By the numbers: Data and measurement in community economic development

In a speech to the Greenlining Institute, Federal Reserve Board Chairman Ben S. Bernanke speaks to the need for developing and analyzing social and economic data at the local level to do the following: uncover new investment opportunities; provide transparency and promote good governance and sound public policies; and promote independent policy research.

Housing, housing finance, and monetary policy: a symposium sponsored by the Federal Reserve Bank of Kansas City: opening remarks

Housing ; Housing - Prices ; Business cycles ; Monetary policy

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

The Macroeconomics of the Great Depression: A Comparative Approach

Recently, research on the causes of the Great Depression has shifted from a heavy emphasis on events in the United States to a broader, more comparative approach that examines the interwar experiences of many countries simultaneously. In this lecture I survey the current state of our knowledge about the Depression from a comparative perspective. On the aggregate demand side of the economy, comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the Depression; an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one Nash equilibrium to another. On the aggregate supply side, comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects. Still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment.

Adjustment Costs, Durables, and Aggregate Consumption

Previous tests of the permanent income hypothesis (PIH) have focused on either nondurables or durables expenditures in isolation. This paper studies consumer purchases of nondurables and durables as the outcome of a single optimization problem.It is shown that the presence of adjustment costs of changing durables stocks may substantially affect the time series properties of both components of expenditure under the PIH.However, econometric tests based on this model do not contradict earlier rejections of the PIH in aggregate quarterly data.

Irreversibility, Uncertainty, and Cyclical Investment

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of information gained by waiting. Uncertainty, because it increases the value of waiting for new information, retards the current rate of investment. The nature of investor's optimal reactions to events whose implications are resolved over time is a possible explanation of the instability of aggregate investment over the business cycle.

The Credit Crunch

macroeconomics, credit crunch

Permanent Income, Liquidity, and Expenditure on Automobiles: Evidence from Panel Data

Several recent papers have tested the permanent income-cum- rational expectations hypothesis using data on nondurable or semi-durable consumption. We show how this approach can be extended to the case of durables. An application to panel data on automobile expenditures reveals no evidence against the permanent income hypothesis. This result is unchanged in subsamples segregated by family holdings of liquid assets.

Measuring Monetary Policy

Extending the approach of Bernanke and Blinder (1992), Strongin (1992), and Christiano, Eichenbaum, and Evans (1994a, 1994b), we develop and apply a VAR-based methodology for measuring the stance of monetary policy. More specifically, we develop a 'semi-structural' VAR approach, which extracts information about monetary policy from data on bank reserves and the federal funds rate but leaves the relationships among the macroeconomic variables in the system unrestricted. The methodology nests earlier VAR-based measures and can be used to compare and evaluate these indicators. It can also be used to construct measures of the stance of policy that optimally incorporate estimates of the Fed's operating procedure for any given period. Among existing approaches, we find that innovations to the federal funds rate (Bernanke-Blinder) are a good measure of policy innovations during the periods 1965-79 and 1988-94; for the period 1979-94 as a whole, innovations to the component of nonborrowed reserves that is orthogonal to total reserves (Strongin) seems to be the best choice. We develop a new measure of policy stance that conforms well to qualitative indicators of policy such as the Boschen- Mills (1991) index. Innovations to our measure lead to reasonable and precisely estimated dynamic responses by variables such as real GDP and the GDP deflator.