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1988 Economic Commentaries

  • Service-Sector Wages: the Importance of Education


    John Swinton

    Abstract

    Many of the new jobs in the rapidly growing service sector offer wages that are competitive with the best manufacturing jobs. These service jobs require relatively scarce skills, however. The current labor market demands higher levels of basic education in return for greater compensation. Read More

  • Commercial Lending of Ohio's S&Ls


    Gary Whalen

    Abstract

    Two new laws in the early 1980s fundamentally changed the relationship between thrifts and commercial banks, allowing S&Ls to compete for the full range of household and commercial business. An examination of Ohio S&Ls shows the impact of the expanded commercial lending powers on their performance. Read More

  • Productivity, Costs, and International Competitiveness


    John Erceg Theodore Bernard

    Abstract

    The U.S. trade deficit has been on an improving trend recently, largely due to changes in the exchange value of the dollar. Also associated with the rising trend, however, is the comeback in manufacturing cost competitiveness, evidenced by moderation in labor costs and by rapid growth in manufacturing productivity. Read More

  • What's Happened to Ohio's Manufacturing Jobs?


    Randall Eberts

    Abstract

    Although the current business expansion has spawned a resurgence in Ohio manufacturing, fewer factory jobs are being created than in previous growth periods. In examining components of Ohio's net rnanufacturing employment change through three recent periods, the author finds that while job losses from plant closings have remained constant, a lower percentage of jobs have been created from business openings. The slowdown in new job creation has come primarily from large firms. Read More

  • Assessing and Resisting Inflation


    Gerald Anderson

    Abstract

    The inflation rate has risen, and there is good reason to believe that it is likely to rise even further. Although the future path of the inflation rate cannot be known with certainty, a case can be made that it is preferable for policymakers to resist a further acceleration of inflation rather than to wait for more information. Read More

  • How Are the Ex-ODGF Thrifts Doing?


    Paul Watro

    Abstract

    The thrifts that have survived the 1985 ODGF crisis as independent depository institutions have performed better than similar-sized thrifts in Ohio because they have been able to hold down costs and improve their net worth through higher earnings. Read More

  • The Case for Zero Inflation


    William Gavin Alan Stockman

    Abstract

    The authors argue that a monetary policy of zero inflation would benefit society by eliminating price distortion, increasing economic growth, adding liquidity to the economy, and reducing uncertainty associated with price-level drift. Read More

  • Intervention and the Dollar


    Owen F. Humpage

    Abstract

    Does U.S. intervention have a lasting effect on the foreign-exchange value of the dollar that is independent of monetary policy actions? The author examines evidence from a recent study of U.S. intervention during a three-year period and discusses the relationship between intervention and exchange rates. Read More

  • Is the Thrift Performance Gap Widening? Evidence from Ohio


    Paul Watro

    Abstract

    In examining thrift performance, the author discusses the differences in the earnings of the best and worst thrifts in Ohio and shows that the healthy thrifts are getting better and the sick thrifts are getting worse. Read More

  • Humphrey-Hawkins: The July 1988 Monetary Policy Report


    William Gavin John McElravey

    Abstract

    A review of the Federal Reserve's Monetary Policy Reports to Congress over the last few years reveals a decline in the role of the monetary aggregates in the policy process. The Federal Open Market Committee's projections of economic conditions supplement the money targets in evaluating current policy intentions, particularly in regard to price stability. Read More

  • Three Common Misperceptions About Foreign Direct Investment


    Gerald Anderson

    Abstract

    The increasing purchase of U.S. assets by foreigners in recent years has been blamed on the currentaccount deficit, has been attributed to the Japanese, and has caused alarm about loss of U.S. economic independence. These three common views are based on misperceptions about the causes, sources, and implications of foreign direct investment. Read More

  • A User's Guide to Capacity-Utilization Measures


    Paul Bauer Mary Deily

    Abstract

    The U.S. Census Bureau and the Federal Reserve prepare the two most widely disseminated indexes of capacity utilization. This article, the second of a two-part series on capacity utilization, explains how the indexes are constructed and analyzes the advantages and shortcomings of both approaches. Read More

  • Measuring the Unseen A Primer on Capacity Utilization


    Paul Bauer Mary Deily

    Abstract

    Capacity-utilization measures can be useful in evaluating industry price pressures, investment, and war mobilization capabilities. In this first article of a two-part series, the authors define and examine some of these measures. The upcoming July 1 Economic Commentary uses the concepts to analyze two widely disseminated indexes of capacity utilization. Read More

  • Debt Repayment and Economic Adjustment


    Owen F. Humpage

    Abstract

    The international debt situation involves questions about financial arrangements and about resource adjustments. To fully appreciate the complexity of the problem, one must consider both sets of questions and must understand how they interact. Read More

  • What's Happening to Labor Compensation?


