Economic Letter

This Letter summarizes the papers and discussion at a conference that was held at the Federal Reserve Bank of San Francisco on March 1 under the joint sponsorship of the Bank and Stanford University’s Center for Economic Policy Research.

This Weekly Letter summarizes Twelfth District economic conditions as reported in the latest edition of the Federal Reserve Bank of San Francisco’s Western Economic Developments, which was authored by Robert Ingenito, Joe Mattey, and Rob Valletta.

This Weekly Letter is adapted from recent speeches given by Robert T. Parry, President and Chief Executive Officer of the Federal Reserve Bank of San Francisco.

The President and Congress are directly responsible for fiscal policy, but Congress has chosen (through the Federal Reserve Act) to delegate authority for monetary policy to the Federal Reserve System. Furthermore, it has granted the Federal Reserve a substantial degree of independence.

Has Job Security in the U.S. Declined? Yes, according to public perception and a number of articles in newspapers and business magazines.

Many countries in the world fix their exchange rate to that of another currency. In Africa, a number of countries have a currency in common the CFA Franc which they peg to the French franc; in Europe, the European Monetary System (EMS) links its members’ currencies to the German Deutschemark; and in Asia and Latin America, several countries peg their currencies unilaterally to the U.S. dollar.

One of the most important concerns of a state or local government is whether state policies will encourage or dampen growth in its manufacturing sector. A large amount of research has been done in an effort to determine what causes a locality’s manufacturing sector to grow.

The rate of wage growth has moderated recently, leading some observers to predict that inflation will continue to remain subdued in the near future. In this Letter we discuss what economic theory tells us about the relationship between changes in wages and changes in prices and also look at some of the empirical evidence on this issue, in order to determine whether the recent slowdown in wage growth does, in fact, tell us something about future inflation that we might otherwise miss.

The securitization of mortgages has fundamentally changed home mortgage financing. In the past, the vast majority of home mortgages were originated and funded by depository institutions. Today about half of total home mortgage debt outstanding is held by a wide variety of financial institutions and investors in the form of mortgage-backed securities.