Research Topics

Banking and Financial Markets

An Enhanced Approach to Measuring Financial Stress
The CFSI monitors stress in the overall financial system by tracking conditions in different types of financial markets. Two new markets have just been incorporated into the index, making it more sensitive to potential instability. And because early detection is critical, the CFSI will now be updated daily. In recent months, the CFSI has remained low, as key financial conditions continued to improve.

Economic Modeling

Macroeconomic Models, Forecasting, and Policymaking
Models of the macroeconomy have gotten quite sophisticated, thanks to decades of development and advances in computing power. Such models have also become indispensable tools for monetary policymakers, useful both for forecasting and comparing different policy options. Their failure to predict the recent financial crisis does not negate their usefulness, it only points to some areas that can be improved. ()
  • Privately Optimal Contracts and Suboptimal Outcomes in a Model of Agency Costs ()
  • Real-Time Nowcasting with a Bayesian Mixed Frequency Model with Stochastic Volatility ()
  • Business Cycles and Financial Crises: The Roles of Credit Supply and Demand Shocks ()
  • See all 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.

Education

Educational Attainment and Demographic Differences in Employment
It is well-known that employment outcomes such as unemployment rates and employment-to-population ratios vary markedly across demographic groups. Differences in unemployment rates are especially pronounced across age and racial groups. It is also well-known that employment outcomes depend significantly on educational attainment, and that levels of educational attainment vary across race and ethnicity. In this article, we examine these factors.

Financial Stability

The Cleveland Financial Stress Index: A Tool for Monitoring Financial Stability
To promote stability in a dynamic financial system, supervisors must monitor the system for risks at all times. The Cleveland Fed has developed an index of financial stress, the CFSI, which is designed to track distress in the financial system as it is building. The CFSI will help financial system supervisors monitor and understand the state of financial markets on a real-time basis, and take appropriate regulatory or supervisory action as necessary. ()

Foreclosure

Foreclosure-Related Vacancy Rates

The national foreclosure crisis has caused there to be millions more vacancies in our housing stock than before. Vacant homes lower their community’s property values and quality of life. Neighbors and public officials know foreclosed homes sit empty for months, but precise measures of foreclosure-related vacancy are rare. Using data from Cuyahoga County, Ohio, I trace the rise and fall in the vacancy rates of homes during the 18 months following their foreclosure. Ominously, the data suggest that foreclosure may permanently scar some homes. Foreclosed homes still have higher vacancy rates than neighboring houses two to five years after a sheriff’s sale.

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  • The Impact of Recovery Efforts on Residential Vacancies ()
  • The Impact of Vacant, Tax-Delinquent, and Foreclosed Property on Sales Prices of Neighboring Homes ()
  • Inter-Regional Home Price Dynamics through the Foreclosure Crisis ()
  • See all Foreclosure

Growth and Production

The Delayed Recovery of Investment in Nonresidential Structures
Business fixed investment remains below its pre-recession peak, mainly due to the delayed recovery of one of its components, investment in nonresidential structures (factories, office buildings, etc.). One reason for the slow recovery is the overhang of structures that had been built before the recession.

Households and Consumers

The Evolution of Debt Balances
Since the end of the recent financial crisis, individuals have been reducing the large amounts of debt that they had built up prior to the recession. Recent studies show that the percentage of individuals holding debt in 2012 is less than in 2000.

Industrial Organization

Inflation and Prices

Why Are Interest Rates So Low?
Interest rates have been at historical lows for some time now. There are many possible reasons why that is so. We make use of recent work done at the Federal Reserve Bank of Cleveland that allows us to look at individual components of interest rates and see which are exerting the biggest influence. Knowing why rates are where they are now helps to predict where interest rates will likely be in the near future. ()
  • It’s Not Just for Inflation: The Usefulness of the Median CPI in BVAR Forecasting ()
  • Trimmed-Mean Inflation Statistics: Just Hit the One in the Middle ()
  • The Term Structure of Inflation Compensation in the Nominal Yield Curve ()
  • See all Inflation and Prices

International Markets and Foreign Exchange

Has the Natural Gas Boom Impacted the Trade Deficit?
Natural gas production in the United States has surged, thanks to innovations and expansions of shale drilling activity. Though the boom has the potential to affect the broader economy, its impact on the trade deficit has thus far been small.

Labor Markets, Unemployment, and Wages

Are We Like Sweden? Recovery in the Labor Market
More than 20 years ago Sweden suffered a severe financial crisis that brought unemployment to an all-time high. To this day the unemployment rate has not returned to where it was before the crisis. Economists say that if the U.S. is anything like Sweden, our full recovery may still be a long way off. Sweden is like the U.S. in many ways, but the roots of its labor market troubles appear to be very different from ours. ()
  • Human Capital in the Inner City ()
  • The Cyclical Behavior of Equilibrium Unemployment and Vacancies across OECD Countries ()
  • The Ins and Outs of Unemployment in the Long Run: Unemployment Flows and the Natural Rate ()
  • See all Labor Markets, Unemployment, and Wages

Monetary Policy

Recent Changes in FOMC Communication and the Committee’s Updated Projections
Over time, the Federal Open Market Committee (FOMC) has sought to improve its public communications by providing more guidance on the likely future path of monetary policy. That is, the FOMC has tried to better explain to the public the direction the Committee expects its target for the federal funds rate to take in the future.
  • Liquidity Provision during the Crisis of 1914: Private and Public Sources ()
  • It’s Not Just for Inflation: The Usefulness of the Median CPI in BVAR Forecasting ()
  • Fiscal Multipliers under an Interest Rate Peg of Deterministic vs. Stochastic Duration ()
  • See all Monetary Policy

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. ()

Regional Economics

Employment Growth Slows in Ohio
Employment in Ohio has grown 2.7 percent since the start of the recovery (June 2009 to March 2013). Over the same period, national employment grew almost a percentage point more. Ohio’s employment growth to this point in the recovery puts it close to the middle of the distribution.
  • Assessing the Evidence on Neighborhood Effects from Moving to Opportunity ()
  • Measures beyond the College Degree Share to Guide Inter-regional Comparisons and Workforce Development ()
  • Land Bank 2.0: An Empirical Evaluation ()
  • See all Regional Economics

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.