ECONOMY
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A New Set of Indicators of Reserve Ampleness
Gara Afonso, Kevin Clark, Brian Gowen, Gabriele La Spada, JC Martinez, Jason Miu, and Will Riordan The Federal Reserve (Fed) implements monetary policy in a regime of ample reserves, where short-term interest rates are controlled mainly through the setting of administered rates, and active management of the reserve supply is not required. In yesterday’s post, we proposed a methodology to…
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Reallocating Liquidity to Resolve a Crisis
Kinda Hachem Shortly after the collapse of Silicon Valley Bank (SVB) in March 2023, a consortium of eleven large U.S. financial institutions deposited $30 billion into First Republic Bank to bolster its liquidity and assuage panic among uninsured depositors. In the end, however, First Republic Bank did not survive, raising the question of whether a reallocation of liquidity among financial institutions can…
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The Anatomy of Labor Demand Pre- and Post-COVID
Richard Audoly, Miles Guerin, Giorgio Topa, and Roshie Xing Has labor demand changed since the COVID-19 pandemic? In this post, we leverage detailed data on the universe of U.S. online job listings to study the dynamics of labor demand pre- and post-COVID. We find that there has been a significant shift in listings out of the central cities and into…
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Mortgage Lock-In Spurs Recent HELOC Demand
Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle W. Scally, and Wilbert van der Klaauw Mortgage balances, the largest component of U.S. household debt, grew by only $77 billion (0.6 percent) in the second quarter of 2024, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. This modest increase reflects…
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Wage Insurance: A Potential Policy for Displaced Workers
Ben Hyman, Brian Kovak, and Adam Leive Despite the existing safety net, worker displacement continues to have severe consequences that motivate the consideration of new social insurance programs. Wage insurance is a novel policy that temporarily provides additional income to workers who lose their job and become re-employed at a lower wage. In this post, we draw on evidence from…
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What Was Up with Grocery Prices?
Thomas Klitgaard The consumer price index for groceries has risen more than the overall price index since the start of the pandemic, with a particularly large jump in 2022. In looking for explanations, a starting place is the behavior of raw commodity prices, which surged from early 2021 to mid-2022. In addition, wages for low-paid grocery workers have gone up…
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The Mysterious Slowdown in U.S. Manufacturing Productivity
Danial Lashkari and Jeremy Pearce Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the…
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Nonbanks Are Growing but Their Growth Is Heavily Supported by Banks
Viral V. Acharya, Nicola Cetorelli, and Bruce Tuckman Traditional approaches to financial sector regulation view banks and nonbank financial institutions (NBFIs) as substitutes, one inside and the other outside the perimeter of prudential regulation, with the growth of one implying the shrinking of the other. In this post, we argue instead that banks and NBFIs are better described as intimately…
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On the Distributional Effects of Inflation and Inflation Stabilization
Marco Del Negro, Keshav Dogra, Pranay Gundam, Donggyu Lee, and Brian Pacula This post and the next discuss the distributional effects of inflation and inflation stabilization through the lenses of a theoretical model—a Heterogeneous Agent New Keynesian (HANK) model. This model combines the features of New Keynesian models that have been the workhorse for monetary policy analysis since the work…
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On the Distributional Consequences of Responding Aggressively to Inflation
Marco Del Negro, Keshav Dogra, Pranay Gundam, Donggyu Lee, and Brian Pacula This post discusses the distributional consequences of an aggressive policy response to inflation using a Heterogeneous Agent New Keynesian (HANK) model. We find that, when facing demand shocks, stabilizing inflation and real activity go hand in hand, with very large benefits for households at the bottom of the…
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