Pub Date : 2022-09-01DOI: 10.1353/eca.2022.a901277
J. Parker, J. Schild, Laura Erhard, David Johnson
ABSTRACT:Households spent only a small fraction of their 2020 Economic Impact Payments (EIPs) within a month or two of arrival, consistent with pandemic constraints on spending, other pandemic programs and social insurance, and the broader disbursement of the EIPs compared to the economic losses during the early stages of the pandemic. While these EIPs did not fill an urgent economic need for most households, the first round of EIPs did provide timely pandemic insurance to some households that were more exposed to the economic losses from the pandemic. Households with lower liquid wealth entering the pandemic and those less able to earn while working from home raised consumption more following receipt of their EIP. While our measurement for later EIPs is not as reliable, our estimates suggest even less spending on average to the second and third rounds of EIPs. Our point estimates imply less short-term spending on average than in response to economic stimulus payments in 2001 or 2008. While our analysis lacks the power to measure longer-term spending effects, the lack of short-term spending contributed to strong household balance sheets as the direct economic effects of the pandemic on households waned.
{"title":"Economic Impact Payments and Household Spending during the Pandemic","authors":"J. Parker, J. Schild, Laura Erhard, David Johnson","doi":"10.1353/eca.2022.a901277","DOIUrl":"https://doi.org/10.1353/eca.2022.a901277","url":null,"abstract":"ABSTRACT:Households spent only a small fraction of their 2020 Economic Impact Payments (EIPs) within a month or two of arrival, consistent with pandemic constraints on spending, other pandemic programs and social insurance, and the broader disbursement of the EIPs compared to the economic losses during the early stages of the pandemic. While these EIPs did not fill an urgent economic need for most households, the first round of EIPs did provide timely pandemic insurance to some households that were more exposed to the economic losses from the pandemic. Households with lower liquid wealth entering the pandemic and those less able to earn while working from home raised consumption more following receipt of their EIP. While our measurement for later EIPs is not as reliable, our estimates suggest even less spending on average to the second and third rounds of EIPs. Our point estimates imply less short-term spending on average than in response to economic stimulus payments in 2001 or 2008. While our analysis lacks the power to measure longer-term spending effects, the lack of short-term spending contributed to strong household balance sheets as the direct economic effects of the pandemic on households waned.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"176 1","pages":"156 - 81"},"PeriodicalIF":5.9,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85000804","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-01DOI: 10.1353/eca.2022.a901798
Karen E. Dynan, M. Rognlie
{"title":"Comment and Discussion","authors":"Karen E. Dynan, M. Rognlie","doi":"10.1353/eca.2022.a901798","DOIUrl":"https://doi.org/10.1353/eca.2022.a901798","url":null,"abstract":"","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"18 1","pages":"131 - 156"},"PeriodicalIF":5.9,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85599482","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-01DOI: 10.1353/eca.2022.a901802
Sydney C. Ludvigson
ABSTRACT:This paper focuses on interpreting the stock market's reactions to Federal Reserve announcements about its balance sheet normalization plans, applying the methodology developed with Francesco Bianchi and Sai Ma. The results indicate that the stock market declines after announcements, suggesting perceived inflexibility in statements about balance sheet normalization, but many of the large reactions to these announcements can be ascribed to forces that move the stock market but not the broader economy.
{"title":"Market Reactions to the Federal Reserve's Balance Sheet Normalization Plans","authors":"Sydney C. Ludvigson","doi":"10.1353/eca.2022.a901802","DOIUrl":"https://doi.org/10.1353/eca.2022.a901802","url":null,"abstract":"ABSTRACT:This paper focuses on interpreting the stock market's reactions to Federal Reserve announcements about its balance sheet normalization plans, applying the methodology developed with Francesco Bianchi and Sai Ma. The results indicate that the stock market declines after announcements, suggesting perceived inflexibility in statements about balance sheet normalization, but many of the large reactions to these announcements can be ascribed to forces that move the stock market but not the broader economy.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"22 1","pages":"243 - 258"},"PeriodicalIF":5.9,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73732176","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-01DOI: 10.1353/eca.2022.a901801
A. Krishnamurthy
ABSTRACT:I review lessons from the research on central bank actions over the last decade and draw out implications for expanding the Federal Reserve balance sheet (quantitative easing) and shrinking the balance sheet (quantitative tightening). As I outline, there is already enough evidence in the research to indicate the manner in which the Federal Reserve could update its policy normalization principles and plans.
