, reaching its lowest level in the postwar period after the Great Recession. Detailed examination of the magnitude, determinants and implications of this decline delivers five conclusions. First, around one third of the decline in the published labor share is an artifact of a progressive understatement of the labor income of the self-employed underlying the headline measure. Second, movements in labor?s share are not a feature solely of recent U.S. history: The relative stability of the aggregate ...
Low Interest Rates, Policy, and the Predictive Content of the Yield Curve
Does the yield curve’s ability to predict future output and recessions differ when interest rates are low, as in the current global environment? In this paper we build on recent econometric work by Shi, Phillips, and Hurn that detects changes in the causal impact of the yield curve and relate that to the level of interest rates. We explore the issue using historical data going back to the 19th century for the United States and more recent data for the United Kingdom, Germany, and Japan. This paper is similar in spirit to Ramey and Zubairy (2018), who look at the government spending ...
The long–run macroeconomic impacts of fuel subsidies
Many developing and emerging market countries have subsidies on fuel products. Using a small open economy model with a non-traded sector I show how these subsidies impact the steady state levels of macroeconomic aggregates such as consumption, labor supply, and aggregate welfare. These subsidies can lead to crowding out of non-oil consumption, inefficient inter-sectoral allocations of labor, and other distortions in macroeconomic variables. Across steady states aggregate welfare is reduced by these subsidies. This result holds for a country with no oil production and for a net exporter of ...
High-Skilled Services and Development in China
We document that the employment share of high-skill-intensive services is much lower in China than in countries with similar gross domestic product (GDP) per capita. We build a model of structural change with goods and low- and high-skill-intensive services to account for this observation. We find that large distortions limit the size of high-skill-intensive services in China. If they were removed, both high-skill-intensive services and GDP per capita would increase considerably. We document a strong presence of state-owned enterprises in high-skill-intensive services and argue that this ...
Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited
We develop flexible semiparametric time series methods that are then used to assess the causal effect of monetary policy interventions on macroeconomic aggregates. Our estimator captures the average causal response to discrete policy interventions in a macro-dynamic setting, without the need for assumptions about the process generating macroeconomic outcomes. The proposed procedure, based on propensity score weighting, easily accommodates asymmetric and nonlinear responses. Application of this estimator to the effects of monetary restraint shows the Fed to be an effective inflation fighter. ...
Assessing potential financial imbalances in an era of accommodative monetary policy : a speech at the 2011 International Conference: Real and Financial Linkage and Monetary Policy, Bank of Japan, Tokyo, Japan, June 1, 2011
remarks at the 2011 International Conference: Real and Financial Linkage and Monetary Policy, Bank of Japan, Tokyo, Japan, June 2, 2011
Bank Linkages and International Trade
We show that bank linkages have a positive effect on international trade. We construct the global banking network (GBN) at the bank level, using individual syndicated loan data from Loan Analytics for 1990-2007. We compute network distance between bank pairs and aggregate it to country pairs as a measure of bank linkages between countries. We use data on bilateral trade from IMF DOTS as the subject of our analysis and data on bilateral bank lending from BIS locational data to control for financial integration and financial flows. Using gravity approach to modeling trade with country-pair and ...
Keynote Address: The Economic Outlook
Speaking before an audience in Bucks County, PA, Philadelphia Fed President Patrick Harker said that a "new normal" in the economy may mean rethinking policy targets. "Things are unlikely to return to what we considered their relative norms before the recession," he said.
Inflation to target : what inflation to target?
This paper derives a central bank's objective function and optimal policy rule for an economy with both CPI and PPI inflation rates. It implements constrained-optimal policy rules with minimal information requirement, and evaluates the robustness of these simple rules when the central bank may not know the exact sources of shocks or nominal rigidities. One of the main findings is that monetary policy that ignores PPI inflation rate or PPI sector shocks can result in significant welfare loss.
Foreclosure Externalities and Vacant Property Registration Ordinances
This paper tests the effectiveness of vacant property registration ordinances (VPROs) in reducing negative externalities from foreclosures. VPROs were widely adopted by local governments across the United States during the foreclosure crisis and facilitated the monitoring and enforcement of existing property maintenance laws. We implement a border discontinuity design combined with a triple-difference specification to overcome policy endogeneity concerns, and we find that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This finding is robust to a ...