Showing papers in "Review in 2022"
TL;DR: In this article , the authors investigated the role supply chain disruptions during the COVID-19 pandemic played in U.S. producer price index (PPI) inflation and found that exposure to global supply chain disruption played a significant role.
Abstract: We investigate the role supply chain disruptions during the COVID-19 pandemic played in U.S. producer price index (PPI) inflation. We exploit pre-pandemic cross-industry variation in sourcing patterns across countries and interact it with measures of international supply chain bottlenecks during the pandemic. We show that exposure to global supply chain disruptions played a significant role in U.S. cross-industry PPI inflation between January and November 2021. If bottlenecks had followed the same path as in 2019, PPI inflation in the manufacturing sector would have been 2 percentage points lower in January 2021 and 20 percentage points lower in November 2021. (JEL F13, F14, F44)
16 citations
TL;DR: In 2019, the Federal Reserve published a Statement on Longer-run Goals and Monetary Policy Strategy (SLLRS) as discussed by the authors , which formally established a 2 percent longer-run inflation target as being consistent with its price stability mandate and stressed that it was not appropriate to establish a quantitative target for maximum employment, as such a target was not directly observable and was influenced by many factors unrelated to monetary policy.
Abstract: The Federal Reserve first published a “Statement on Longer-run Goals and Monetary Policy Strategy” in January 2012.1 The purpose was to enhance transparency and accountability by clarifying its interpretation of the statutory mandates established by Congress. The two key elements of that effort were to formally establish a 2 percent longer-run inflation target as being consistent with its price stability mandate and to stress that it was not appropriate to establish a quantitative target for maximum employment, as such a target was not directly observable and was influenced by many factors unrelated to monetary policy. This document was frequently referred to by the Fed as the “consensus statement.” During the ensuing eight years, the economy continued its recovery from the 2007-09 recession. The unemployment rate fell to a 50-year low of 3.5 percent prior to the pandemic and government shutdowns of 2020. The inflation rate remained modestly below the Fed’s adopted inflation target, averaging about 1.4 percent over the 2012-19 period. In response to concerns about low inflation In August 2020, the Federal Reserve unveiled its new strategic framework. One major objective of the Fed was to address its concerns over the potential consequences for the conduct of monetary policy when the policy rate was constrained by its effective lower bound. This article concludes that there are significant flaws in the new strategy and that it encourages a more discretionary approach to monetary policy and increases the risks of policy errors. The new framework is an overly complex and asymmetric flexible average inflation targeting scheme that introduces a significant inflationary bias into policy and expands the scope for discretion by broadening the Fed’s employment mandate to “maximum inclusive employment.” In a postscript, the article describes how quickly the flaws have been revealed and urges a reset toward a more systematic and coherent strategy that is transparent and broadly understood by the public. (JEL E52)
4 citations
TL;DR: In this article , the relationship between VC, firm growth, and innovation is investigated, and some stylized facts about VC's impact on innovation and growth are discussed, and empirically evaluated.
Abstract: Venture capital (VC) is a particular type of private equity that focuses on investing in young companies with high-growth potential. The companies and products and services VC helped develop are ubiquitous in our daily lives: the Apple iPhone, Google Search, Amazon, Facebook and Twitter, Starbucks, Uber, Tesla electric vehicles, Airbnb, Instacart, and the Moderna COVID-19 vaccine. Although these companies operate in drastically different industries and with dramatically different business models, they share one common and crucial footprint in their corporate histories: All of them received major financing and mentorship support from VC investors in the early stages of their development. This article outlines the history of VC and characterizes some stylized facts about VC’s impact on innovation and growth. In particular, this article empirically evaluates the relationship between VC, firm growth, and innovation.
2 citations
TL;DR: Money, digital money, and payments; cryptocurrencies, blockchain, and the double-spending problem of digital money; decentralized finance; and central bank digital currency are discussed.
Abstract: Cryptocurrencies decentralized bitcoin article presents an of cryptocurrencies, blockchain technology, and their applications, explaining the of the enterprise and We discuss money, digital money, and payments; cryptocurrencies, blockchain, and the double-spending problem of digital money; decentralized finance; and central bank digital currency. (JEL E42, E44, E58, G21, G23, G28, G34) Quarter
2 citations
TL;DR: In this article , the authors investigated the socio-demographic differences in household responses to the COVID-19 pandemic regarding employment and consumption and found that the significant racial disparities in employment observed during the pandemic can be explained, in part, by differences in households income, composition, education, and occupational sorting.
