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Journal Article
Negative Sentiment toward Spending and Declining Real Incomes May Meaningfully Lower Consumption
Cakir Melek, Nida; Pollard, Emily (2022-11-04)
Despite a contraction in real GDP in the first half of 2022, consumer spending has remained resilient. We examine a set of factors that have historically affected consumption growth and find that excess savings have boosted consumer spending during the COVID-19 pandemic. However, as excess savings decline and economic relationships normalize, negative sentiment toward spending and declining real incomes may meaningfully lower consumption.
Economic Bulletin , Issue November 4, 2022 , Pages 4

Working Paper
Explaining Cross-Cohort Differences in Life Cycle Earnings
Vandenbroucke, Guillaume; Ravikumar, B.; Kong, Yu-Chien (2015-10-01)
College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively. Why are earnings profiles flatter for recent cohorts? We build a parsimonious model of schooling and human capital accumulation on the job and calibrate it to earnings statistics of workers from the 1940 cohort. The model accounts for 99 percent of the flattening of earnings ...
Working Papers , Paper 2015-35

Working Paper
Cheap Talk and the Efficacy of the ECB’s Securities Market Programme: Did Bond Purchases Matter?
De Pooter, Michiel; Pruitt, Seth; Rebecca, DeSimone; Martin, Robert F. (2015-07-06)
In 2010, in response to an ever-worsening fiscal crisis, the ECB began purchasing sovereign debt from troubled euro-area countries through its Securities Market Programme (SMP). This program was designed to improve market functioning and restore the monetary transmission mechanism within the euro area. This paper does not test those ideals. Rather, we test whether SMP purchases systematically lowered peripheral yields and spreads. We find limited evidence of purchase effects but large announcement effects. In addition, on days in which the ECB was believed to have made large purchases, yields ...
International Finance Discussion Papers , Paper 1139

Working Paper
Why Does Consumption Fluctuate in Old Age and How Should the Government Insure it?
De Nardi, Mariacristina; Borella, Margherita (2020-10-23)
In old age, consumption can fluctuate because of shocks to available resources and because health shocks affect utility from consumption. We find that even temporary drops in income and health are associated with drops in consumption and most of the effect of temporary drops in health on consumption stems from the reduction in the marginal utility from consumption that they generate. More precisely, after a health shock, richer households adjust their consumption of luxury goods because their utility of consuming them changes. Poorer households, instead, adjust both their necessary and luxury ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 40

Working Paper
Re-Examining the Role of Sticky Wages in the U.S. Great Contraction: A Multisectoral Approach
MacGee, James; Amaral, Pedro S. (2009)
We quantify the role of contractionary monetary shocks and nominal wage rigidities in the U.S. Great Contraction. In contrast to conventional wisdom, we find that the average economy-wide real wage varied little over 1929?33, although real wages rose significantly in some industries. Using a two-sector model with intermediates and nominal wage rigidities in one sector, we find that contractionary monetary shocks can account for only a quarter of the fall in GDP, and as little as a fifth at the trough. Intermediate linkages play a key role, as the output decline in our benchmark is roughly ...
Working Papers (Old Series) , Paper 0911

Speech
The 2015 economic outlook and the implications for monetary policy
Dudley, William (2014-12-01)
Remarks at Bernard M. Baruch College, New York City.
Speech , Paper 153

Working Paper
Employer Credit Checks: Poverty Traps versus Matching Efficiency
Corbae, Dean; Glover, Andrew (2023-01-06)
We develop a framework to understand the effects of pre-employment credit screening in both labor and credit markets. People differ in both their propensity to default on debt and the profits they create for firms that employ them. In our calibrated economy, workers with a low default probability are highly productive and therefore generate more profits for their employers; thus, firms create more jobs for those with good credit. However, using credit reports to screen job applicants creates a poverty trap: an unemployed worker with poor credit has a low job-finding rate and cannot improve ...
Research Working Paper , Paper RWP 23-01

Working Paper
Beliefs, Aggregate Risk, and the U.S. Housing Boom
Jacobson, Margaret M. (2022-09-23)
Endogenously optimistic beliefs about future house prices can account for the path and standard deviation of house prices in the U.S. housing boom of the 2000s. In a general equilibrium model with incomplete markets and aggregate risk, agents form beliefs about future house prices in response to shocks to fundamentals. In an income expansion with looser credit conditions, agents are more likely to underpredict house prices and revise up their beliefs. Matching the standard deviation and steady rise in house prices results in homeownership becoming less affordable later in the boom as well as ...
Finance and Economics Discussion Series , Paper 2022-061

Report
Student loan debt and economic outcomes
Cooper, Daniel H.; Wang, J. Christina (2014-10-01)
This policy brief examines the impact of student loan debt on individuals' homeownership status and wealth accumulation, employing a rich set of financial and demographic variables that are not available in many of the existing studies that use credit bureau data. It is important to understand whether and, if so, how student loan debt affects households' economic decisions because student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt.
Current Policy Perspectives , Paper 14-7

Working Paper
Rationally Inattentive Savers and Monetary Policy Changes: A Laboratory Experiment
Civelli, Andrea; Deck, Cary; Tutino, Antonella (2019-12-19)
We present a model where rationally inattentive agents decide how much to save while imperfectly tracking interest rate changes. Suitable assumptions on agents’ preferences and interest rate distribution allow us to derive testable theoretical predictions and their implications for monetary policy. We probe these predictions using a laboratory experiment with induced inattention that closely reflects the theoretical assumptions. We find that, empirically, the laboratory data corroborates the results of the theoretical model. In particular, we show that experimental subjects respond to ...
Working Papers , Paper 1915

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