In a series of speeches, Federal Reserve Governor Jeremy Stein emphasized the importance of financial stability concerns in monetary policy-making. But how does one measure whether threats to financial stability are lurking? Put differently, can we know that there is a credit bubble about to burst? In his speeches, Stein cites the work of two Harvard Business School …
New housing starts for March are out today. Rather than focus on the short-term movements, it’s worth looking at the long run. Here is the graph from calculatedriskblog.com: It’s really quite an amazing graph. We are now five full years from the end of the recession (if you buy NBER dating). And housing starts are still …
Chicago Fed President Charles Evans noted last week that “the U.S. consumer is slowly improving but is just a shadow of its former self.” We couldn’t have said it better. Retail sales for March is out this morning, and we thought it would be a good time to examine why household spending has been so weak using data that …
Imagine we dropped cash on every household in the country. Who would spend it? Who would save money? The answer to this question matters a great deal given the rise in inequality before the Great Recession. It also matters because the economy is likely to be demand-constrained during severe downturns, especially if the economy hits the zero-lower …
What are the determinants of inequality? The first step in answering this question is defining exactly what we mean by inequality. A working paper by Chetty, Hendren, Kline, and Saez takes an interesting approach: it measures inequality based on the likelihood that a child born into a poor family will rise in the overall income distribution. They …
Actions by the Federal Reserve are having strong effects on the price of stocks, bonds, and other financial assets in the economy. You can see this effect clearly on Fed meeting days, which are associated with large market movements. A question we tackled in an earlier post was: what assets bear the most risk of surprise Fed …
Excessive household debt was crucial in explaining the severity of the Great Recession. So where are we now? Have households strengthened their financial position since 2009? Are household balance sheets strong enough to prevent another massive pull back in spending if there are significant job losses? To answer to these questions, we look at evidence from the 2012 …
“I asked Mr. Summers what was behind secular stagnation, and he said he was still thinking through all of its causes. But globalization, automation, income inequality and changes in corporate finance might be important factors, he said. Income is now more concentrated in the hands of the rich. Those well-off households tend to save and …
Lenders are showing an increasing willingness to take risk, especially over the last two years. One measure of risk tolerance that economists typically track in corporate bond markets is the credit spread–the difference between interest rates for risky debt versus safe debt. But for the household sector, it is much more informative to track the quantity of …
We are in our fourth week of blogging, and so far it has been a lot of fun! And a lot of work … we are learning new appreciation for people who do this for a living. We thought it would be a good time to share some links and thoughts in response to comments …
