By the numbers: data and measurement in community economic development

Highlights of a speech by Federal Reserve Chairman Ben S. Bernanke at the Greenlining Institute’s 13th Annual Economic Development Summit in Los Angeles, April 20, 2006.Community development

Panel discussion

"The Importance of Being Predictable" by John B. Taylor -- "Monetary Policy Under Uncertainty" by Ben S. Bernanke -- "The Importance of Being Predictable" by William PooleMonetary policy

Early education's big dividends: the better public investment

Public investments in projects like new stadiums never achieve returns equal to those from early childhood education—which several small studies have assessed at 7 percent to 20 percent. Now Minnesota is testing whether scaling up can produce the same results.Early childhood education ; Early childhood education - Minnesota

This is not your father's recession ... or is it?

The current declines in employment and income are consistent with what happened in previous recessions going back to 1969. Unique this time are the major drop in home prices and the proactive response by policymakers.Recessions

The financial crisis in S, M and L: three very different countries respond similarly

An examination of what Iceland, the United Kingdom and the United States went through last September and October during the financial crisis reveals some important differences and similarities.Financial crises

STOCK MARKET VALUATIONS AND FOREIGN DIRECT INVESTMENT

We outline and test two theories of foreign direct investment based on capital market mispricing. The “cheap assets” or “fire-sale” theory considers FDI inflows as the purchase of undervalued host country assets, while the “cheap financial capital” theory views FDI outflows as a natural use of the relatively low-cost capital available to overvalued firms in the source country. The results are consistent with the cheap financial capital theory: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source country valuations and negatively related to future source country stock returns, especially when capital account restrictions limit cross-country arbitrage

Expected Returns and Expected Dividend Growth

We investigate a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth are an important feature of the post-war U.S. stock market, despite the failure of the dividend-price ratio to uncover such variation. In addition, these dividend forecasts are found to covary with changing forecasts of excess stock returns. The variation in expected dividend growth we uncover is positively correlated with changing forecasts of excess returns and occurs at business cycle frequencies, those ranging from one to six years. This covariation is important because positively correlated fluctuations in expected dividend growth and expected returns have offsetting affects on the log dividend-price ratio. The results therefore imply that both the market risk-premium and expected dividend growth vary considerably more than what can be revealed using the log dividend-price ratio alone as a predictive variable

Asset Price Bubbles, Price Stability, and Monetary Policy: Japan' s Experience

Japan's economy has experienced an extremely large swing against the backdrop of the emergence, expansion, and bursting of asset price bubbles. When examining the emergence and bursting of the bubble economy from the viewpoint of monetary policy management, should the Bank of Japan have given more consideration to asset price fluctuations in formulating its monetary policy? Or, should the Bank not have been perplexed with asset price fluctuations and conducted policies focusing only on the general price level such as inflation targeting? In answering these questions and deciding policy actions, to what extent should the Bank consider financial system problems? This paper aims at forming some tentative answers to these questions.

Credit Channel without the LM Curve

This paper extends Bernanke and Blinder (1988)'s macroeconomic model of credit channel to an environment where the monetary authority has control over a short-term interest rate. The comparative statics regarding changes in the market interest rate, in the required reserve ratio over bank deposits, and in the risk of public bonds are highlighted.