Search Results
Working Paper
Is It Time to Reassess the Focal Role of Core PCE Inflation?
In this paper, I review the history of “core” PCE inflation and its rationale: remove volatile items with transitory shocks to better highlight the trend in inflation. Structural changes in the inflation process imply that, on a “reducing volatility” basis, the list of items excluded from the “core” inflation basket (aside from gasoline) is far from optimal. This is true whether one assesses volatility on the basis of a weighted component monthly, or an index monthly, or a 12-month index, or a 5-year index. In addition, I demonstrate other deficiencies of exclusion indexes. ...
Working Paper
Monetary Policy and Real Exchange Rate Dynamics in Sticky-Price Models
We study how real exchange rate dynamics are affected by monetary policy in dynamic, stochastic, general equilibrium, sticky-price models. Our analytical and quantitative results show that the source of interest rate persistence ? policy inertia or persistent policy shocks ? is key. When the monetary policy rule has a strong interest rate smoothing component, these models fail to generate high real exchange rate persistence in response to monetary shocks, as policy inertia hampers their ability to generate a hump-shaped response to such shocks. Moreover, in the presence of persistent monetary ...
Working Paper
The Impact of Health and Economic Policies on the Spread of COVID-19 and Economic Activity
This paper empirically investigates the causal linkages between COVID-19 spread, government health containment and economic support policies, and economic activity in the U.S. up to the introduction of vaccines in early 2021. We model their joint dynamics as generated by a structural vector autoregression and estimate it using U.S. state-level data. We identify structural shocks to the variables by making assumptions on their short-run relation consistent with salient epidemiological and economic features of COVID-19. We isolate the direct impact of COVID-19 spread and policy responses on ...
Working Paper
The Impact of Health and Economic Policies on the Spread of COVID-19 and Economic Activity
This paper empirically investigates the causal linkages between COVID-19 spread, government health containment and economic support policies, and economic activity during 2020 in the U.S. We model their joint dynamics as generated by a structural vector autoregression and estimate it using U.S. state-level data. We identify structural shocks to the variables by making assumptions on their short-run relation consistent with salient epidemiological and economic features of COVID-19. We isolate the direct impact of COVID-19 spread and policy responses on economic activity by controlling for ...
Discussion Paper
The Emergence of Tokenized Investment Funds and Their Use Cases
A blockchain is a distributed database where independent computers across the world maintain identical copies of a transaction record, updating it only when the network reaches consensus on new transactions—making the history transparent and extraordinarily difficult to alter. Historically, bonds have traded almost entirely in over-the-counter (OTC) markets, while equities and money market fund shares have largely settled through centralized infrastructures such as stock exchanges and central securities depositories. In both settings, each institution maintains its own records, and ...
Discussion Paper
The Financial Stability Implications of Tokenized Investment Funds
In a previous post, we provided background information about the emergence of tokenized investment funds and their use cases. These use cases are currently limited to the digital asset ecosystem. However, the recent approval of cryptocurrency exchange-traded funds (ETFs) and the passage of the GENIUS Act raise concerns about the impact of these tokenized investment fund to the broader financial system. In this post, we assess this impact by considering three economic mechanisms based in part on market participants’ investment strategies and liquidity needs. They include: liquidity ...
Working Paper
The Macroeconomic Effects of Cash Transfers: Evidence from Brazil
This paper provides new evidence on the macroeconomic impact of cash transfers in developing countries. Using a Bartik-style identification strategy, the paper documents that Brazil’s Bolsa Familia transfer program leads to a large and persistent increase in relative state-level GDP, formal employment, and informal employment. A state receiving 1% of GDP in extra transfers grows 2.2% faster in the first year, with R$100,000 of extra transfers generating five formal-equivalent jobs, half of which are informal. Consistent with a demand-side mechanism, the effects are concentrated in ...
Journal Article
On Using SIR Models to Model Disease Scenarios for COVID-19
From introduction: This paper is intended to introduce economists to a simple SIR model of the progression of COVID-19 to aid understanding of how such a model might be incorporated into more standard macroeconomic models. An SIR model is a Markov model of the spread of an epidemic in which the total population is divided into categories of being susceptible to the disease (S); actively infected with the disease (I); and resistant (R), meaning those that have recovered, died from the disease, or have been vaccinated. The initial distribution of the population across these states and the ...
Report
Money in the Production Function
Businesses hold large quantities of cash reserves, which have average returns well below their investments in tangible capital. Businesses do this because these monetary assets provide services. One implication is that money services is a factor of production in capital theoretic valuation equilibrium models. Our aggregate production function is consistent with both the classical demand for money function relationship and with extended periods of near zero short-term nominal interest rates. In our model economy, there is a 100 percent reserve requirement on all demand deposits. Demand ...
Working Paper
Gross Migration, Housing and Urban Population Dynamics
Cities experience significant, near random walk productivity shocks, yet population is slow to adjust. In practise local population changes are dominated by variation in net migration, and we argue that understanding gross migration is essential to quantify how net migration may slow population adjustments. Housing is also a natural candidate for slowing population adjustments because it is difficult to move, costly to build quickly, and a large durable stock makes a city attractive to potential migrants. We quantify the influence of migration and housing on urban population dynamics using a ...