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Minding the Output Gap: What Is Potential GDP and Why Does It Matter?
Potential output is an estimate of what the economy could produce. Actual output is what the economy does produce. If actual is below potential -- a negative output gap -- there is "slack" in the economy. If actual is above potential -- a positive output gap -- resources are fully employed, or perhaps overutilized. This issue of Page One Economics explains how the output gap is useful for checking the health of the economy. It also points out how errors in the estimation of potential real GDP can reduce the effectiveness of policy.
Catching Up or Falling Behind? New Jersey Schools in the Aftermath of the Great Recession
Today’s post, which complements Monday’s on New York State and a set of interactive graphics released by the New York Fed earlier, assesses the effect of the Great Recession on educational finances in New Jersey. The Great Recession severely restricted state and local funds, which are the main sources of funding for schools. To help avoid steep budget cuts to schools, the federal government allocated $100 billion for education as part of the American Recovery and Reinvestment Act of 2009 (ARRA), also known as the stimulus. The stimulus money was meant to provide temporary relief to ...
Bullard Interviewed on Fox Business
St. Louis Fed President James Bullard shared his views on the U.S. economy, fiscal stimulus and other topics during an interview on “Barron’s Roundtable” on Fox Business.
The production impact of "cash-for-clunkers": implications for stabilization policy
Stabilization policies frequently aim to boost spending as a means to increase GDP. Spending does not necessarily translate into production, however, especially when inventories are involved. We look at the ?cash-for-clunkers? program that helped finance the purchase of nearly 700,000 vehicles in 2009. An analysis of auto sales and production movements reveals that the program did prompt a large spike in sales. But the program had only a modest and fleeting impact on production, as inventories buffered the movements in sales. These findings suggest caution in judging the efficacy of such ...
International Inflation Trends
Expected inflation rates have risen in many countries after fiscal and monetary stimulus helped economies recover from the COVID-19 lockdown.
Living Life Near the ZLB
Remarks at 2019 Annual Meeting of the Central Bank Research Association (CEBRA), New York City.