Abstract: This article investigates the socio-demographic differences in household responses to the COVID-19 pandemic regarding employment and consumption. We find that the significant racial disparities in employment observed during the pandemic can be explained, in part, by differences in household income, composition, education, and occupational sorting. Nonetheless, we document pervasive racial, income, and educational gradients when focusing on household food insecurity and individuals' reliance on social insurance programs and other government assistance during the pandemic. Overall, our results highlight that the disparities observed for household income and education tend to be the most significant and most pervasive following the onset of the COVID-19 crisis. (JEL J21, J24, J63, I38)
1 citations
TL;DR: In this article , the causal impact of benefit cessation on employment was investigated and it was shown that cessation increased employment by 29 persons for every 100 (pre-halt) EUB recipients.
Abstract: In mid-2021, 26 states halted participation in all or some federal emergency unemployment benefits (EUB) programs before those programs’ federal funding lapsed. This article uses this asynchronous EUB cessation between early- and late-halting states to estimate the causal impact of benefit cessation on employment. We find that cessation increased employment by 29 persons for every 100 (pre-halt) EUB recipients. Expressed as a number of jobs, if all states had halted EUB in June, September employment would have been 3.4 million persons higher relative to a no-halt counterfactual. Late-halting states could have signifi-cantly accelerated their states’ jobs recoveries in the second half of 2021 through early program cessation. state-level employment. Our estimate indicates a 29-person increase in state employment—within a few months—for every 100 (pre-halt) EUB recipients. The jobs effect is statistically significant and robust to allowing for a number of controls. There remains a great deal of work to be done on this episode. Useful research might examine the effect of halting benefits on, for example, the employment response of older individuals, labor force participation, job openings, quits, and hires. n
1 citations
TL;DR: This article investigated the relative performance of consumer, professional, market-based, and model-based inflation forecasts and found that professional forecasts most accurately predict one-year-ahead year-over-year inflation.
Abstract: Inflation expectations constitute important components of macroeconomic models and monetary policy rules. We investigate the relative performance of consumer, professional, market-based, and model-based inflation forecasts. Consistent with the previous literature, professional forecasts most accurately predict one-year-ahead year-over-year inflation. Both consumers and professionals overestimate inflation over their respective sample periods. Market-based forecasts as measured by the swap market breakeven inflation rates significantly overestimate actual inflation; Treasury Inflation-Protected Securities market breakeven inflation rates exhibit no significant bias. We find that none of the forecasts can be considered rationalizable under symmetric loss. We also find that each forecast has predictive information that is not encompassed within that of another. (JEL E31, E37) pp. 131-48.
1 citations
TL;DR: The authors examined subjective supervisory assessments of managerial performance in the banking industry and found that better assessments are positively associated with decisions made by examiners to upgrade relatively objective bank performance ratings; negatively associated with decision made by examsiners to downgrade relatively objective banks performance ratings, and positive associated with bank holding company managers to distribute resources among subsidiary banks, consistent with the finding that soft information generated in the supervisory process is validated by subsequent decisionmaking both internally (by bankers) and externally (by examiners).
Abstract: We examine subjective supervisory assessments of managerial performance in the banking industry. Results of empirical tests show that better assessments are (i) positively associated with decisions made by examiners to upgrade relatively objective bank performance ratings; (ii) negatively associated with decisions made by examiners to downgrade relatively objective bank performance ratings; and (iii) positively associated with decisions made by bank holding company managers to distribute resources among subsidiary banks. These results are consistent with the finding that soft information generated in the supervisory process is validated by subsequent decisionmaking both internally (by bankers) and externally (by examiners). (JEL G28, G21, L14) Federal Reserve Bank of St. Louis Review , Third Quarter 2022, 104 (3), pp. 210-23.
1 citations
TL;DR: In this paper , the authors explore the experiences of two other countries that implemented a policy of targeting a short-term rate and find that, as in the United States, the correlation between the policy rate and the long-term sovereign bond yield declined effectively to zero for both the Bank of England and the Reserve Bank of New Zealand after they began using a shortterm rate as their policy instrument.
