Category: Macroeconomics

Commentary, Macroeconomics

LONG-FORM COMMENTARY: Meeting the Fed’s Mandate: The Recent Past and a Look Into the Future

Karthick Arunachalam

Rutvij Thakkar, Claremont McKenna -- The Federal Reserve’s dual mandate is as simple as holding unemployment below 4% and inflation below 2%. Unemployment should ideally be at the “natural rate” or the lowest unemployment rate possible without creating inflation. According to the Federal Reserve Economic Database, it’s the rate of unemployment arising from all sources except fluctuations in aggregate demand. Since the Baby Boomer generation has chosen to leave the workforce and retire, the Natural Rate—now called the Noncyclical Rate—of unemployment has consistently declined since 1980 to approximately 4%.

Commentary, Macroeconomics

COMMENTARY: The Pandemic Economy and the Power of Labor

Karthick Arunachalam

Devan Bhumralkar, Stanford University -- Inflation has become an unfortunate fact of life in the post-pandemic era. But with Americans dipping deeper into their savings for holiday shopping and keeping their houses a little cooler this winter season to save on energy costs, many are wondering when—and how—it ends. The Federal Reserve has been on a rate-raising mission to combat inflation since early 2022, but while everyone is concerned about consumer prices, what this means for the job market remains to be seen. By the time the dust settles in the pandemic economy, workers may emerge with higher wages and bargaining power.

Macroeconomics

Keystroke Money: Empirical Evidence From India (1999-2019)

etang21

Louis Lamaury, University of Leeds -- Since the revival of money supply endogeneity of the 1980s, post-Keynesian monetary theory has become increasingly accepted in central banking institutions. In developed economies, academia has paved the way forward through empirical research but has often neglected developing economies. This paper investigates the exogenous-endogenous money supply hypothesis in India from 1999 to 2019.

Macroeconomics

BLOG: Three Gap Analysis of Macroeconomic Consistency: A Case Study of the Ecuadorian Economy

rugilmartin

By Juan Andres Mesias, The George Washington University -- This paper studies the macroeconomic consistency of the Ecuadorian economy from 2007- 2016. Initially, the paper develops a Three-Gap Model to carry out a basic consistency check on all three macroeconomic accounts, public, private and current accounts.

Macroeconomics

Vector Autoregressive Modeling of Interest Rate Shocks on Bank Balance Sheets: A Comparative Study

ruruhoong

By Sara Diressova, Princeton University
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Di Tella and Kurlat (2017) and Drechser et al. (2017a) study the effects of a nominal interest rate shock on various bank balance sheet variables. I study the same relationships using a VAR model, to understand them over multiple periods of time, without assumptions of exogeneity, and with clear interactions between variables through impulse response functions (Hamilton 1994). I find that ...

Macroeconomics

BLOG: Employment Effects of Minimum Wage Increases – A Matched Pairs Design Using US Data

danielwainstock

By Eric Karsten, Chong An Ong, Immanuel Adriana Rakshana, and Arushi Saksena, University of Chicago 
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The minimum wage is a contentious issue, with proponents arguing that it is required to protect the wage security of low-income earners, and opponents arguing that it places downwards pressure on employment in the labor market. Our paper uses a differences in differences regression model, similar to the one used in Card & Krueger(1993) to estimate the unemployment effects of a minimum wage increase.

Macroeconomics

BLOG: Market Distorting Moral Hazard of Dodd-Frank’s Title II: The Costs of Inefficient Capital Markets

torenfronsdal

By Charles LeSueur, Vassar College
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The purpose of this paper is to analyze whether Title II of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) effectively fulfills the stated goals of ending “too big to fail”, “no more taxpayer-funded bailouts”, and decreasing systemic risk.  I argue that Title II institutionalized taxpayer-funded bailouts under different language and increased systemic risk ...