Effective Policy Communication: Targets versus Instruments
In recent decades, and especially since the Great Recession, interest rates have remained very low, meaning that central banks have had to devise new ways to invigorate the economy in times of recession. In some cases, like quantitative easing, whereby central banks purchase long-term securities in the open market to increase the money supply and encourage lending and investment, these new tools are deemed unconventional.
Topics: Monetary Policy
Fifty Shades of QE: Conflicts of Interest in Economic Research
In response to the COVID-19 pandemic, the Federal Reserve dusted off one of its unconventional monetary policy tools from the Great Recession—quantitative easing, or QE. This practice, whereby the Fed purchases long-term securities in the open market, is meant to increase the money supply and, thus, encourage lending and investment. The Fed originally introduced this program in 2009 when interest rates were near zero, thus rendering traditional monetary policy ineffective and limiting the Fed’s ability to address the economic slump.
The Allocation of Talent and US Economic Growth
Imagine falling sick in a world where half or more of all the good doctors were intentionally kept out of the profession. How confident would you be in the care you received? Or imagine that you needed a lawyer to get you out of a tight legal jam, yet roughly half of the brightest legal minds were intentionally unavailable?
Topics: Employment & Wages
The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the US
The COVID-19 pandemic has fueled a global health and economic crisis of unprecedented severity. Six months into the pandemic, the death toll in the US is approaching 200,000 and, despite massive fiscal stimulus, the country faces its deepest economic contraction in modern history. Since person-to-person contact is essential for a substantial fraction of the US economy to function, and since such close contact allows the virus to spread easily, both fatalities and economic losses are unavoidable.
Trade and Domestic Production Networks
When most people think about international trade, they likely imagine large companies trading goods back and forth among many countries, and they likely picture rows and rows of colorful intermodal containers stacked on huge transport ships.
Political Scandal: A Theory
Imagine a scenario where Politician A is reported to have said something politically damaging in a closed-door meeting. However, the news of this indiscretion is reported by members of the opposition party, with the members of Politician A’s party vehemently denying the accusation. Who would you believe? Would you lose faith in the politician, or would you blame extreme polarization for the political theater that you just witnessed?
Age of Marriage, Weather Shocks, and the Direction of Marriage Payments
Imagine that you are a parent of a young daughter in a country that provides a dowry to the groom’s family when your daughter is married. On the one hand, you want your daughter to marry and are willing to pay a dowry to ensure that she joins a good family. On the other hand, your resources are limited and you can only afford to contribute so much to a dowry.
Forward Guidance and Household Expectations • Gender Roles and the Gender Expectations Gap
Policymakers make economic policies based, in part, on their assumptions about how households and businesses will react to a given change in policy. This is especially true of monetary policy, where central banks work to set interest rates that both encourage or discourage economic activity, while keeping inflation at bay.
Topics: Monetary Policy