Abstract: During his February 2005 congressional testimony, Alan Greenspan noted that despite the fact that the Federal Open Market Committee (FOMC) had increased the federal funds rate 150 basis points since June 2004, the 10-year Treasury yield remained essentially unchanged. He posited several possible explanations for what he believed was the aberrant behavior of long-term Treasury yields. Rejecting each in turn, he called it a conundrum. Not surprisingly, Greenspan’s observation and ruminations stimulated much research. Several researchers (Backus and Wright, 2007; Kim and Wright, 2005; Rosenberg, 2007; Rudebusch and During his February 2005 congressional testimony, Alan Greenspan identified what he termed a conundrum. Despite the fact that the Federal Open Market Committee (FOMC) had increased the federal funds rate 150 basis points since June 2004, the 10-year Treasury yield remained essentially unchanged. Greenspan considered several explanations for his observation but rejected each. Thornton (2018) showed that the relationship between the 10-year Treasury yield and the federal funds rate changed in the late 1980s, many years prior to Greenspan’s observation. Moreover, he showed that the relationship changed because the FOMC began using the federal funds rate as its policy instrument. The federal funds rate moved only when the FOMC changed its target for it, while, in contrast, the 10-year Treasury yield continued to respond to news as before. As a consequence of this change in the FOMC’s operating procedure, the correlation between changes in the funds rate and the 10-year Treasury yield declined—effectively to zero. There is no obvious reason that the U.S. experience should be unique. Hence, we explore the experiences of two other countries that implemented a policy of targeting a short-term rate. We find that, as in the United States, the correlation between the policy rate and the long-term sovereign bond yield declined effectively to zero for both the Bank of England and the Reserve Bank of New Zealand after they began using a short-term rate as their policy instrument. (JEL E43, E52, E58)
TL;DR: In this article , the authors consider two kinds of transfer subsidies from an external entity such as the US government: a Pigouvian subsidy that simply pays the salaries rewarding individuals who provided e(cid:27)ort.
Abstract: The theory of public goods is mainly about the di(cid:30)culty in paying for them. Here we ask why when funding is available public goods may never-the-less not be provided as in the case of the Afghan Army. We explore this issue using a simple model of a public good that can be provided through collective action and peer pressure by modeling the self organization of a group (the Afghan Army) as a mechanism design problem. We consider two kinds of transfer subsidies from an external entity such as the US government. One is a Pigouvian subsidy that simply pays the salaries rewarding individuals who provide e(cid:27)ort. The second is an output/resource multiplier (for example, the provision of military equipment, tactical skills, training, and so forth) that ampli(cid:28)es the e(cid:27)ort provided through collective action. We show that the introduction of a Pigiouvian subsidy can result in less e(cid:27)ort being provided than in the absence of a subsidy. By contrast, an output/resource multiplier subsidy, which is useful only if collective action is taken, necessarily increases output via an increase in e(cid:27)ort. Our conclusion is that the fact that the USA provided the wrong kind of subsidy may have been among the reasons why the Afghan army did not (cid:28)ght.
TL;DR: This house-level real estate wealth distribution changes nearby a major comparing values before the of the (1940) with those and shortly after the construction (1961-74) as mentioned in this paper .
Abstract: This house-level real estate wealth distribution changes nearby a major comparing values before the of the (1940) with those and shortly after the construction (1961-74). We also curves to examine the distribution of housing among exhibit a small distribution of wealth gains among all homeowners experiencing appreciation. But there a large inequitable distribution of wealth losses among whose houses higher
TL;DR: This paper found that youth convicted at or before age 17 have a lower full-time employment rate and a lower wage growth rate even after 10 years in the labor market, even after a decade in the workforce.
Abstract: This article documents the long-term relationship among juvenile conviction, occupational choices, employment, wages, and recidivism. Using data from the National Longitudinal Survey of Youth 1997 (NLSY97), we document that youth convicted at or before age 17 have a lower full-time employment rate and lower wage growth rate even after 10 years in the labor market.
TL;DR: A macroeconomic model with epidemiological restrictions using Colombian data assumes that a portion of the population is immune and cannot transmit the virus, which improves substantially the fit of the model to the observed contagion and economic activity data.
Abstract: We calibrate a macroeconomic model with epidemiological restrictions using Colombian data. The key feature of our model is that a portion of the population is immune and cannot transmit the virus, which improves substantially the fit of the model to the observed contagion and economic activity data. The model implies that during 2020, government restrictions and the endogenous changes in individual behavior saved around 15,000 lives and decreased consumption by about 4.7 percent. The results suggest that most of this effect was the result of government policies.
