Economic Commentary
Providing you with in-depth analysis of current economic and financial issues.
2007
- December 2007
- A Brief History of Central Banks
- One of the world?s foremost economic historians explains the forces behind the development of modern central banks, providing insight into their role in the financial system and the economy. Read more (PDF)
- November 2007
- Coordination Failures in the Labor Market
- Can two countries, or two different states, with similar technologies, resources, and policies exhibit differences in labor market performance? In contrast to a commonly held view, the answer is yes under some conditions that we review in this Commentary. If these conditions are satisfied, the unemployment rate and the production of an economy can fluctuate even in the absence of shocks. Moreover, government intervention can be useful provided that it coordinates the economy on the preferred outcome. Read more (PDF)
- October 15, 2007
- Regional Productivity Growth and Plant-Level Dynamics
- The mix of companies in the economy is always changing. The more-productive ones expand, and the less-productive ones are driven out of the market, freeing resources such as labor and capital for new ventures. This reallocation contributes more to aggregate productivity growth than the productivity gains achieved by individual businesses. The efficiency with which the process takes place is a key factor affecting rates of productivity growth in different regions and explaining why they differ. Read more (PDF)
- October 1, 2007
- Are Consumers Cashing Out?
- The information age has led to many new forms of payment, including credit cards, debit cards, and online banking. In many ways, these new mechanisms seem preferable to cash. While the disappearance of cash is a very long way off, it seems people are starting to use it less. Read more (PDF)
- September 15, 2007
- Regional Variation in Job Creation and Destruction
- As companies and consumers adapt to a changing marketplace, jobs are eliminated and new ones are created. Rates at which this happens vary across states and reflect the flexibility of the labor market. More flexible markets are associated with faster growth. Read more (PDF)
- September 1, 2007
- Prepayment Penalties on Subprime Mortgages
- As a result of the subprime mortgage mess, prepayment penalties are under close scrutiny. While these, like other kinds of contract terms, can be abused, there are good reasons for why they exist. In principle, they serve to extend credit to a greater number of borrowers. Read more (PDF)
- August 15, 2007
- Peak Oil
- When will the world’s production of oil peak, and what will the economic consequences be? Calculating when turns out not to be so straightforward as it seems, but predicting the likely economic consequences is-and they’re not as bleak as many fear. Read more (PDF)
- August 1, 2007
- The Growth of Cities in the Fourth District
- Many Fourth District cities have experienced relatively weak population growth over the past half century. One possible reason some cities have recently grown more is because they have better educated workforces. Recent research suggests that the educational attainment of residents is critical to population growth, particularly for cities in the Northeast and Midwest. Read more (PDF)
- July 2007
- What’s Really Going on in Housing Markets?
- Most of the public concern about housing markets is based on claims that house prices have increased at historically anomalous rates and that house prices have outpaced incomes. The first claim is based on inaccurate historical data. The second is linked to relaxed credit constraints. House prices are likely to fall further, but not for the reasons usually proposed. Read more (PDF)
- June 2007
- Price Stability: Issues and Challenges
- Central banks have done a very impressive job of achieving low and stable rates of inflation in recent years. But despite past successes, they must always be ready to deal with new challenges that might arise. Sandra Pianalto, president and CEO of the Federal Reserve Bank of Cleveland, discusses some of those challenges and how central banks might best prepare for them (from a speech she gave at a conference sponsored by the Deutsche Bundesbank and the Cleveland Fed in Frankfurt, Germany, on June 6, 2007). Read more (PDF)
- May 15, 2007
- Global Risks to U.S. Monetary Policy
- We recently invited four international economists to the Federal Reserve Bank of Cleveland to discuss global developments and to help us identify and understand the key international risks that these developments present for U.S. monetary policy. This Commentary develops a key macroeconomic concern that emerged from our conversations. Read more (PDF)
- May 1, 2007
- The Minimum Wage and the Labor Market
- New models of employment show that there are some cases in which a minimum wage can have positive effects on employment and social welfare. The effects depend ultimately on the prevailing market wage and the frictions in the market. Evidence to date does not support the view that raising the minimum wage will lead to positive employment effects. Read more (PDF)
- April 15, 2007
- How Much U.S. Technological Innovation Begins in Universities?
- Technological progress has been the key to improved living standards, but how and where do new ideas get their start? The answer might give us some insight into how we can support greater innovation. Some suggest universities have been an important source of innovative technology. A look at the people involved in the development of patented technologies can give an idea of how much innovation originates in universities. Read more (PDF)
- April 1, 2007
- U.S. Ethnic Scientists and Entrepreneurs
- Immigrants are exceptionally important for U.S. technology development, accounting for almost half of the country?s Ph.D. workforce in science and engineering. Most notably, the contribution of Chinese and Indian scientists and entrepreneurs in U.S. high-technology sectors increased dramatically in the 1990s. These ethnic scientific communities in the United States also help transfer new technologies back to their home countries. Read more (PDF)
- March 15, 2007
- Mirror, Mirror, Who’s the Best Forecaster of Them All?
- Say you need an accurate forecast of future GDP or inflation. What’s your best bet-the economist who was hot last year or the forecaster in the middle? The record indicates it’s tough to consistently beat the median prediction. Read more (PDF)
- March 1, 2007
- Credit Spreads and Subordinated Debt
- Stock and bond prices contain all sorts of information about investors’ beliefs and expectations. For example, the interest rate on bank debt not insured by the FDIC has information about the health of the banks issuing the debt. Unfortunately, difficulties in extracting information from these subordinated debt prices reduces the information’ usefulness to regulators and policymakers. Read more (PDF)
- February 15, 2007
- A Closer Look at Cleveland’s Latest Poverty Ranking
- News that Cleveland’s poverty rate is the worst in the nation--and rising--has elevated the community’s concern about conditions in the city. But a closer look at the way poverty rates are calculated suggests that all the possible causes of Cleveland’s ranking have not been fully understood. Read more (PDF)
- February 1, 2007
- Human Capital and the Challenge of Persistent Poverty in Appalachia
- Recent research suggests that investments in education may provide the key to reducing persistent poverty in regions such as Appalachia. A look at some trends in poverty and educational attainment in Appalachia over the past two decades confirms that the two are strongly related. Read more (PDF)
- January 15, 2007
- Home Price Derivatives
- Until recently, homeowners had no way to protect the value of their homes against losses that could result from housing market downturns. With the derivatives contracts introduced by the CME last year, homeowners now have some means of protection, and new and better products are more likely to follow from them. Read more (PDF)
- January 1, 2007
- Private Money in our Past, Present, and Future
- The government isn’t the only entity allowed to issue money. Private citizens and businesses can too, and throughout U.S. history, they often have. But private money--as such money is called--isn’t issued much these days. What lessons have our experiences with private money taught us, and what do they imply for our money today and in the future? Read more (PDF)