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Economic Research

Wealth Inequality by Age in the Post-Pandemic Era
The authors present recent evidence about the distribution of wealth across age groups, specifically how disparities in wealth distribution by age have slightly narrowed since the beginning of the pandemic. They find that this change was likely driven by expanded ownership of financial assets among younger Americans.
By Rajashri Chakrabarti, Natalia Emanuel, and Ben Lahey
Racial and Ethnic Wealth Inequality in the Post-Pandemic Era
The authors use the Federal Reserve Board’s Distributional Financial Accounts to document the wealth disparities between Black, Hispanic, and white households from the first quarter of 2019 to the third quarter of 2023. They find that these disparities have been exacerbated since the pandemic, likely due to rapid growth in financial assets more often held by white individuals.
By Rajashri Chakrabarti, Natalia Emanuel, and Ben Lahey
The Power of Proximity: How Working beside Colleagues Affects Training and Productivity
Firms remain divided about the value of employees working in the office versus at home. Some think that their employees are more productive when working from home, while others believe that the office is a key place for investing in workers’ skills. Could both be right? The authors examine if working in the office facilitates investments in workers' skills for tomorrow that diminish productivity today.
By Natalia Emanuel, Emma Harrington, and Amanda Pallais
Towards Increasing Complexity: The Evolution of the FX Market
The foreign exchange market has evolved extensively over time, undergoing important shifts in the types of market participants and the mix of instruments traded, within a trading ecosystem that has become increasingly complex. The authors discuss fundamental changes in this market over the past twenty-five years and highlight some of the implications for its future evolution.
By Alain Chaboud, Lisa Chung, Linda S. Goldberg, and Anna Nordstrom
An Overlooked Factor in Banks’ Lending to Minorities
The homeownership rate for white households was 75 percent in the second quarter of 2022, compared to 45 percent for Black households and 48 percent for Hispanic households. One reason for these differences, virtually unchanged in the last few decades, is uneven access to credit. In this post, which is based on a related Staff Report, the authors show that banks vary substantially in their lending to minorities, and they document an overlooked factor in this difference—the inequality aversion of banks’ stakeholders.
By Matteo Crosignani and Hanh Le
Measuring Price Inflation and Growth in Economic Well-Being with Income-Dependent Preferences
How can we accurately measure changes in living standards over time in the presence of inflation? The author discusses a novel and simple methodology that uses the cross-sectional relationship between income and household-level inflation to construct accurate measures of changes in living standards that account for the dependence of consumption preferences on income. Applying this method to data from the United States suggests potentially substantial mismeasurements in our available proxies of average growth in consumer welfare.
By Danial Lashkari
Self-Employment and Labor Market Risks
The author studies the labor market risks associated with self-employment and the provision of benefits targeted at these risks. He provides new empirical evidence on the earnings risks faced by the self-employed using U.S. monthly survey data. He shows that earnings are substantially more volatile during self-employment spells than during paid-employment spells, and that there are frequent direct transitions from self-employment to unemployment. He also builds a framework to assess the impact of extending unemployment insurance benefits to the self-employed.
Richard Audoly, Staff Report 1085, January 2024
On the Validity of Classical and Bayesian DSGE-Based Inference
The author investigates the asymptotic validity of classical and Bayesian inference on the structural parameters in a dynamic stochastic general equilibrium (DSGE) model whenever the distributional assumption on the model’s structural shocks is misspecified. Since both classical and Bayesian methods are full-information, such distributional assumptions are required, and the standard assumption made in the literature is Gaussianity. This paper demonstrates that classical and Bayesian inference on the structural parameters based on Gaussian likelihood is unaffected by departures from Gaussianity of the structural shocks.
Katerina Petrova, Staff Report 1084, January 2024
Monetary Policy across Inflation Regimes
Does the effect of monetary policy depend on the prevailing level of inflation? The authors find that the effects of monetary policy are markedly different when year-over-year inflation exceeds 5.5 percent. Below this threshold, changes in monetary policy have a short-lived effect on prices, but no effect on the unemployment rate. Above this threshold, the effects on both inflation and unemployment can be larger and longer lasting.
Valeria Gargiulo, Christian Matthes, and Katerina Petrova, Staff Report 1083, January 2024
The New York Fed DSGE Model: A Post-Covid Assessment
The authors document the real-time forecasting performance for output and inflation of the New York Fed dynamic stochastic general equilibrium (DSGE) model since 2011. How did its performance pan out? They found the DSGE’s accuracy to be comparable to that of private forecasters before Covid, but somewhat worse thereafter.
Marco Del Negro, Keshav Dogra, Aidan Gleich, Pranay Gundam, Donggyu Lee, Ramya Nallamotu, and Brian Pacula, Staff Report 1082, January 2024
The Global Dash for Cash: Why Sovereign Bond Market Functioning Varied across Jurisdictions in March 2020
As the economic disruptions associated with the COVID-19 pandemic increased in March 2020, there was a global dash-for-cash by investors. This selling pressure occurred across advanced sovereign bond markets and caused a deterioration in market functioning, leading to central bank interventions. The authors show that these market disruptions occurred disproportionately in the U.S. Treasury market and were due to investors’ selling pressures being far more pronounced and broad-based.
Jordan Barone, Alain Chaboud, Adam Copeland, Cullen Kavoussi, Frank Keane, and Seth Searls, Economic Policy Review 29, no. 3, December
Fed Transparency and Policy Expectation Errors: A Text Analysis Approach
This paper seeks to estimate the extent to which market-implied monetary policy expectations could be improved with further information disclosure from the Federal Open Market Committee. Using text analysis methods based on large language models, the authors show that if FOMC meeting materials with five-year lagged release dates—like meeting transcripts and Tealbooks—were accessible to the public in real time, market policy expectations could substantially improve forecasting accuracy.
Eric Fischer, Rebecca McCaughrin, Saketh Prazad, and Mark Vandergon, Staff Report 1081, November 2023
Pandemic-Era Inflation Drivers and Global Spillovers
In recent years, advanced countries have experienced inflation rates not seen in four decades. The underlying causes of this inflationary episode are still debated. This paper develops a New Keynesian open-economy model that allows for a multitude of shocks at the sector and aggregate levels to quantify the drivers of domestic inflation during 2020–23 across several countries, notably the United States and the euro area.
Julian di Giovanni, Şebnem Kalemli-Özcan, Alvaro Silva, and Muhammed A. Yıldırım, Staff Report 1080, November 2023
Stakeholders’ Aversion to Inequality and Bank Lending to Minorities
Despite the tremendous growth in U.S. household net worth over the past several decades, prosperity has not been felt in certain areas and by certain demographic groups. One reason for this uneven economic development is because banks differ in their propensity to lend to minorities based on their stakeholders’ aversion to inequality. Using mortgage application data collected under the Home Mortgage Disclosure Act, this paper documents a large and persistent cross-sectional variation in banks’ propensity to lend to minorities and opens up several avenues for future research.
Matteo Crosignani and Hanh Le, Staff Report 1079, November 2023
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