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Journal Article
The Unequal Effect of Interest Rates by Race, Gender
Household spending typically falls as interest rates rise, but the responses vary by race and gender. Data show that households with mortgages headed by white women cut their spending on durable goods about a quarter percentage point in the three years following a 1 percentage point increase in interest rates. This is a much larger reduction than for households with mortgages headed by white men or Black men or women. The differences highlight the challenge of understanding how policy interest rate changes affect a diverse population.
Report
Do long-haul truckers undervalue future fuel savings?
The U.S. federal government enacted fuel efficiency standards for medium and heavy trucks for the first time in September 2011. Rationales for using this policy tool typically depend upon frictions existing in the marketplace or consumers being myopic, such that vehicle purchasers undervalue the future fuel savings from increased fuel efficiency. We measure by how much long-haul truck owners undervalue future fuel savings by employing recent advances to the classic hedonic approach to estimate the distribution of willingness-to-pay for fuel efficiency. We find significant heterogeneity in ...
Journal Article
Has durable goods spending become less sensitive to interest rates?
Despite record-low interest rates, the pace of the current economic recovery has been only moderate. One reason is that the positive impact of lowered interest rates on consumer purchases of durable goods has diminished. Comparing the current economic recovery with those that followed the recessions of 1981-82, 1990-91 and 2001, Van Zandweghe and Braxton explore the way movements in key interest rates have affected consumer spending on durable goods. They find that if the boost from lowered interest rates to durable goods spending in the current recovery had stayed as strong as it was on ...
Report
Lumpy Durable Consumption Demand and the Limited Ammunition of Monetary Policy
The prevailing neo-Wicksellian view holds that the central bank's objective is to track the natural rate of interest (r*), which itself is largely exogenous to monetary policy. We challenge this view using a fixed-cost model of durable consumption demand, in which expansionary monetary policy prompts households to accelerate purchases of durable goods. This yields an intertemporal trade-off in aggregate demand as encouraging households to increase durable holdings today leaves fewer households acquiring durables going forward. Interest rates must be kept low to support demand going forward, ...
Working Paper
Do long-haul truckers undervalue future fuel savings?
The U.S. federal government enacted fuel efficiency standards for medium and heavy trucks for the first time in September 2011. Rationales for using this policy tool typically depend upon frictions existing in the marketplace or consumers being myopic, such that vehicle purchasers undervalue the future fuel savings from increased fuel efficiency. We measure by how much long-haul truck owners undervalue future fuel savings by employing recent advances to the classic hedonic approach to estimate the distribution of willingness-to-pay for fuel efficiency. We find significant heterogeneity in ...
Journal Article
The weakened influence of low interest rates on durable goods spending
Despite record-low interest rates, the pace of the current economic recovery has been only moderate. One reason is that the positive impact of lowered interest rates on consumer purchases of durable goods has diminished
Breaking Down the Contributors to High Inflation
Sharp increases in prices of durable and nondurable goods have been behind the recent rise in U.S. inflation.