TL;DR: In this paper , the authors examined the performance of U.S. commercial banks from through 2020 and provided an overall picture by examining the evolution of assets, deposits, loans, and other financial characteristics over the period.
Abstract: of very low interest rates, and increased regulation. The number of commercial banks operating in the United States by 51 percent during this period. This article examines the performance of U.S. commercial banks from through 2020. An overall picture is provided by examining the evolution of assets, deposits, loans, and other financial characteristics over the period. In addition, new estimates of technical inefficiency are provided, offering additional insight into banks’ performance during the recent difficult years. C14, G01, G21)
TL;DR: The authors analyzes financial market reactions to the Russia-Ukraine war with a focus on the opening weeks and concludes that markets did not completely anticipate the war, and asset price reactions strengthened from the first week when there were hopes for a quick resolution to the second week when prices generally peaked and began to partially revert to prewar values.
Abstract: This article analyzes financial market reactions to the Russia-Ukraine war with a focus on the opening weeks. Markets did not completely anticipate the war, and asset price reactions strengthened from the first week—when there were hopes for a quick resolution—to the second week, when prices generally peaked and began to partially revert to prewar values.
TL;DR: In this article , the authors developed an accounting framework to evaluate the sectoral impacts of the current U.S.-China trade war and found that the largest losses occurred in the Electronic and ICT (information and communication technology) industry and the Electrical industry.
Abstract: Not long after the worldwide Great Recession, protectionism began to rise, from the battled renegotiations of the North America Free Trade Agreement (NAFTA), to the recently escalated U.S.-China trade war, to the ongoing Japan-Korea trade war. Rising protectionism concerns some economists, particularly those who view free trade as beneficial to both developed countries (hereafter, the North) and developing countries (hereafter, the South), by advancing world productivity and enhancing global consumer welfare. A particular concern is that recent trade protectionism has included broad ranges of tariffs imposed on intermediate products (for example, in the United States, nearly 90 percent of intermediate imports from China faced increased tariffs in 2018, as computed by Bown, 2019). Such tariffs violate the so-called Diamond and Mirrlees (1971) principle of optimal taxation: Taxing intermediate goods creates much larger economic distortions and is more harmful to economic development. In recent years, we have witnessed rising trade protectionism with broad ranges of tariffs imposed on intermediate products. In this article, we develop an accounting framework to evaluate the sectoral impacts of the current U.S.-China trade war. We find that U.S. final demand and intermediate demand for goods produced by China decline significantly, with the largest losses occurring in the Electronic and ICT (information and communications technology) industry and the Electrical industry. We obtain sizable deadweight losses for the United States, particularly in the Electronic and ICT; Electrical; and Furniture industries. We also find that, with a leakage rate of 20 percent, total losses to U.S. consumers and importers are $3.3 billion, about 0.05 percent of gross U.S. output, whereas the full leakage losses are $10.7 billion, or 0.16 percent of gross U.S. output, which is twice as much as the annual welfare gains from the North America Free Trade Agreement. (JEL D20, F10, O50)
TL;DR: In this paper , the authors harmonize the American Time Use Survey and O*NET data to construct a measure of infection risk (exposure index) and measure of the ease with which a job can be performed remotely (work-from-home index) across both industries and occupations.
Abstract: Shutting down the workplace is an effective means of reducing contagion but can induce large economic losses. We harmonize the American Time Use Survey and O*NET data to construct a measure of infection risk (exposure index) and a measure of the ease with which a job can be performed remotely (work-from-home index) across both industries and occupations.
TL;DR: The authors showed that the aggregate markup and markup dispersion increase in response to both a firm debt shock and a household debt shock, and that household credit expansion also plays a role in firm markups.
Abstract: This article documents new empirical facts about the effects of credit expansion on the aggregate markup and markup dispersion in the United States. We use U.S. macroeconomic data and Jordà’s local projection and single-equation estimation methods. The results for both methods show that the aggregate markup and markup dispersion increase in response to both a firm debt shock and a household debt shock. The previous literature mostly focused on the effect of firm debt financing on firm markups. Extending previous research, our study shows that household credit expansion also plays a role in firm markups. This finding calls for further theoretical and analytical studies to understand the underlying mechanism regarding the effect of household credit expansion on firm markups. (JEL E31, E51, L11) St. Louis Fourth 297-316.