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Report
Business cycle fluctuations and the distribution of consumption
De Giorgi, Giacomo; Gambetti, Luca (2015-03-01)
This paper sheds new light on the interactions between business cycles and the consumption distribution. We use Consumer Expenditure Survey data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to total factor productivity shocks and economic policy uncertainty shocks. Importantly, we find that the responses of the right tail of the consumption distribution, ...
Staff Reports , Paper 716

Discussion Paper
Medicare and Financial Health across the United States
Goldsmith-Pinkham, Paul; Wallace, Jacob; Pinkovskiy, Maxim L. (2020-07-08)
Consumer financial strain varies enormously across the United States. One pernicious source of financial strain is debt in collections—debt that is more than 120 days past due and that has been sold to a collections agency. In Massachusetts, the average person has less than $100 in collections debt, while in Texas, the average person has more than $300. In this post, we discuss our recent staff report that exploits the fact that virtually all Americans are universally covered by Medicare at 65 to show that health insurance not only improves financial health on average, but also is a major ...
Liberty Street Economics , Paper 20200708e

Report
Banking across borders with heterogeneous banks
Niepmann, Friederike (2013-04-01)
Individual banks differ substantially in their foreign operations. This paper introduces heterogeneous banks into a general equilibrium framework of banking across borders to explain the documented variation. While the model matches existing micro and macro evidence, novel and unexplored predictions of the theory are also strongly supported by the data: The efficiency of the least efficient bank active in a host country increases the greater the impediments to banking across borders and the efficiency of the banking sector in the host country. There is also evidence of a tradeoff between ...
Staff Reports , Paper 609

Working Paper
Financial Contracting with Enforcement Externalities
Drozd, Lukasz A.; Serrano-Padial, Ricardo (2018-10-18)
We study the negative feedback loop between the aggregate default rate and the efficacy of enforcement in a model of debt-financed entrepreneurial activity. The novel feature of our model is that enforcement capacity is accumulated ex ante and thus subject to depletion ex post. We characterize the effect of shocks that deplete enforcement resources on the aggregate default rate and credit supply. In the model default decisions by entrepreneurs are strategic complements, leading to multiple equilibria. We propose a global game selection to overcome equilibrium indeterminacy and show how shocks ...
Working Papers , Paper 18-21

Working Paper
Bubbles and Leverage: A Simple and Unified Approach
Bogusz, Theodore (2013-11-13)
In this paper, we lay out a simple framework that captures much of what the theoretical literature has to say about the role of credit in systemically important asset booms and busts. In addition, we suggest ways in which to incorporate physical investment in the bubble asset as well as monetary policy.
Working Paper Series , Paper WP-2013-21

Working Paper
Earnings Dynamics and Its Intergenerational Transmission: Evidence from Norway
Ozkan, Serdar; Salgado, Sergio; Halvorsen, Elin (2021-12-16)
Using administrative data from Norway, we first present stylized facts on labor earnings dynamics between 1993 and 2017 and its heterogeneity across narrow population groups. We then investigate the parents’ role in children’s income dynamics—the intergenerational transmission of income dynamics. We find that children of high-income, high-wealth fathers enjoy steeper income growth over the life cycle and face more volatile but more positively skewed income changes, suggesting that they are more likely to pursue high-return, high-risk careers. Children of poorer fathers also face more ...
Working Papers , Paper 2021-015

Working Paper
A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area
Tracy, Joseph; Rich, Robert W. (2018-09-28)
This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank?s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents? uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an ...
Working Papers (Old Series) , Paper 1813

Briefing
Why Do Long-Term Unemployed Workers Struggle to Find New Jobs?
Borovickova, Katrina (2023-04)
The job finding probabilities of workers who just lost their jobs are higher than for those who have been unemployed for several months. There are two broad reasons why this is the case: Either the job finding probabilities of workers decrease with unemployment duration, or workers differ in how quickly they can find jobs. Using an economic model and Austrian social security data on unemployment duration of workers, we estimate the importance of these two channels. We find that the latter is more important, especially in explaining a sharp decline in the job finding probability during the ...
Richmond Fed Economic Brief , Volume 23 , Issue 10

Working Paper
Inflation Uncertainty and Disagreement in Bond Risk Premia
D'Amico, Stefania; Orphanides, Athanasios (2014-01-11)
This paper examines the relation between variations in perceived inflation uncertainty and bond premia. Using the subjective probability distributions available in the Survey of Professional Forecasters we construct a quarterly time series of average individual uncertainty about inflation forecasts since 1968. We show that this ex-ante measure of inflation uncertainty differs importantly from measures of disagreement regarding inflation forecasts and other proxies, such as model-based ex-post measures of macroeconomic risk. Inflation uncertainty is an important driver of bond premia, but the ...
Working Paper Series , Paper WP-2014-24

Working Paper
The Piketty Transition
Carroll, Daniel R.; Young, Eric R. (2014-12-03)
We study the effects on inequality of a "Piketty transition" to zero growth. In a model with a worker-capitalist dichotomy, we show first that the relationship between inequality (measured as a ratio of incomes for the two types) and growth is complicated; zero growth can raise or lower inequality, depending on parameters. Extending our model to include idiosyncratic wage risk we show that growth has quantitatively negligible effects on inequality, and the effect is negative. Finally, following Piketty?s thought experiment, we study how the transition might occur without declining returns; ...
Working Papers (Old Series) , Paper 1432

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