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58 posts on "Macroecon"

February 20, 2014

Just Released: The Inflation Outlook in the Euro Zone . . . Survey Says

Robert Rich, Kaivan K. Sattar, and Joseph Tracy

The European Central Bank (ECB) released its 2014:Q1 Survey of Professional Forecasters (SPF) on February 13. The release comes at a time of growing concern about low Euro-zone inflation: consumer prices were up only 0.7 percent over the year in January, the fourth consecutive monthly reading of less than 1 percent and well below the ECB’s target of just below 2 percent. Some commentators have argued that falling inflation after five years of recession or very slow growth has raised the threat of deflation.

Continue reading "Just Released: The Inflation Outlook in the Euro Zone . . . Survey Says" »

Posted by Blog Author at 7:00 AM in International Economics, Macroecon | Permalink | Comments (0)

February 19, 2014

Why Is the Job-Finding Rate Still Low?

Victoria Gregory, Christina Patterson, Ayşegül Şahin, and Giorgio Topa

Fluctuations in unemployment are mostly driven by fluctuations in the job-finding prospects of unemployed workers—except at the onset of recessions, according to various research papers (see, for example, Shimer [2005, 2012] and Elsby, Hobijn, and Sahin [2010]). With job losses back to their pre-recession levels, the job-finding rate is arguably one of the most important indicators to watch. This rate—defined as the fraction of unemployed workers in a given month who find jobs in the consecutive month—provides a good measure of how easy it is to find jobs in the economy. The chart below presents the job-finding rate starting from 1990. Clearly, the job-finding rate is still substantially below its pre-recession levels, suggesting that it is still difficult for the unemployed to find work. In this post, we explore the underlying reasons behind the low job-finding rate.

Continue reading "Why Is the Job-Finding Rate Still Low?" »

Posted by Blog Author at 7:00 AM in Labor Economics, Macroecon | Permalink | Comments (1)

February 18, 2014

Just Released: Does Transportation Spending Make Good Stimulus?

Andrew Haughwout, Therese McGuire, and Joseph Morris

On January 14, the Transportation Research Board, an arm of the National Research Council, released a new report, Transportation Investments in Response to Economic Downturns. The report is intended to provide guidance on three important and related policy questions:

  1. If the federal government undertakes a future stimulus program, should transportation spending be part of that package?
  2. If so, how should the transportation spending be structured and managed?
  3. Should established transportation programs be modified to make transportation spending more useful as economic stimulus?

Continue reading "Just Released: Does Transportation Spending Make Good Stimulus?" »

Posted by Blog Author at 3:00 PM in Macroecon | Permalink | Comments (1)

February 12, 2014

The Long and Short of It: The Impact of Unemployment Duration on Compensation Growth

M. Henry Linder, Richard Peach, and Robert Rich

How tight is the labor market? The unemployment rate is down substantially from its October 2009 peak, but two-thirds of the decline is due to people dropping out of the labor force. In addition, an unusually large share of the unemployed has been out of work for twenty-seven weeks or more—the long-duration unemployed. These statistics suggest that there remains a great deal of slack in U.S. labor markets, which should be putting downward pressure on labor compensation. Instead, compensation growth has moved modestly higher since 2009. A potential explanation is that the long-duration unemployed exert less influence on wages than the short-duration unemployed, a hypothesis we examine here. While preliminary, our findings provide some support for this hypothesis and show that models taking into account unemployment duration produce more accurate forecasts of compensation growth.

Continue reading "The Long and Short of It: The Impact of Unemployment Duration on Compensation Growth " »

Posted by Blog Author at 7:00 AM in Macroecon | Permalink | Comments (4)

February 03, 2014

A Mis-Leading Labor Market Indicator

Samuel Kapon and Joseph Tracy

The unemployment rate is a popular measure of the condition of the labor market. With the Great Recession, the unemployment rate increased from a low of 4.4 percent in March 2007 to a peak of 10.0 percent in October 2009. As the economy recovered and growth resumed, the unemployment rate has fallen to 6.7 percent. What other measures are useful to supplement our understanding of the degree of the labor market recovery?

Continue reading "A Mis-Leading Labor Market Indicator" »

Posted by Blog Author at 12:00 PM in Labor Economics, Macroecon | Permalink | Comments (18)

November 27, 2013

Has the Fed Stabilized the Price Level?

