Rising prices have long been a concern of monetary policymakers due to wealth effects on spending. This column presents evidence that local demand effects from house price increases result in significant local price inflation. Households living in locations with rapidly increasing real estate prices will also face rapidly increasing costs of goods purchased in local stores.
Johannes Stroebel, Joseph Vavra, Monday, January 26, 2015
Valerie Ramey, Sarah Zubairy, Friday, January 23, 2015
There is no consensus among economists about the size of the multiplier of government purchases. It is not clear either how multipliers vary with the state of the economy. This column presents new evidence on this issue using large historical data set from the US. The findings suggest that there is no evidence that fiscal multipliers differ by the amount of unemployment or the degree of monetary accommodation.
Jeffrey Clemens, Michael Wither, Wednesday, January 14, 2015
The merit of a minimum wage is a classic issue of contention in economics and is of particular interest during a contraction. This column uses worker-level microdata to investigate the effect of a federal policy change in the US that affected some states more than others. The authors evaluate not only the proximate effects on employment, but also follow workers for up to three years afterward to track career trajectory following a minimum wage hike.
Lutz Kilian, Wednesday, January 14, 2015
The recent expansion of US shale oil production has captured the imagination of policymakers and industry analysts. It has fuelled visions of the US becoming independent of oil imports, of cheap US gasoline, of a rebirth of US manufacturing, and of net oil exports improving the US current account. This column asks how plausible these visions are, and examines the evidence to date.
John Mondragon, Sunday, January 11, 2015
The Great Recession was marked by disruptions to the supply of credit to firms and households. But little is known about how much supply shocks to household credit actually contributed to employment losses. This column uses data on US counties to examine the causal relationship running from the supply of household credit to employment during the recession. The author concludes that contractions in household credit supply caused substantial employment losses.
Maarten van ’t Riet, Arjan Lejour, Monday, January 5, 2015
The recent actions of the US Treasury to rein in corporate tax inversions leave their rationale largely intact. This column discusses new evidence suggesting that the potential tax benefits of inversions are still huge. The recent Treasury measures raised legal obstacles, but the heart of the problem remains unaddressed. At some point a new technique is likely to be found to circumvent the new measures – just as happened with earlier measures. This is a worldwide problem.
Philippe Andrade, Richard Crump, Stefano Eusepi, Emanuel Moench, Tuesday, December 23, 2014
Expectations are critical for macroeconomics and financial markets. But the expectation-formation process is not well understood. This column discusses some empirical characteristics of forecast disagreement from professional forecasters in the US, and discusses the ‘information frictions’ that underlie the heterogeneity of expectations.
Brian Clark, Clement Joubert, Arnaud Maurel, Sunday, November 16, 2014
There are large rewards of higher education in terms of earnings. However, a sizeable fraction of workers hold occupations that not require as much schooling as they have. This column considers the effects of being overeducated on future employment and wages for a representative cohort of Americans. Around 38% of the college graduates in the sample have higher education than the typical worker in their profession. Rather than transitory, the bulk of overeducation persists in the long run. Even if workers manage to transit to better jobs, they experience wage penalties similar to those after unemployment.
Lionel Fontagné, Sébastien Jean, Sunday, November 16, 2014
The TransAtlantic Trade and Investment Partnership (TTIP) has become a full-blown political issue as the two largest economic entities in the world are negotiating a deep integration agreement, going beyond what has been done previously in any agreement except the EU’s Single Market. This column estimates that a phasing-out of tariffs accompanied by a 25% cut in the trade restrictiveness of non-tariff measures would increase trade in goods and services between the two regions by 50%.
Alberto Cavallo, Guillermo Crucas, Ricardo Perez-Truglia, Monday, November 10, 2014
Although central banks have a natural desire to influence household inflation expectations, there is no consensus on how these expectations are formed or the best ways to influence them. This column presents evidence from a series of survey experiments conducted in a low-inflation context (the US) and a high-inflation context (Argentina). The authors find that dispersion in household expectations can be explained by the cost of acquiring and interpreting inflation statistics, and by the use of inaccurate memories about price changes of specific products. They also provide recommendations for central bank communication strategies.
