Research Topics

Banking and Financial Markets

Bank Executive Pay
In the wake of the financial crisis and the unprecedented government intervention that followed, the compensation of bank executives has been heavily criticized for having encouraged undue risk taking. We examine trends in executive compensation over the past couple of decades, and look for compensation patterns that might have implications for banks’ risk-taking behavior. Read more

Consumer Economics

Economic Modeling

Economy in Perspective

Sticky prices signal subdued inflation
Some prices are "sticky," meaning they don't respond to changing market conditions as quickly as other, more "flexible" prices. According to Federal Reserve researchers Michael Bryan and Brent Meyer, these sticky prices are useful when trying to discern where inflation is heading. Looking at the "sticky price" components of the Consumer Price Index (CPI), the researchers say that "subdued for some time" -- language from the last FOMC statement -- sums up expected price trends nicely. They note that while a core flexible-price measure of the CPI has risen recently, the growth rate of the core sticky-price CPI continues to decline. Read more

Education

Financial Stability

Bank Executive Pay
In the wake of the financial crisis and the unprecedented government intervention that followed, the compensation of bank executives has been heavily criticized for having encouraged undue risk taking. We examine trends in executive compensation over the past couple of decades, and look for compensation patterns that might have implications for banks’ risk-taking behavior. Read more

Foreclosure

Ten Myths about Subprime Mortgages
On close inspection many of the most popular explanations for the subprime crisis turn out to be myths. Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. Nor were its causes unlike other crises of the past. The subprime crisis was building for years before showing any signs and was fed by lending, securitization, leveraging, and housing booms. Read more (PDF)

Growth and Production

Is Debt Overhang Causing Firms to Underinvest?
Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment through several channels. This Commentary explains one of them—debt overhang can cause firms to underinvest—and points to ways in which this effect might be inhibiting the recovery. Read more (PDF)

Households and Consumers

The Homebuyer Tax Credit
The homebuyer tax credits that were intended to aid the floundering housing market have recently expired. Were the programs enough to jump start the housing market or did they merely cannibalize future sales? Read more

Industrial Organization

Inflation and Prices

Recent Developments in Prices and Inflation Expectations
As the economy recovers, interest has turned to the Fed’s strategy for exiting from the accommodative policy it adopted to deal with the crisis. Owing to the Fed’s dual mandate (maximum sustainable employment and price stability), the exit strategy will depend on the developments in prices as well as the real economy. Price statistics suggest that we are in a period of disinflation,and inflation expectations reveal no significant threat of inflation is anticipated. Read more

International Markets and Foreign Exchange

Renminbi Peg: On Again, Off Again
The People’s Bank of China indicated—once again—that it would loosen its grip on the renminbi-dollar exchange rate and allow the renminbi to appreciate against the dollar. All else constant, a renminbi appreciation should raise the dollar price of Chinese goods, lower the renminbi price of U.S. goods, and whittle away at our trade deficit with that country. But unless the exchange rate moves by a substantial amount, we probably will not see much of an effect. Since the People’s Bank’s announcement, the renminbi has appreciated a meager 0.7 percent against the dollar. Read more

Labor Markets, Unemployment, and Wages

The Labor Market for Men and Women
Over the course of this recession, men have experienced significantly higher unemployment rates than women. The unemployment rate for men rose by 6.7 percentage points from its 2007 average level, peaking at 11.4 percent , while the unemployment rate for women increased by 4.3 percentage points, peaking at 8.8 percent. This pattern of more cyclically sensitive unemployment rates for men has been apparent over the last four recessions. Read more

Monetary Policy

W(h)ither the Fed''s Balance Sheet?
The Federal Reserve balance sheet's size and composition have changed dramatically since September 2008. Federal Reserve policymakers have expressed their support for eventually shrinking the Fed's balance sheet and returning the composition of its securities portfolio to include only U.S. Treasury issues. Through the careful study of public Federal Open Market Committee documents, this Economic Commentary concisely explains some of the FOMC's decisions concerning an appropriate sequence of policy actions. Read more (PDF)

Payment Systems

The Check Is Dead! Long Live the Check! A Check 21 Update
Check 21 legislation has enabled the check clearing system to transform from paper to electronics, and much more rapidly than some had predicted. As a result of competition with other payment methods, check use has been declining since the mid-1990s, but because of the rapid adoption of electronic payment methods, checks are evolving and are unlikely to disappear anytime soon. Checks are still a convenient way to initiate some payments, and electronic processing has only made them more competitive with all types of electronic payments. Read more (PDF)

Regional Economics

Changes in Foreclosure and Unemployment across States
During the recent recession, the unemployment rate more than doubled and the foreclosure start rate roughly tripled, but the timing of the increases differed somewhat over the business cycle. In this article, we take a look at the recent movements of these two series and discuss what their paths might be going forward. Read more

US Economy

An Immoderate Inventory Cycle
The final estimate of fourth-quarter real GDP growth was substantially higher than the 2.2 percent pace recorded in the third quarter. To better understand the apparent strength in fourth quarter activity, it is instructive to split GDP into two basic components: final sales of gross domestic product and the change in private inventories. Read more