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Institution

Federal Reserve System

OtherWashington D.C., District of Columbia, United States
About: Federal Reserve System is a other organization based out in Washington D.C., District of Columbia, United States. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 2373 authors who have published 10301 publications receiving 511979 citations.


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TL;DR: In the United States, wealth is highly concentrated and very unequally distributed: the richest 1% hold one third of the total wealth in the economy as mentioned in this paper. But understanding the determinants of wealth inequality is a challenge for many economic models.
Abstract: In the United States wealth is highly concentrated and very unequally distributed: the richest 1% hold one third of the total wealth in the economy. Understanding the determinants of wealth inequality is a challenge for many economic models. We summarize some key facts about the wealth distribution and what economic models have been able to explain so far.

183 citations

Journal ArticleDOI
TL;DR: This paper found that the groups of households whose balance sheets were boosted the most by surging equity prices were also the groups that substantially decreased their saving rates, corroborating a direct view of the wealth effect on consumption.
Abstract: In the U.S., household net worth rose substantially in the latter half of the 1990s and the personal saving rate dropped sharply. Researchers do not agree about just what behavior links these two events, or how to interpret the negative correlation between wealth and the saving rate over a longer time span. In this paper, we combine household-level data from the triennial Survey of Consumer Finances with quarterly, aggregate data from the Flow of Funds Accounts to estimate net worth and saving for different cohorts of households in the 1990s. We find that the groups of households whose balance sheets were boosted the most by surging equity prices were also the groups that substantially decreased their saving rates. Further, econometric analysis of these data produces propensities to consume out of wealth in the range of typical estimates obtained from aggregate data. Taken together, our results corroborate a direct view of the wealth effect on consumption.

183 citations

Journal ArticleDOI
TL;DR: A mean reversion process is shown rather than Geometric Brownian Motion, allowing for supply responses to increasing prices and providing an explanation for this result.
Abstract: We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the dynamic properties of models and data. We use bootstrap algorithms to evaluate the significance of deviations between models and data, and we use goodness-of-fit criteria to produce estimators that optimize economically-relevant loss functions. We provide a detailed illustrative application to modeling the U.S. cattle cycle. Acknowledgments: The Co-Editor and referees provided helpful and constructive input, as did participants at meetings of the Econometric Society, the CEPR, the NBER, and numerous university seminars. We gratefully acknowledge additional help from Bill Brown, Fabio Canova, Tim Cogley, Bob Lucas, Ellen McGrattan, Danny Quah, Lucrezia Reichlin, Sherwin Rosen, Chris Sims, Tony Smith, Jim Stock, Mark Watson, and especially Lars Hansen, Adrian Pagan, and Tom Sargent. All remaining errors and inaccuracies are ours. Jose Lopez provided dedicated research assistance in the early stages of this project. We thank the National Science Foundation, the Sloan Foundation and the University of Pennsylvania Research Foundation for support.

182 citations

Posted Content
TL;DR: In this article, the authors quantify the role of financial frictions in business cycle fluctuations by estimating a DSGE model with the financial accelerator mechanism that links balance sheet conditions to the real economy through movements in the external finance premium.
Abstract: Embedded in canonical macroeconomic models is the assumption of frictionless financial markets, implying that the composition of borrowers’ balance sheets has no effect on their spending decision. As a result, these models have a difficult time accounting for the feedback effects between financial conditions and the real economy during periods of financial turmoil. Financial frictions — reflecting agency problems in credit markets — provide a theoretical link between the agents’ financial health and the amount of borrowing and hence economic activity in which they are able to engage. This paper attempts to quantify the role of such frictions in business cycle fluctuations by estimating a DSGE model with the financial accelerator mechanism that links balance sheet conditions to the real economy through movements in the external finance premium. Our estimation methodology incorporates a high information-content credit spread — constructed directly from the secondary market prices of outstanding corporate bonds — into the Bayesian ML estimation. This credit spread serves as a proxy for the unobservable external finance premium, an approach that allows us to estimate simultaneously the key parameters of the financial accelerator mechanism along with the shocks to the financial sector. Our results indicate the presence of an operative financial accelerator in U.S. cyclical fluctuations over the 1973–2009 period: Increases in the external finance premium cause significant and protracted declines in investment and output. The estimated effects of financial shocks and their impact on the macroeconomy also accord well with historical perceptions of the interaction between financial conditions and economic activity during cyclical fluctuations over the past three decades and a half.

182 citations

Journal ArticleDOI
TL;DR: In this paper, the design and calculation of a set of consistent weights for the Surveys of Consumer Finances is discussed, taking both these weights and the multiply-imputed survey data, they look at estimates of changes in the distribution of wealth over the first half of the 1990s.
Abstract: Estimates using survey data are determined by two factors: the data collected and the survey weights. This paper discusses the design and calculation of a set of consistent weights for the Surveys of Consumer Finances. Taking both these weights and the multiply-imputed survey data, we look at estimates of changes in the distribution of wealth over the first half of the 1990s.

182 citations


Authors

Showing all 2412 results

NameH-indexPapersCitations
Ross Levine122398108067
Francis X. Diebold11036874723
Kenneth Rogoff10739075971
Allen N. Berger10638265596
Frederic S. Mishkin10037234898
Thomas J. Sargent9637039224
Ben S. Bernanke9644676378
Stijn Claessens9646242743
Andrew K. Rose8837442605
Martin Eichenbaum8723437611
Lawrence J. Christiano8525337734
Jie Yang7853220004
James P. Smith7837223013
Glenn D. Rudebusch7322622035
Edward C. Prescott7223555508
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Performance
Metrics
No. of papers from the Institution in previous years
YearPapers
202317
202247
2021303
2020448
2019356
2018316