    Erica Groshen

    Abstract

    Despite recent low unemployment rates and high capacity-utilization levels, wages have remained stable. This stability is not a result of new wage rigidity. Wages have undergone a fundamental shift toward flexibility because of changes in the industrial composition of employment and in the structure of compensation. Read More

  • Stable Inflation Fosters Sound Economic Decisions


    James Hoehn

    Abstract

    How should monetary policy use its control over money and prices to influence employment and output? Under a policy to stabilize inflation, people can more easily make sound production and consumption decisions, and economic activity will tend to vary appropriately with changes in productive opportunities. Read More

  • Merchandise Trade and the Outlook for 1988


    Gerald Anderson

    Abstract

    Will this year's improvement in U.S. foreign trade be double, triple, or even quadruple last year's gain? Many forecasters think this will happen and are expecting that a major growth of real net exports will fuel further expansion of our economy. There are many factors, however, working against trade improvement of this magnitude, making it unlikely that the expectations of the more optimistic of these forecasters will be met. Read More

  • International Developments and Monetary Policy


    W. Lee Hoskins

    Abstract

    Policy choices we make today can strongly influence the process by which trade imbalances will adjust. The most desirable path for reforming our international accounts and for creating a healthy economic environment requires the use of monetary policy to promote price stability in the United States and abroad. Read More

  • Federal Budget Deficits: Sources and Forecasts


    John Erceg Theodore Bernard

    Abstract

    Despite a two-year deficit reduction plan, government projections for the five-year federal budget outlook still show large deficits. Additional legislative actions will be necessary if federal budget deficits are to be reduced sufficiently to meet annual deficit targets. Read More

  • The Bank Credit-Card Boom: Some Explanations and Consequences


    Paul Watro

    Abstract

    What is behind the surge in credit card lending and the sharp rise in credit-card charge-off rates at banks? Factors related to risk-taking help explain why some banks have higher charge-off rates than others. Read More

  • Bank Runs, Deposit Insurance, and Bank Regulation, Part II


    Charles T. Carlstrom

    Abstract

    Part I of this article, presented in the February 1 Economic Commentary, described some of the costs and benefits of providing federal deposit insurance. The major benefit of providing deposit insurance is the prevention of contagious bank runs-a bank failure that spreads to solvent banks. Part II, presented here, discusses why bank runs may be contagious and examines some of the ways in which private clearinghouses protected against widespread bank failures. The article concludes that federally provided deposit insurance may not be necessary in order to protect against such bank runs. Read More

  • Bank Runs, Deposit Insurance, and Bank Regulation, Part I


    Charles T. Carlstrom

    Abstract

    Widespread bank failures are often thought to be a possible consequence of a banking system without federal deposit insurance. This article considers whether federal deposit insurance is necessary to prevent bank runs. Part I describes some of the costs of providing deposit insurance and then introduces its justification and benefits. Part II, presented in the upcoming February 15 Economic Commentary, concludes with an examination of contagious bank runs and a discussion of how the market handled banking panics prior to the Federal Reserve System and the Federal Deposit Insurance Corporation. Read More

  • Public Infrastructure and Economic Development


    Douglas Dalenberg Randall Eberts

    Abstract

    Public infrastructure deterioration has an important effect on urban economic development. Many cities with an aging industrial base are caught between the need to maintain or improve public capital stock and the immediate demand for community welfare programs. Neglecting public infrastructure may make it more difficult for these cities to achieve future economic growth. Read More

  • Has Manufacturing's Presence in the Economy Diminished?


    Randall Eberts John Swinton

    Abstract

    Much has been written and said about the "decline" of manufacturing in America. The arguments pro and con, however, have centered on a simplistic view of manufacturing's role in the economy. Even though its share of employment has fallen, for example, manufacturing still maintains its strength through its linkages with the rest of the economy. Read More