year and a half after the COVID-19 recession, one of the sharpest economic contractions in history, the U.S. economy has rebounded rapidly and now seems to be overheated. Inflation is at its highest level in 30 years, and supply chains are strained: Shipping costs and delivery lags are increasing substantially, inventories are running down, and firms are finding it difficult to get key production inputs. However, there is no consensus on the extent to which disrupted supply chains account for recent increases in inflation relative to other channels. In particular, the bold fiscal response to the pandemic, along with the increased wealth due to the stock market and housing boom, have boosted demand for goods and services. Along with unprece dented labor market shortages, these forces can increase inflation even with well-oiled supply chains. Supply chain issues can exacerbate price increases: Even industries without large changes in demand might be forced to reduce supply and increase prices in response to shortages of key inputs. This essay discusses the extent to which supply chain disruptions account for the recent rise in inflation. We focus on the case of semiconductors, for which demand increased along with the pandemic-driven demand for electronics. The following features of the semiconductor industry make it an important case for investigating the role of supply chains in inflation: (i) Semiconductors, including microchips, are used in a wide range of goods, from computers to toys and automobiles, among many others.1 According to our calculations, approximately 25 percent of 226 manufacturing sectors use semiconductors as a direct input, and these industries account for 39 percent of total manufacturing output.2 (ii) Semiconductors are a key component for production in many sectors. Even though semiconductors typically account for only a small fraction of total input costs, scarcity of semiconductors can halt production of any good needing them because semiconductors have no close substitutes and production capacity is extremely Supply Chain Bottlenecks and Inflation: The Role of Semiconductors
{"title":"Supply Chain Bottlenecks and Inflation: The Role of Semiconductors","authors":"Fernando Leibovici, Jason Dunn","doi":"10.20955/es.2021.28","DOIUrl":"https://doi.org/10.20955/es.2021.28","url":null,"abstract":"year and a half after the COVID-19 recession, one of the sharpest economic contractions in history, the U.S. economy has rebounded rapidly and now seems to be overheated. Inflation is at its highest level in 30 years, and supply chains are strained: Shipping costs and delivery lags are increasing substantially, inventories are running down, and firms are finding it difficult to get key production inputs. However, there is no consensus on the extent to which disrupted supply chains account for recent increases in inflation relative to other channels. In particular, the bold fiscal response to the pandemic, along with the increased wealth due to the stock market and housing boom, have boosted demand for goods and services. Along with unprece dented labor market shortages, these forces can increase inflation even with well-oiled supply chains. Supply chain issues can exacerbate price increases: Even industries without large changes in demand might be forced to reduce supply and increase prices in response to shortages of key inputs. This essay discusses the extent to which supply chain disruptions account for the recent rise in inflation. We focus on the case of semiconductors, for which demand increased along with the pandemic-driven demand for electronics. The following features of the semiconductor industry make it an important case for investigating the role of supply chains in inflation: (i) Semiconductors, including microchips, are used in a wide range of goods, from computers to toys and automobiles, among many others.1 According to our calculations, approximately 25 percent of 226 manufacturing sectors use semiconductors as a direct input, and these industries account for 39 percent of total manufacturing output.2 (ii) Semiconductors are a key component for production in many sectors. Even though semiconductors typically account for only a small fraction of total input costs, scarcity of semiconductors can halt production of any good needing them because semiconductors have no close substitutes and production capacity is extremely Supply Chain Bottlenecks and Inflation: The Role of Semiconductors","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"13 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83426825","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
is the difference between the yields on constantmaturity nominal Treasury securities and Treasury Inflation-Protected Securities (TIPS). Payments on nominal securities are fixed. That is, they are not adjusted for inflation. Payments on TIPS are adjusted for inflation—specifically, changes in the consumer price index (CPI).1 This difference between nominal and inflation-adjusted (real) Treasury yields is sometimes called the breakeven inflation rate (BEI) because, if actual inflation comes in at the BEI rate, then holders of nominal and real Treasury bonds will get the same return. Because the BEI rate provides the same return and, thus, a risk-neutral investor would be indifferent between holding the two types of bonds, BEI is considered a forecast of future inflation. This easy-to-measure gauge of the Treasury market’s expectation for average inflation (over a given horizon) has been a boon to economists and policymakers since it was first introduced in the United States in the late 1990s.2 The figure shows the yields on nominal and real 5-year Treasury securities and the difference between those yields: that is, the five-year BEI that measures the bond market’s expectation of average inflation over the next five years. The vertical line marks March 13, the Friday before the FOMC meeting announcement on Sunday, March 15, 2020. Measuring Market-Based Inflation Expectations
