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223 posts on "Macroeconomics"
October 6, 2022

Computer Saturation and the Productivity Slowdown

One of the current puzzles in economics is the recent worldwide slowdown in productivity, compared to the late 1990s and early 2000s. This productivity loss is economically large: if productivity growth had stayed at the same level as in 1995-2004, American GDP would have increased by trillions of dollars. In this post, I discuss a new paper that links this productivity slowdown to saturation in electronics adoption across most industries. I show that most of the productivity growth from electronic miniaturization is concentrated between 1985 and 2005.

Posted at 7:00 am in Macroeconomics | Permalink
September 23, 2022

The New York Fed DSGE Model Forecast—September 2022

Photo: decorative; numbers with line chart on top

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since June 2022.

August 24, 2022

How Much Did Supply Constraints Boost U.S. Inflation?

Photo: Man with COVID mask picking one of the last of the breads in the grocery aisle

What factors are behind the recent inflation surge has been a huge topic of debate amongst academics and policymakers. We know that pandemic-related supply constraints such as labor shortages and supply chain bottlenecks have been key factors pushing inflation higher. These bottlenecks started with the pandemic (lockdowns, sick workers) and were made worse by the push arising from increased demand caused by very expansionary fiscal and monetary policy. Our analysis of the relative importance of supply-side versus demand-side factors finds 60 percent of U.S. inflation over the 2019-21 period was due to the jump in demand for goods while 40 percent owed to supply-side issues that magnified the impact of this higher demand.

August 17, 2022

The Disconnect between Productivity and Profits in U.S. Oil and Gas Extraction

U.S. oil and gas production boomed during the years leading up to the pandemic. From 2011 to 2019, oil production more than doubled and dry natural gas production rose by more than half. Remarkably, these gains occurred despite lackluster investment spending and hiring. Instead, higher production came largely from productivity gains, via wider adoption of fracking technologies. More recently, production recovered sluggishly from the pandemic downturn despite a quick recovery in prices. Our analysis in this post suggests that slower productivity growth and investors’ demand for higher returns have made U.S. firms willing to boost output only at a higher threshold oil price.

Posted at 7:00 am in Inflation, Macroeconomics | Permalink
July 29, 2022

The Transatlantic Economy Policy Responses to the Pandemic and the Road to Recovery Conference

Photo: transatlantic economy conference speakers images compiled on background.

The Federal Reserve Bank of New York, the European Commission, and the Center for Economic and Policy Research (CEPR) jointly organized the conference “Transatlantic Economic Policy Responses to the Pandemic and the Road to Recovery,” on November 18, 2021. The conference brought together U.S. and European-based policymakers and economists from academia, think tanks, and international financial institutions to discuss issues that transatlantic policymakers are facing. The conference was held before the Russian invasion of Ukraine and the global monetary tightening. Still, its medium to long-term focus provides interesting insights on economic policy challenges ahead.  

July 7, 2022

Climate Change: Implications for Macroeconomics

photo: windmill and solar farm

What are the implications of climate change, and climate change–related policies, for macroeconomics in general and monetary policy in particular? This is the key question debated at a recent symposium on “Climate Change: Implications for Macroeconomics” organized by the Applied Macroeconomics and Econometrics Center (AMEC) of the New York Fed on May 13. This post briefly summarizes the content of the discussion and provides links to recordings of the various sessions and the participants’ slides.

June 24, 2022

How Could Oil Price and Policy Rate Hikes Affect the Near-Term Inflation Outlook?

Photo: Oil pump on a sunset background. World Oil Industry

Since the start of the year, oil prices have risen sharply owing to worsening expectations regarding global oil supply. We’ve also had an acceleration of inflation in the United States and the euro area, as well as a sharp steepening of the expected paths of policy rates in both economies. These factors, combined with the potential for a slowdown in growth, have made the inflation outlook quite uncertain. In this post, we combine the demand and supply oil price decomposition from the New York Fed’s Oil Price Dynamics Report with yield curve data to quantify the likely path of inflation in the United States and the euro area over the next twelve months. Based on our analysis, we anticipate that inflation will likely remain elevated through the second quarter of 2023, despite payback for the inflationary impact of current negative oil supply shocks during the second half of 2022 and the disinflationary effects of tighter monetary policy.

June 21, 2022

Will the U.S. Dollar Continue to Dominate World Trade?

photo: cargo ship with dollar bills in the background

There are around 180 currencies in the world, but only a very small number of them play an outsized role in international trade, finance, and central bank foreign exchange reserves. In the modern era, the U.S. dollar has a dominant international presence, followed to a lesser extent by the euro and a handful of other currencies. Although the use of specific currencies is remarkably stable over time, with the status of dominant currencies remaining unchanged over decades, there have been decisive shifts in the international monetary system over long horizons. For example, the British pound only lost its dominant currency status in the 1930s, well after Britain stopped being the leading world economy. In a new study, we show that the currency that is used in international trade transactions is an active firm-level decision rather than something that is just fixed. This finding raises the question of what factors could augment or reduce the U.S. dollar’s dominance in world trade.

June 17, 2022

The New York Fed DSGE Model Forecast—June 2022

photo: line chart over an aqua background with some numbers

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since March 2022.

June 2, 2022

Does China’s Zero Covid Strategy Mean Zero Economic Growth?

The Chinese government has followed a “zero covid strategy” (ZCS) ever since the world’s first COVID-19 lockdowns ended in China around late March and early April of 2020. While this strategy has been effective at maintaining low infection levels and robust manufacturing and export activity, its viability is being severely strained by the spread of increasingly infectious coronavirus variants. As a result, there now appears to be a fundamental incompatibility between the ZCS and the government’s economic growth objectives.

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