Land of opportunity? Economic mobility in the United States. 2012 annual report of the Federal Reserve Bank of Richmond
Economics writer Jessie Romero and group vice president Kartik Athreya interpret data that suggest economic mobility has decreased in recent years. Many factors contribute to mobility, but for most people advancement depends on opportunities to obtain human capital ? opportunities that are not as good for children in poor families. Initiatives that focus on early childhood education seem to yield high returns on investment. Their feasibility on a large scale is unknown, but they may have the potential to help the United States achieve a more inclusive prosperity.
Understanding Urban Decline
Senior policy economist Santiago Pinto and economics writer Tim Sablik discuss the forces that drive urbanization and the factors that determine where firms and households locate within cities. Pinto and Sablik also evaluate a variety of place-based and people-based policy responses to urban decline. Because every city is different, the authors caution that revitalization efforts that worked for one city may not work for another.
Systemic risk and the pursuit of efficiency
In this essay, senior economist Kartik Athreya identifies systemic risk with the presence of linkages between market participants, where problems for one directly create problems for others. He argues that such situations can arise from the use of contractual arrangements, especially debt that requires frequent refinancing and liquidation in the event of an inability to repay. The presence of spillover effects can, in turn, lead to outcomes in the wake of shocks that can be improved via policy intervention. Nonetheless, he cautions against taking this as a license to intervene after the fact, ...
Falling Short: Why Isn't the U.S. Producing More College graduates?
Why is the United States not producing more college graduates, especially in light of the large and persistent wage gap between workers who graduate from college and those who do not? Senior policy economist Urvi Neelakantan and economics writer Jessie Romero consider several factors that may help answer the question, including inadequate preparation during students' K-12 years. They discuss how K-12 preparation varies with socioeconomic status and how "school-choice" initiatives are intended to give more children access to high-quality schools.
Living Wills: A Tool for Curbing 'Too Big to Fail'
Economist Arantxa Jarque and senior editor David A. Price explore an innovation of the Dodd-Frank Act of 2010, which requires the largest and most complex financial institutions to create resolution plans to follow if the institutions fall into severe financial distress. In these plans, or "living wills," the institutions must give regulators a roadmap for resolving them via the bankruptcy process ? without disrupting the financial system or resorting to public bailouts. Jarque and Price argue that living wills are a tool that regulators can use to curb the "too big to fail" problem ...
A \\"New Normal\\"? The Prospects for Long-Term Growth in the United States
Aaron Steelman, director of publications, and John A. Weinberg, senior vice president and special advisor to the president, examine the claim that the U.S. economy has reached a "new normal" of roughly 2 percent annual growth. This has been the average growth rate since the end of the Great Recession, considerably lower than the post-World War II average. Proponents of the new normal hypothesis argue, among other things, that innovation has slowed and is unlikely to improve. They also believe that demographic trends pose serious problems for U.S. fiscal policy and will exert a drag on the ...
Should the Fed Have a Financial Stability Mandate? Lessons from the Fed's first 100 Years
President Jeffrey Lacker and Research Publications Content Manager Renee Haltom explore the Fed's role in financial stability. Following the global financial crisis of 2007-08, the Fed has been given enhanced regulatory responsibilities to prevent future crises. However, most of the Fed's actions in pursuit of financial stability have historically come through emergency lending once crises are underway. The authors conclude that arguments in favor of emergency lending are based on erroneous readings of history. Instead, emergency lending may undermine financial stability, as well as the Fed's ...
Unsustainable fiscal policy: implications for monetary policy
Federal government debt held by the public reached 67.7 percent of gross domestic product in 2011, and trends point to large budget deficits for many years to come. In this essay, economics writer Renee Haltom and research director John Weinberg explore the implications for monetary policy if the United States ever approached its "fiscal limit." In that scenario, the Federal Reserve might face pressure to produce inflation revenue. The authors conclude that the United States must avoid this scenario by placing fiscal policy on a more sustainable path