Month: March 2014

Measuring Wealth Inequality

The sharp rise in income inequality in the United States is well-established. But what about wealth inequality? Income represents the flow of cash that a household earns every year, whereas wealth is the total stock of assets that a household owns, either through accumulation or inheritance. Wealth is as important as income for thinking about overall well-being. For …

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Monetary Policy And Secular Stagnation

The Federal Reserve directly controls the short-term interest rate. But what it really tries to target is inflation and its expectations. The Fed’s goal is to achieve the target of 2% inflation in the long-term, and its preferred price index is the core personal consumption expenditure price index that excludes the volatile food and energy …

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Why the Income Distribution Matters for Macroeconomics

A central argument we have made on this blog and in our book is that the distribution of income/wealth matters a great deal for thinking about the macro-economy. Convincing some of this fact is not easy — many continue to work within a modeling framework in which all distributional considerations are assumed away, the so-called “representative-agent” framework. Perhaps the …

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Secular Stagnation and Wealth Inequality

Alvin Hansen introduced the notion of “secular stagnation” in the 1930s. Hansen’s hypothesis has been brought back to life by Larry Summers in his November 2013 secular stagnation speech. The speech generated a huge amount of discussion, and for good reason. Summers’ provocative hypothesis is that the Great Recession was symptomatic of a longer-term problem: persistently inadequate demand that is evidenced by low …

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