{"title":"Measuring Market-Based Inflation Expectations","authors":"Kevin L. Kliesen","doi":"10.20955/ES.2021.6","DOIUrl":"https://doi.org/10.20955/ES.2021.6","url":null,"abstract":"is the difference between the yields on constantmaturity nominal Treasury securities and Treasury Inflation-Protected Securities (TIPS). Payments on nominal securities are fixed. That is, they are not adjusted for inflation. Payments on TIPS are adjusted for inflation—specifically, changes in the consumer price index (CPI).1 This difference between nominal and inflation-adjusted (real) Treasury yields is sometimes called the breakeven inflation rate (BEI) because, if actual inflation comes in at the BEI rate, then holders of nominal and real Treasury bonds will get the same return. Because the BEI rate provides the same return and, thus, a risk-neutral investor would be indifferent between holding the two types of bonds, BEI is considered a forecast of future inflation. This easy-to-measure gauge of the Treasury market’s expectation for average inflation (over a given horizon) has been a boon to economists and policymakers since it was first introduced in the United States in the late 1990s.2 The figure shows the yields on nominal and real 5-year Treasury securities and the difference between those yields: that is, the five-year BEI that measures the bond market’s expectation of average inflation over the next five years. The vertical line marks March 13, the Friday before the FOMC meeting announcement on Sunday, March 15, 2020. Measuring Market-Based Inflation Expectations","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89457285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Childhood Income Volatility","authors":"Hannah Rubinton, M. Isaacson","doi":"10.20955/ES.2021.8","DOIUrl":"https://doi.org/10.20955/ES.2021.8","url":null,"abstract":"","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89745512","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Rise of Asia as a Destination for U.S. Patenting","authors":"Ana Maria Santacreu, J. LaBelle","doi":"10.20955/es.2021.27","DOIUrl":"https://doi.org/10.20955/es.2021.27","url":null,"abstract":"","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88594595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
either implicitly or explicitly had an annual inflation target (IT) of around 2 percent. The Federal Reserve Open Market Committee’s (FOMC’s) preferred inflation measure to meet this target is core personal consumption expenditures (PCE), which explicitly excludes the prices on food and fuel to mitigate short-term volatility in the index. There has been a debate about using the core measure of inflation instead of the headline measure, which includes all PCE categories,1 but for the purpose of this analysis we focus primarily on the core measure. In addition to its target inflation rate, the Fed seeks to achieve “full employment” or the lowest level of unemployment possible. The combination of its inflation and employment mandates is known as the Fed’s “dual mandate.” In August 2020 at the Jackson Hole conference, Fed Chair Jerome Powell announced a revision to the Fed’s A Simple Evaluation of Two Decades of Inflation Targeting: Lessons for the New Monetary Policy Strategy
{"title":"A Simple Evaluation of Two Decades of Inflation Targeting: Lessons for the New Monetary Policy Strategy","authors":"Matthew Famiglietti, Carlos Garriga","doi":"10.20955/ES.2021.1","DOIUrl":"https://doi.org/10.20955/ES.2021.1","url":null,"abstract":"either implicitly or explicitly had an annual inflation target (IT) of around 2 percent. The Federal Reserve Open Market Committee’s (FOMC’s) preferred inflation measure to meet this target is core personal consumption expenditures (PCE), which explicitly excludes the prices on food and fuel to mitigate short-term volatility in the index. There has been a debate about using the core measure of inflation instead of the headline measure, which includes all PCE categories,1 but for the purpose of this analysis we focus primarily on the core measure. In addition to its target inflation rate, the Fed seeks to achieve “full employment” or the lowest level of unemployment possible. The combination of its inflation and employment mandates is known as the Fed’s “dual mandate.” In August 2020 at the Jackson Hole conference, Fed Chair Jerome Powell announced a revision to the Fed’s A Simple Evaluation of Two Decades of Inflation Targeting: Lessons for the New Monetary Policy Strategy","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77129858","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
have surged—some, like steel and lumber, to recordhigh levels. The figure shows 12-month percent changes in four well-known commodity price indexes. Although down from their peaks earlier this year, the average of the four indexes through August is up by about 38 percent from a year earlier. The linkage between commodity price changes and the changes in prices that consumers pay for goods and services is intuitive: If the price of steel increases, consumers will pay more for durable goods such as motor vehicles and appliances, which will tend to lift the measure of inflation that the Fed targets (the personal consumption expenditures price index, or PCEPI). So, perhaps not surprisingly, the surge in commodity prices has occurred in tandem with higher consumer price inflation. In July, the PCEPI rose 4.2 percent from 12 months earlier, which was the largest 12-month increase since January 1991. However, as many Federal Reserve officials have stressed, higher inflation this year also reflects other factors generally not related to rising commodity prices.1 In particular, the challenges stemming from the pandemic appear to be key factors. The pandemic was a global event that triggered The Link Between Higher Commodity Prices and Inflation
