254 posts on "Macroeconomics"
May 16, 2011
Are Rising Commodity Prices Unanchoring Inflation Expectations?
The U.S. inflation outlook is the focus of considerable discussion in business and central banking circles. As shown in the chart below, headline inflation measured as a year-to-year percentage change declined over the first half of 2010, leveled off in the second half of the year, and has been rising recently—driven largely by higher commodity prices. An important question is whether this recent increase is likely to be transitory or the beginning of a more sustained rise in headline inflation. In this post, we examine data from the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters (SPF) and discuss how the survey’s unique features and rich information on inflation expectations can shed light on this question as well as offer insight into the inflation outlook that is not available from other survey instruments. While inflation has indeed increased recently, our analysis suggests that inflation expectations are not presently at risk of becoming “unanchored,” or showing a greater concern over higher future inflation.
May 4, 2011
How Much Will the Second Round of Large‑Scale Asset Purchases Affect Inflation and Unemployment?
With the federal funds rate at the zero lower bound, the Fed’s large-scale purchase of Treasury securities provides an alternative tool to boost the economy. In November 2010, the Federal Open Market Committee (FOMC) announced a second round of large-scale asset purchases (LSAP2) with the goal of accelerating the recovery. In this post, we analyze the impact of LSAP2 on the two variables that fall under the Fed’s dual mandate: inflation and unemployment. Our point estimates suggest that the effects will be moderate and delayed, although there is considerable uncertainty attached to these estimates.
Posted at 10:00 am in Exchange Rates, Fed Funds, Inflation, Macroeconomics, Monetary Policy, Treasury, Unemployment | Permalink
April 6, 2011
Temporary Layoffs during the Great Recession
In this post, I show that despite the depth of the Great Recession, U.S. employers did not use temporary layoffs much to cut costs. Just as they did during the previous two recessions, when firms laid workers off, they usually severed ties completely. This prevalence of permanent layoffs during the recession could slow the employment rebound over the coming months. It also raises questions about why the behavior of employers during recessions has changed.
March 23, 2011
How Much Will the Rise in Commodity Prices Reduce Discretionary Income?
Commodity prices have risen considerably since August 2010, raising concerns that higher commodity prices could reduce households’ discretionary income and slow the recovery. For example, as former Federal Reserve Board Vice Chairman Donald Kohn said in the Wall Street Journal last fall:
“… the surge in international commodity prices. If that persists it could hurt Americans’ disposable income, especially as it is reflected in higher gas and energy prices.”
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