Research Topics

Banking and Financial Markets

Banks Increase their Holdings of Safe Assets
The banking sector seems to have transitioned to a new state in which a higher percentage of bank assets is held in safe forms. During and after the last recession, the percentage of bank assets held in cash, Treasury securities, and agency securities experienced a steep rise, while loans and leases dropped.

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

Five Policy Considerations for Improving Ohio''s Housing Markets
Ohio's housing markets still face a number of challenges, such as elevated foreclosure rates and a prevalence of vacant, low-value housing. This paper suggests five areas where policy interventions are worth considering.
  • 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 Ever-Updated Personal Saving Rate
The Bureau of Economic Analysis estimates that the personal saving rate for the first quarter of 2013 was 2.3 percent—a five-year low, and a substantial drop from the fourth quarter of 2012, when it stood at 5.3 percent. Since many economists think a healthy household balance sheet is a necessary condition to fuel a stronger economic recovery, should we be worried about how low this estimate of the saving rate is?

Industrial Organization

Inflation and Prices

Recent Trends in Various CPI-Based Inflation Measures
The Bureau of Labor Statistics’ most recent release of the Consumer Price Index reported that the index declined in April. This follows a monthly decline in March. On a year-over-year basis, CPI inflation slowed from a recent peak of 2.0 percent in February to 1.1 percent in April. Taken at face value, this slowing of inflation suggests some further deceleration of inflationary pressure in the U.S. economy. A careful assessment of underlying price trends suggested by other, “core” measures of CPI inflation provides further evidence of this deceleration.
  • 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

What Constitutes Substantial Employment Gains in Today''s Labor Market?
The Federal Open Market Committee (FOMC) has tied its asset purchases to a "substantial improvement" in labor market conditions. While we don't speculate on what the FOMC means by substantial improvement, we do explore the level of monthly job gains that would gradually deliver the underlying trend unemployment rate within a reasonable timeframe, under several plausible scenarios. We find that the path of monthly job gains, which is highly dependent on a few key parameters, is likely to be smaller than the path associated with previous recoveries. ()

Monetary Policy

What Constitutes Substantial Employment Gains in Today''s Labor Market?
The Federal Open Market Committee (FOMC) has tied its asset purchases to a "substantial improvement" in labor market conditions. While we don't speculate on what the FOMC means by substantial improvement, we do explore the level of monthly job gains that would gradually deliver the underlying trend unemployment rate within a reasonable timeframe, under several plausible scenarios. We find that the path of monthly job gains, which is highly dependent on a few key parameters, is likely to be smaller than the path associated with previous recoveries. ()
  • 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

Five Policy Considerations for Improving Ohio''s Housing Markets
Ohio's housing markets still face a number of challenges, such as elevated foreclosure rates and a prevalence of vacant, low-value housing. This paper suggests five areas where policy interventions are worth considering.
  • The Long-Term Employment Impacts of Gentrification in the 1990s ()
  • Assessing the Evidence on Neighborhood Effects from Moving to Opportunity ()
  • Measures beyond the College Degree Share to Guide Inter-regional Comparisons and Workforce Development ()
  • 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.