Filippo's primary areas of interest are macroeconomics and financial stability. His recent research has focused on macroprudential policy, financial crises, and macroeconomic effects of financial distortions.
Three and a half years after the beginning of the recession, real GDP is still below its pre-recession peak. One reason is that firms’ investment (private nonresidential fixed investment) has not recovered. Currently, it is down 12 percent relative to its level at the start of the recession. While investment in equipment and software has bounced back and is now at pre-crisis levels, investment in nonresidential structures remains depressed. (Click here for more about investment in structures.) This behavior is unusual compared to past business cycles, when investment returned to its pre-recession peak level much more rapidly. Even during the 1973-1975 and 2001 cycles, in which investment remained depressed for years, it was much closer to its pre-recession peak by this point in the recovery.
Whatever is hindering the capital spending of firms, it is not likely to be the financial conditions in which they are operating. After weakening during the financial crisis, corporate balance sheets have since strengthened. Firms are holding relatively high levels of liquid assets. Profits and cash flows have been growing rapidly, driven by high productivity and low labor costs, and are now at record-high levels. External finance conditions continue to be favorable: Firms have been able to issue bonds and raise external funds at attractive, low bond yields.
Why then are firms still reluctant to invest? And why are they shying away from long-lived assets in particular? The most important factor is the large overhang of unused and underutilized structures and the excess capacity present in the economy. During the years before the crisis, high real estate prices encouraged households and firms to overinvest in structures. This generated an overhang of structures, which is now weighing on current real estate prices and investment. Also, with so much capital installed, capacity utilization rates are relatively low, below 80 percent, and there is little incentive to add to capacity. (Click here for more about structural overhang and capacity utilization.)
This Economic Commentary studies the behavior of colleges when they are asked to list a set of comparison group
colleges in annual data reporting for the US Department of Education but are given little direction on how to do so. I find that, relative to themselves, colleges tend to list for comparison colleges that are more selective, are larger, and have better resources. One possible interpretation of these findings is that colleges overestimate where they stand relative to others, although an alternative interpretation is that colleges have accurate views but list comparison institutions based on aspirations.
Most studies of the persistent gap in wealth between whites and blacks have investigated the large gap in income earned by the two groups. Those studies generally concluded that the wealth gap was “too big” to be explained by differences in income. We study the issue using a different approach, capturing the dynamics of wealth accumulation over time. We find that the income gap is the primary driver behind the wealth gap and that it is large enough to explain the persistent difference in wealth accumulation. The key policy implication of our work is that policies designed to speed the closing of the racial wealth gap would do well to focus on closing the racial income gap.
Though the need to remediate lead seems to be a public health issue with a housing-based solution, the impacts of this crisis are far-reaching. Lead poisoning impacts all of us. The more people and organizations see themselves as part of the solution, the more likely we’ll find success.
The economic conference will provide researchers from academia and central banks an opportunity to exchange new ideas on modeling inflation and inflation expectations and their relationship to the macroeconomy.