{"title":"Lessons for Policy from Research","authors":"A. Krishnamurthy","doi":"10.1353/eca.2022.a901801","DOIUrl":"https://doi.org/10.1353/eca.2022.a901801","url":null,"abstract":"ABSTRACT:I review lessons from the research on central bank actions over the last decade and draw out implications for expanding the Federal Reserve balance sheet (quantitative easing) and shrinking the balance sheet (quantitative tightening). As I outline, there is already enough evidence in the research to indicate the manner in which the Federal Reserve could update its policy normalization principles and plans.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"57 1","pages":"231 - 280"},"PeriodicalIF":5.9,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90862625","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-01DOI: 10.1353/eca.2022.a901803
Jonathan H. Wright
ABSTRACT:This paper discusses the process of balance sheet shrinkage that the Federal Reserve is currently undertaking. I argue that the overall balance sheet is unlikely to shrink by much and that it will remain a much larger share of nominal GDP than it was before the COVID-19 pandemic. I examine the effects of balance sheet shrinkage on asset prices, taking the perspective that these effects are mostly likely to be narrow, that is, specific to the price of the asset that the market has to absorb rather than spilling over to fixed income prices more generally. I argue that the effects of reducing the Fed's holdings of Treasuries can be thought of as equivalent to the Treasury increasing the amount and maturity of its issuance. I estimate that this will have very small effects on term premia and bond yields. The reduction of the Fed's holdings of mortgage-backed securities might have larger effects on the yields of these securities, especially if the Fed starts selling these securities. Any substantive macroeconomic effect of balance sheet runoff is likely to operate through mortgage rates and the housing market.
{"title":"The Extent and Consequences of Federal Reserve Balance Sheet Shrinkage","authors":"Jonathan H. Wright","doi":"10.1353/eca.2022.a901803","DOIUrl":"https://doi.org/10.1353/eca.2022.a901803","url":null,"abstract":"ABSTRACT:This paper discusses the process of balance sheet shrinkage that the Federal Reserve is currently undertaking. I argue that the overall balance sheet is unlikely to shrink by much and that it will remain a much larger share of nominal GDP than it was before the COVID-19 pandemic. I examine the effects of balance sheet shrinkage on asset prices, taking the perspective that these effects are mostly likely to be narrow, that is, specific to the price of the asset that the market has to absorb rather than spilling over to fixed income prices more generally. I argue that the effects of reducing the Fed's holdings of Treasuries can be thought of as equivalent to the Treasury increasing the amount and maturity of its issuance. I estimate that this will have very small effects on term premia and bond yields. The reduction of the Fed's holdings of mortgage-backed securities might have larger effects on the yields of these securities, especially if the Fed starts selling these securities. Any substantive macroeconomic effect of balance sheet runoff is likely to operate through mortgage rates and the housing market.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"125 1","pages":"259 - 275"},"PeriodicalIF":5.9,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73115557","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comments and Discussion","authors":"N. Fortin, Erik Hurst","doi":"10.1353/eca.2022.0007","DOIUrl":"https://doi.org/10.1353/eca.2022.0007","url":null,"abstract":"","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"2 1","pages":"112 - 139"},"PeriodicalIF":5.9,"publicationDate":"2022-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79020197","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:Inflation has an anchor in people's expectations of what its longrun value will be. If expectations persistently change, then the anchor is adrift; if they differ from the central bank's target, the anchor is lost. This paper uses data on expectations from market prices, from professional surveys, and from the cross-sectional distribution of household surveys to measure shifts in this anchor. The paper's main application is to the Great Inflation in the United States. The data suggest that the anchor started drifting as early as 1967 and that this could have been spotted well before policymakers noticed it. Other applications using expectations data from Brazil, Turkey, South Africa, the United States in the 1970s, and the United States in 2021 confirm the data's usefulness to measure the inflation anchor in real time.
