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1983 Economic Commentaries

  • Sources of Regional Growth Disparity: The Case of Ohio's Industries


    Roger Hinderliter

    Abstract

    A serious problem in the U.S. economy is slow growth or outright decline in employment in many manufacturing industries. This problem is not dispersed uniformly among regional or state economies in the United States. It is most acute in those states, including Ohio, that have been leading centers of industrial production for many years. In these states manufacturing jobs have declined sharply. Ohio, for example, lost over 300,000 manufacturing jobs between 1970 and 1982, more than 20 percent of its manufacturing work force in 1970. Read More

  • Banking and Commerce: To Mix or Not to Mix?


    Thomas Buynak

    Abstract

    In the late 1970s, commercial banks and thrifts experienced an unprecedented diversion of their funds to less regulated institutions. Partly in reaction to this massive outflow of depositories' funds, the U.S. Congress passed two separate, fairly comprehensive deregulatory measures-the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn- St Germain Depository Institutions Act of 1982. Because of these two acts, banks and thrift institutions can more freely pay whatever interest rates they choose in order to attract deposit funds. Read More

  • The Japanese Postal Savings System: A State-Run Financial Monster?


    Laura Kuhn

    Abstract

    Japan maintains the highest personal savings rate of all the major industrialized countries. In 1982 the Japanese personal savings rate was about 19.3 percent of disposable income-almost three times that of the United States. Many analysts consider the thrift of the Japanese people to be the primary reason for that country's tremendous industrial growth and technological advancement after World War II. Through the postal savings system (PSS),the Japanese government has converted personal savings deposits into long-term capital for industrial, trade, infrastructural, and social development. The state-run PSS has played a vital role in channeling assets to the private sector and in helping to finance the huge government deficits. Read More

  • Geographic Banking Markets


    Paul Watro

    Abstract

    Various U.S. regulatory agencies are responsible for preventing bank mergers and acquisitions that would have substantially negative effects on banking competition. Regulatory agencies identify relevant product and geographic markets to assess the competitive impact of proposed mergers and acquisitions. Supreme Court decisions indicate that commercial banking generally should be considered as a separate line of commerce, or product market, for antitrust purposes. Commercial banks traditionally offered customers a unique cluster of products that were not available from other institutions. Because of expanded powers, thrift institutions now operate more like commercial banks, becoming increasingly important suppliers of a wide range of financial services. Read More

  • Economic Recovery and the Fourth District


    Robert Schnorbus Sandra Pianalto

    Abstract

    The pattern and composition of the national economic recovery are among the most important elements shaping local economic recoveries. The national economy shifted into recovery in the first quarter of 1983, with real gross national product (GNP) growing at a 2.6 percent annual rate. At the same time, total nonagricultural employment in the Fourth District has steadily risen, and Fourth District unemployment rates, while still substantially higher than national unemployment rates, have dropped. Although these short-run developments are encouraging, the recovery in the Fourth District is restricted to just a few industries, primarily automotives, housing, and retail trade. The concentration of the District's resources in heavy manufacturing, such as automobiles, steel, and machine tools, partly explains the cyclical vulnerability of the local economies and why employment gains have been spotty in the early stages of recovery. Read More

  • The Mythology of Domestic Content


    Michael Bryan

    Abstract

    The virtue of free trade is one concept that nearly every economist advocates. With free trade, a nation can produce the goods and services for which it has a comparative advantage and trade for the goods and services that it is less suited to manufacture domestically. Via profits, specialization channels limited economic resources into industries that use those resources most efficiently. Prices of domestic and imported goods and services will consequently fall, while total consumption and investment will increase. In essence, free trade raises the wealth of all nations that embrace it. Read More

  • Velocity and Monetary Targets


    William Gavin

    Abstract

    To interpret the monetary targets in 1983, we have to know where we have been and where we are going. The equation of exchange, <em>MV = PQ,</em> provides a simple accounting framework for keeping track of where we have been and for suggesting where we may be going. <em>M</em> is the money supply, however defined; <em>V</em> is the related velocity, or turnover of money; <em>P</em> is the general price level; and <em>Q</em> is real output. Read More