Jagjit Chadha, Sunday, November 2, 2014
The impact of the stock and maturity of government debt on longer-term bond yields matters for monetary policy. This column assesses the magnitude and relative importance of overall bond supply and maturity effects on longer-term US Treasury interest rates using data from 1976 to 2008. Both factors have a significant impact on both forwards and term premia, but maturity of public debt appears to matter more. The results have implications for exit from unconventional policies, and also for the links between monetary and fiscal policy and debt management.
Moreno Bertoldi, Philip R. Lane, Valérie Rouxel-Laxton, Paolo Pesenti, Friday, October 24, 2014
The reason for the divergent macroeconomic policies on the two sides of the Atlantic after the Crisis remains a hotly debated subject. The topic was also discussed at the recent “Macroeconomic Policy Mix in the Transatlantic Economy” workshop. This column summarises the main discussions at the workshop. Other covered topics included secular stagnation, the output effects of fiscal consolidation, cross-border banking (as a source and propagator of shocks), and the asset-market effects of unconventional monetary policies.
Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, John Silvia, Saturday, October 25, 2014
There are several conflicting channels through which monetary policy could affect the distribution of wealth, income, and consumption. This column argues that contractionary monetary policy raised inequality in the US, while expansionary monetary policy lowered it. This evidence stresses the need for monetary policy models that take into account heterogeneity across households. Current monetary policy models may significantly understate the welfare costs of zero-bound episodes.
Edward Glaeser, Joshua Gottlieb, Oren Ziv, Wednesday, October 15, 2014
Governments are now measuring happiness, or subjective wellbeing, and some have begun trying to maximise it. This column discusses recent research showing that happiness is not the same thing as utility. The choices people make suggest that they have desires and objectives other than happiness. It is therefore possible to make people worse off while increasing their reported subjective wellbeing.
Daniel S. Hamermesh, Elena Stancanelli, Monday, September 29, 2014
American employees put in longer workweeks than Europeans. They are also more likely to work at undesirable times, such as nights and weekends. This column argues that the phenomena of long hours and strange hours are related. One possibility for this is cultural – Americans simply enjoy working at strange times. Another, more probable explanation, is the greater inequality of earnings of low-skilled workers in the US, compared to Europeans.
Judith Niehues, Sunday, September 28, 2014
Income inequality is high in the US, but the support of social welfare programmes is low. In Europe, income inequality is low and the welfare states are generous. This column argues that this paradox is largely due to perceived inequality. Many Europeans believe that there is high inequality in their countries, justifying the need for redistributive policies. Americans, however, are less concerned with income differences and with respective redistributive state intervention.
Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, Brendan Price, Sunday, September 28, 2014
Manufacturing in the US has rebounded after the Great Recession, but employment levels have not recovered from their steep decline in the decade before the recession. This column examines to what extent the sector’s fall is a result of the rise of China. The authors estimate direct effects of import competition from China, as well as labour market and buyer-seller indirect effects that operate at the local level. China’s impact has been strong, and employment in US manufacturing is unlikely to recover.
Giuseppe Berlingieri, Thursday, September 25, 2014
Advanced nations are shedding manufacturing jobs and gaining service jobs – a trend that has been in place for decades. Some of the shift, however, is a reclassification effect. Corporate outsourcing of tasks like marketing means workers doing the same task as before now show up as working for a firm in the service sector. Using US data from the past 60 years, this column shows that the evolution of the input-output structure – which is mostly due to professional and business services outsourcing – accounts for 36% of the increase in services and 25% of the fall in manufacturing.
Peter Cappelli, Sunday, September 21, 2014
Many high-paying jobs in the US cannot be filled, raising concerns about an existing skills gap. However, this column does not find evidence in support of serious skills gap or shortages in the US labour force. Similarly to other developed economies, the prevailing situation in the US is due to skill mismatches. This could have implications for students and their tuition-paying families.
Karl Walentin, Thursday, September 11, 2014
Central banks have resorted to various unconventional monetary policy tools since the onset of the Global Crisis. This column focuses on the macroeconomic effects of the Federal Reserve’s large-scale purchases of mortgage-backed securities – in particular, through reducing the ‘mortgage spread’ between interest rates on mortgages and government bonds at a given maturity. Although large-scale asset purchases are found to have substantial macroeconomic effects, they may not necessarily be the best policy tool at the zero lower bound.