{"title":"Losing the Inflation Anchor","authors":"R. Reis","doi":"10.1353/eca.2022.0004","DOIUrl":"https://doi.org/10.1353/eca.2022.0004","url":null,"abstract":"ABSTRACT:Inflation has an anchor in people's expectations of what its longrun value will be. If expectations persistently change, then the anchor is adrift; if they differ from the central bank's target, the anchor is lost. This paper uses data on expectations from market prices, from professional surveys, and from the cross-sectional distribution of household surveys to measure shifts in this anchor. The paper's main application is to the Great Inflation in the United States. The data suggest that the anchor started drifting as early as 1967 and that this could have been spotted well before policymakers noticed it. Other applications using expectations data from Brazil, Turkey, South Africa, the United States in the 1970s, and the United States in 2021 confirm the data's usefulness to measure the inflation anchor in real time.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"9 1","pages":"307 - 379"},"PeriodicalIF":5.9,"publicationDate":"2022-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78783490","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT:Investments in the green economy are used for both environmental goals and fiscal stimulus. The success of these investments depends, at least in part, on whether they create new jobs and whether such jobs are available to workers hurt by a green transition. We evaluate the employment effect of green investments from the American Recovery and Reinvestment Act (ARRA). Most job creation from green ARRA investments is permanent and emerged in the post-ARRA period, but the plausible range of estimates is extremely wide (zero to twenty-five jobs per $1 million). Such large uncertainty on aggregate effects masks substantial heterogeneity across communities. The green stimulus mostly benefited areas with a greater prevalence of preexisting green skills that created 40 percent additional jobs than average communities. New jobs are primarily manual labor and in occupations performing green tasks, especially in renewable energy. However, manual labor wages do not increase. Descriptive evidence suggests that the skill gap between green energy and fossil fuel workers is modest, but green jobs require significantly more training. Because the spatial distribution of skills and jobs matters, using green stimuli can help reshape the economy in the long run but may also exacerbate regional inequities associated with the green energy transition.
{"title":"The Employment Impact of a Green Fiscal Push: Evidence from the American Recovery and Reinvestment Act","authors":"D. Popp, F. Vona, Giovanni Marin, Ziqiao Chen","doi":"10.1353/eca.2022.0000","DOIUrl":"https://doi.org/10.1353/eca.2022.0000","url":null,"abstract":"ABSTRACT:Investments in the green economy are used for both environmental goals and fiscal stimulus. The success of these investments depends, at least in part, on whether they create new jobs and whether such jobs are available to workers hurt by a green transition. We evaluate the employment effect of green investments from the American Recovery and Reinvestment Act (ARRA). Most job creation from green ARRA investments is permanent and emerged in the post-ARRA period, but the plausible range of estimates is extremely wide (zero to twenty-five jobs per $1 million). Such large uncertainty on aggregate effects masks substantial heterogeneity across communities. The green stimulus mostly benefited areas with a greater prevalence of preexisting green skills that created 40 percent additional jobs than average communities. New jobs are primarily manual labor and in occupations performing green tasks, especially in renewable energy. However, manual labor wages do not increase. Descriptive evidence suggests that the skill gap between green energy and fossil fuel workers is modest, but green jobs require significantly more training. Because the spatial distribution of skills and jobs matters, using green stimuli can help reshape the economy in the long run but may also exacerbate regional inequities associated with the green energy transition.","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"126 4 1","pages":"1 - 69"},"PeriodicalIF":5.9,"publicationDate":"2022-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87459151","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comments and Discussion","authors":"M. Greenstone, Mar Reguant","doi":"10.1353/eca.2022.0010","DOIUrl":"https://doi.org/10.1353/eca.2022.0010","url":null,"abstract":"","PeriodicalId":51405,"journal":{"name":"Brookings Papers on Economic Activity","volume":"25 1","pages":"276 - 305"},"PeriodicalIF":5.9,"publicationDate":"2022-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85493538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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