“Do periods of persistently loose monetary policy increase financial fragility and the likelihood of a financial crisis? This is a central question for policymakers, yet the literature does not provide systematic empirical evidence about this link at the aggregate level. In this paper we fill this gap by analyzing long-run historical data. We find that…

“Across advanced economies, growth in labor productivity and total factor productivity is notably lower than it was 20 to 30 years ago. We compare the two primary narratives for this slowdown. The first emphasizes the common shock of the Great Recession. The second emphasizes a common trend slowdown. The two explanations are not mutually exclusive;…

“Key data in January suggest that the economy began 2023 on solid footing, although there are some inklings that the pace of retail sales could be slower in February. Continued high inflation rates and a rebound in market-based measures of inflation expectations indicate that downside risks to the economy remain elevated. For these reasons, uncertainty…

“A defining feature of the US economy since 2021 has been the unusual tightness of the labor market. The unemployment rate, currently 3.5 percent, not long ago reached historic lows, while currently about 7 percent of available jobs are unfilled, a historically high level. Labor markets can tighten if labor demand increases or labor supply…

“So, what does a ‘typical’ recession look like? Recessions usually include the following characteristics:” “A. A negative shock such as a financial crisis occurs.” “B. Firms reduce investment spending on machinery, equipment, new factories, and new office buildings (physical capital). In fact, typical recessions begin with reduced business investment spending, which is the most volatile…

“Some of these pandemic factors that contributed to the surge in rents appear to be unwinding, as evident in Zillow’s measure of rent inflation. After running well above the official BLS measure of rent inflation, the Zillow rent inflation metric has since turned down sharply. Some policymakers have interpreted the decline in the Zillow measure…

“There are several good reasons why low and stable inflation is desirable. High inflation tends to distort prices and incentives to hold cash and buy certain goods and services. Furthermore, unstable inflation generates uncertainty in income and wealth holdings.” “On the other hand, policymakers are justified in accepting some inflation instability if this avoids such…

“The importance of the U.S. dollar in the context of the international monetary system has been examined and studied extensively. In this post, we argue that the dollar is not only the dominant global currency but also a key variable affecting global economic conditions. We describe the mechanism through which the dollar acts as a…

“How can a plethora of individual price changes in the economy be combined into a single number that represents the overall change in the cost of living? When building the Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) accomplishes this by figuring out (via consumer spending surveys) what a representative basket of consumer…