{"title":"The Link Between Higher Commodity Prices and Inflation","authors":"Kevin L. Kliesen","doi":"10.20955/es.2021.22","DOIUrl":"https://doi.org/10.20955/es.2021.22","url":null,"abstract":"have surged—some, like steel and lumber, to recordhigh levels. The figure shows 12-month percent changes in four well-known commodity price indexes. Although down from their peaks earlier this year, the average of the four indexes through August is up by about 38 percent from a year earlier. The linkage between commodity price changes and the changes in prices that consumers pay for goods and services is intuitive: If the price of steel increases, consumers will pay more for durable goods such as motor vehicles and appliances, which will tend to lift the measure of inflation that the Fed targets (the personal consumption expenditures price index, or PCEPI). So, perhaps not surprisingly, the surge in commodity prices has occurred in tandem with higher consumer price inflation. In July, the PCEPI rose 4.2 percent from 12 months earlier, which was the largest 12-month increase since January 1991. However, as many Federal Reserve officials have stressed, higher inflation this year also reflects other factors generally not related to rising commodity prices.1 In particular, the challenges stemming from the pandemic appear to be key factors. The pandemic was a global event that triggered The Link Between Higher Commodity Prices and Inflation","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"44 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86823308","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
labor market as they cycle through various jobs and weather unemployment spells. What systematic patterns in employment histories do we see in U.S. data? Our recent paper (Gregory, Menzio, and Wiczer, 2021) documents the existence of several types of workers who are differently affected by job loss and by the onset of a recession.1 Classifying workers in this way can help resolve several puzzles in economics related to labor market dynamics. We use data from the Census Bureau’s Longitudinal Employer-Household Dynamics program to classify workers by their labor market histories. This dataset consists of a random sample of employment records from 1997 to 2014 Classifying Worker Types in the U.S. Labor Market
劳动力市场，因为他们在不同的工作岗位上循环，经受住了失业的考验。我们在美国的就业数据中看到了什么样的系统性模式?我们最近的论文(Gregory, Menzio, and Wiczer, 2021)记录了几种类型的工人的存在，他们受到失业和经济衰退的不同影响以这种方式对工人进行分类可以帮助解决与劳动力市场动态相关的几个经济学难题。我们使用来自人口普查局的纵向雇主-家庭动态计划的数据，根据劳动力市场历史对工人进行分类。本数据集由1997年至2014年美国劳动力市场分类工人类型的就业记录随机样本组成
{"title":"Classifying Worker Types in the U.S. Labor Market","authors":"Victoria Gregory, G. Menzio, David Wiczer","doi":"10.20955/ES.2021.10","DOIUrl":"https://doi.org/10.20955/ES.2021.10","url":null,"abstract":"labor market as they cycle through various jobs and weather unemployment spells. What systematic patterns in employment histories do we see in U.S. data? Our recent paper (Gregory, Menzio, and Wiczer, 2021) documents the existence of several types of workers who are differently affected by job loss and by the onset of a recession.1 Classifying workers in this way can help resolve several puzzles in economics related to labor market dynamics. We use data from the Census Bureau’s Longitudinal Employer-Household Dynamics program to classify workers by their labor market histories. This dataset consists of a random sample of employment records from 1997 to 2014 Classifying Worker Types in the U.S. Labor Market","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"27 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85224214","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Two Percent Inflation Over the Next Year: Should You Take the Over or the Under?","authors":"Kevin L. Kliesen","doi":"10.20955/ES.2021.11","DOIUrl":"https://doi.org/10.20955/ES.2021.11","url":null,"abstract":"","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76729809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
a domestic event, fomented by domestic factors and/or policies, such as money creation. There is some truth to this in extreme cases. For example, essentially all hyper inflations—monthly inflation greater than 40 percent— result from uncontrolled domestic fiscal deficits that are financed by domestic money creation and followed by a selfreinforcing cycle of price rises and increases in the velocity of money. At lesspathological rates of inflation, domestic policies, especially those of central banks, are still important. Even central banks of small, open economies can approximately determine average levels of inflation over periods of at least several years.
{"title":"International Inflation Trends","authors":"Christopher J. Neely","doi":"10.20955/ES.2021.9","DOIUrl":"https://doi.org/10.20955/ES.2021.9","url":null,"abstract":"a domestic event, fomented by domestic factors and/or policies, such as money creation. There is some truth to this in extreme cases. For example, essentially all hyper inflations—monthly inflation greater than 40 percent— result from uncontrolled domestic fiscal deficits that are financed by domestic money creation and followed by a selfreinforcing cycle of price rises and increases in the velocity of money. At lesspathological rates of inflation, domestic policies, especially those of central banks, are still important. Even central banks of small, open economies can approximately determine average levels of inflation over periods of at least several years.","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"37 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74190028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"COVID-19: Scarring Body and Mind","authors":"J. Kozlowski","doi":"10.20955/es.2020.43","DOIUrl":"https://doi.org/10.20955/es.2020.43","url":null,"abstract":"\"Belief scarring\" from the COVID-19 pandemic may generate prolonged effects on the economy—with economic costs greater than the drop in GDP in 2020.","PeriodicalId":11402,"journal":{"name":"Economic Synopses","volume":"9 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-12-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80950206","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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