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Journal Article
How Much Have Record Corporate Profits Contributed to Recent Inflation?
Andrew Glover, José Mustre-del-Río, and Alice von Ende-Becker present evidence that markup growth was a major contributor to inflation in 2021. Specifically, markups grew by 3.4 percent over the year, whereas inflation, as measured by the price index for Personal Consumption Expenditures, was 5.8 percent, suggesting that markups could account for more than half of 2021 inflation. However, the timing and cross-industry patterns of markup growth are more consistent with firms raising prices in anticipation of future cost increases, rather than an increase in monopoly power or higher demand.
Journal Article
Monetary Policy and Intangible Investment
Cooper Howes and Alice von Ende-Becker provide a simple framework to explain how the financing structure and depreciation rate of intangible investment cause it to respond differently to changes in interest rates and then analyze what these properties imply for the efficacy of monetary policy. Building on the findings of Döttling and Ratnovski (2021), they show that monetary policymakers may need to adjust their approach to managing the economy as the share of intangible investment continues to grow.
Journal Article
Capital Flows and Monetary Policy in Emerging Markets around Fed Tightening Cycles
The Federal Reserve’s interest rate hikes in 2022–23 raised concerns about spillover effects on smaller emerging market and developing economies. Historically, a higher U.S. federal funds rate has been associated with international investors withdrawing capital from emerging markets, which can lead to lower economic activity and depreciating exchange rates in these markets—and, in turn, greater financial vulnerability. To reduce capital outflows, central banks in emerging markets can tighten their own monetary policy rates to increase yields on debt securities. But raising interest ...
Journal Article
How Did the 2018–19 U.S. Tariff Hikes Influence Household Spending?
Jun Nie, Alice von Ende-Becker, and Shu-Kuei X. Yang construct a tariff intensity measure to assess the uneven effects of the 2018–19 tariff increases across different types of households. They find that low-income households were more exposed to tariff increases than high-income households; younger households were more exposed than older households; Black households were more exposed than white or Asian households; and Hispanic households were more exposed than non-Hispanic households. In addition, they find that the tariff increases led to only a small shift in household spending from ...
Journal Article
Current Monetary Policy May Be Less Restrictive Than It Seems
Compared with most historical inflationary episodes since the 1960s, the current U.S. inflation cycle features both higher core inflation and a more resilient real economy. This co-movement of prices and real activity suggests monetary policy has not sufficiently reduced demand. We examine the current policy stance and argue that interest rates may indeed be less restrictive than commonly thought. To lower inflation to 2 percent, the Federal Reserve may have to maintain a restrictive policy stance for some time.