Marc P. Giannoni and Hannah Herman

The Federal Reserve Reform Act of 1977 established the monetary policy objectives of maximum employment, stable prices, and moderate long-term interest rates. The goal of “stable prices” has long been understood to mean a low positive inflation rate. On January 25, 2012, the Federal Open Market Committee (FOMC) explicitly defined its price stability mandate in terms of a longer-run goal of 2 percent inflation measured by the total personal consumption expenditure (PCE) deflator. Here, we examine how the behavior of inflation over different time periods compares to this goal. We then discuss how the goal of stabilizing inflation over the long run, rather than on a year-after-year basis, tends to imply a stabilization of the U.S. price level around a trend line—an outcome similar to that from price-level targeting, which offers various theoretical benefits.

Continue reading "Has the Fed Stabilized the Price Level?" »

Posted by Blog Author at 7:00 AM in Macroecon, Monetary Policy | Permalink | Comments (1)

November 18, 2013

Yen and Yang: The Response of the Nikkei to the Yen

Andrew Howland and Benjamin Mandel

To what extent are Japanese equities driven by changes in the value of the yen? This question is especially relevant for recent developments in Japan, where both the Nikkei equity index and the dollar value of the yen appear to have reacted strongly to new policy initiatives that were introduced in late 2012 (that is, the fiscal and monetary policy changes collectively referred to as “Abenomics”). In this post, we use a particular statistical technique to compute how much of the post-Abenomics Nikkei reaction can be ascribed to changes in the foreign exchange rate. Our estimates imply that roughly half of the recent movements in the Nikkei can be ascribed to the changing value of the yen, with the remainder reflecting the domestic implications of Abenomics and other factors.

Continue reading "Yen and Yang: The Response of the Nikkei to the Yen" »

Posted by Blog Author at 7:00 AM in International Economics, Macroecon | Permalink | Comments (2)

November 13, 2013

On the Design of Monetary and Macroprudential Policies

Bianca De Paoli

The financial crisis, recession, and slow recovery have emphasized the interactions between financial markets and the real economy. These developments have also motivated macroeconomists, central bankers, and financial regulators to think of new policy instruments that could help limit “systemic” or “systemwide” financial risks, as the Bank for International Settlements and the Financial Stability Board describe them. But apart from finding the right tools, policymakers are also interested in understanding how such instruments should be set in conjunction with monetary policy. In this post, we discuss the issues that arise when deciding how to design institutions for monetary and macroprudential policymaking. It turns out that the answer to this question hinges on a key issue in monetary policy: the ability of a decisionmaker to make binding commitments regarding his or her future behavior.

Continue reading "On the Design of Monetary and Macroprudential Policies" »

Posted by Blog Author at 7:00 AM in Macroecon, Monetary Policy | Permalink | Comments (0)

October 07, 2013

What’s News?

Linda Goldberg

Economic news moves markets. Most analyses find that economic news is incorporated quickly (within minutes) into asset prices, with some measurable persistence of these effects, and with some spillovers across national borders. Some types of announcements—for example, U.S. nonfarm payrolls announcements—generate much larger asset price responses than others. Generally, news that is more timely, is more precise (being subject to smaller revisions on average), and contains more information (being better able to better forecast GDP growth, inflation, or central bank policy decisions) has a larger effect on asset prices.

Continue reading "What’s News?" »

Posted by Blog Author at 7:00 AM in Financial Markets, Macroecon | Permalink | Comments (0)

September 09, 2013

Preparing for Takeoff? Professional Forecasters and the June 2013 FOMC Meeting

Richard Crump, Stefano Eusepi, and Emanuel Moench

Following the June 18-19 Federal Open Market Committee (FOMC) meeting different measures of short-term interest rates increased notably. In the chart below, we plot two such measures: the two-year Treasury yield and the one-year overnight indexed swap (OIS) forward rate, one year in the future. The vertical line indicates the final day of the June FOMC meeting. To what extent did this rise in rates following the June FOMC meeting reflect a shift in the expected future path of the federal funds rate (FFR)? Market participants and policy makers often directly read the expected path from financial market data such as the OIS contracts. In this post, we take an alternative approach by looking at surveys of professional forecasters to assess how expectations changed.

Continue reading "Preparing for Takeoff? Professional Forecasters and the June 2013 FOMC Meeting" »

Posted by Blog Author at 7:00 AM in Macroecon, Monetary Policy | Permalink | Comments (0)
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