  • Exchange Rates and U.S. Prices


    Gerald Anderson Owen F. Humpage

    Abstract

    Between October 1980 and November 1982, the U.S. dollar appreciated substantially in foreign-exchange markets. Relative to the major currencies, the advance of the dollar ranged from 5 percent against the Canadian dollar to 69 percent against the French franc. On a trade-weighted average basis against 10 key currencies, the dollar appreciated 40 percent, fully offsetting its depreciation during the preceding decade. While the dollar has given up only a fraction of its trade-weighted advance since November 1982, many exchange-market analysts anticipate a further depreciation in the near future. Read More

  • Economic Outlook for 1983


    Paulette Maclin Joanne Bronish

    Abstract

    Twenty-nine economists met at the Federal Reserve Bank of Cleveland this March to discuss the economy. Known as the Fourth District Economists Round Table, this meeting produced a rather subdued economic outlook, indicating that 1983 would be a year of relatively slow recovery. The median of 29 forecasts anticipated real gross national product (GNP) growth of 4.1 percent over the year (fourth quarter to fourth quarter), compared with an average 6 percent increase in the first year of the six previous postwar recoveries. The expected growth, however, will not be distributed evenly among sectors; some industries that are important to the Fourth District economy, such as capital goods and primary metals, will recuperate more slowly. The Round Table economists also expressed concern about the viability of the recovery beyond 1983. Monetary policy, interest rates, and inflation psychology are variables that add a great deal of uncertainty to the economic outlook. This <em>Economic Commentary</em> reviews the major factors shaping the Round Table's 1983 forecast, touching on some of the uncertainties for 1984 and beyond. Read More

  • Loan Quality of Bank Holding Companies


    Gary Whalen

    Abstract

    Like most types of depository institutions, commercial banks operate with a high degree of financial leverage; that is, their equity typically is small relative to their total assets. As a result, the loan quality and solvency of commercial banks are inextricably related. For this reason banking regulators, who are charged with preserving the safety and soundness of the nation's banking system, are concerned with bank loan quality; businesses and households, who supply banks with investable funds, share these concerns. Read More

  • Issues in the 1983 Auto-Sales Outlook


    Michael Bryan

    Abstract

    Since the late 1970s, the U.S. auto market has suffered a severe decline. Total auto sales (domestic and foreign) have fallen from the highs of over 11 million units in 1977 and 1978 to an anemic average of 8.5 million units since 1980. The sales performance of U.S. autos has become one of the business horror stories of the 1980s, as imports consistently have captured a greater share of the shrinking new-car market. Accompanying the sales dive of U.S. autos is a corresponding dip in the capacity utilization rate of U.S. motor vehicle industries; this measure fellfrom 99 percent in 1977 to approximately 60 percent in 1982. Total employment in these industries declined nearly 27 percent over the same period. With an industry so decimated, it has been difficult for market analysts to predict the level of auto sales in 1983. After examining the sources of new-car demand, we still question whether the recent weakness in the auto industry is temporary or whether it represents a long-run downward adjustment that could continue indefinitely. Read More

  • Soil Conservation: Market Failure and Program Performance


    Paul Wyckoff

    Abstract

    Since the days of the Dust Bowl, policy analysts and policymakers have worried that uninformed and/or indifferent farmers might wear out the very resource most crucial to their livelihood-the soil. In the 1970s and 1980s, this concern has intensified as part of a growing awareness of natural resource scarcity and environmental quality issues. This Economic Commentary examines the economic rationale behind soil conservation programs, assesses the magnitude of the soil erosion problem, and evaluates the effectiveness of current U.S. soil conservation policies. In addition, this article analyzes the reasons why these programs have failed to meet all of their objectives, and it illustrates some common problems in making and carrying out public policy. Read More

  • Social Security: Issues and Options


    Amy Kerka

    Abstract

    If nothing is done to bailout our social security system, by 1984 Americans might not receive continued timely payments. Early in 1983, the Congress will consider reform measures to restore the financial soundness of the social security system. This <em>Economic Commentary</em> describes social security and its funding problems, summarizes the latest financial projections for the system, and reviews some of the social security reforms that are being proposed. Read More