Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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Predicting Crises, Part I: Do Coming Crises Cast Their Shadows Before?
Bharat Trehan
The enormity of the current financial collapse, widely described as a bursting bubble, raises the question whether the crisis could have been predicted, possibly permitting action to offset its effects. In the first of two Economic Letters on the subject, we look at developments in the United States and find evidence suggesting that simple indicators based on asset market developments can provide early warnings about potentially dangerous financial imbalances.
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New Highs in Unemployment Insurance Claims
Aisling Cleary, Joyce Kwok, and Rob Valletta
Unemployment insurance benefits have been on an upward trend over the past two decades, partially reversing an earlier decline. The trend is associated with shifts toward a higher share of job losers among the unemployed and longer durations of unemployment, which may cause benefits to lapse for some recipients as labor market weakness persists.
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Credit Market Conditions and the Use of Bank Lines of Credit
Christopher M. James
Many credit line agreements contain restrictive covenants and other contingencies that may limit the ability of borrowers to draw on their lines, which is a particular concern to small firms. This Economic Letter reviews recent empirical studies that suggest that private firms’ access to credit lines is much more sensitive to changes in bank lending standards than is access by publicly traded firms.
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Growth Accounting, Potential Output, and the Current Recession
John Fernald and Kyle Matoba
Total factor productivity—a measure of the efficiency with which labor and capital are used—has fallen during the current recession. But, after adjustment for lower utilization of labor and capital, such productivity has risen strongly over the past two years. These growth–accounting measures suggest that efficiency gains have continued during the recession, boding well for long-term economic growth.
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Have the Fed Liquidity Facilities Had an Effect on Libor?
Jens Christensen
In response to turmoil in the interbank lending market, the Federal Reserve inaugurated programs to bolster liquidity beginning in December 2007. Research offers evidence that these liquidity facilities have helped lower the London interbank offered rate, a key market benchmark, significantly from what it otherwise would have been expected to be.
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Did Welfare Reform Work for Everyone? A Look at Young Single Mothers
Mary C. Daly
Since Congress overhauled the U.S. welfare system in 1996, single mothers between 18 and 24 have reduced welfare dependency, increased workforce participation, and registered gains in household income. The group’s growing attachment to the labor force means they may be better positioned to take advantage of unemployment insurance during the current recession.
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Macroeconomic Models for Monetary Policy: Conference Summary
Eric Swanson
Papers presented at the conference on “Macroeconomic Models for Monetary Policy” held March 6, 2009, at the Federal Reserve Bank of San Francisco addressed such issues as how to model wage and price behavior and how to measure economic output. The answers to these and other questions examined at the conference are highly relevant for monetary policy and for the macroeconomic models in use at central banks around the world.
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A View of the Economic Crisis and the Federal Reserve’s Response
Janet L. Yellen
The Federal Reserve has responded to a severe recession by developing programs to bolster the financial system and restore economic growth. The Fed has the tools to unwind these programs when appropriate, maintaining price stability. The following is adapted from a speech delivered by the president and CEO of the Federal Reserve Bank of San Francisco to the Commonwealth Club in San Francisco on June 30, 2009.
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Employer Health Benefits and Insurance Expansions: Hawaii’s Experience
Tom Buchmueller, John Dinardo, and Rob Valletta
As policies are proposed to expand health insurance coverage in the United States, it is useful to focus on the experience of Hawaii, where employers are required to offer such insurance to their full-time employees. Our findings suggest that Hawaii’s law has substantially increased health insurance coverage in the state, although the impact has been partially offset by employers’ increased reliance on the exempt class of employees who work fewer than 20 hours per week.
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Fighting Downturns with Fiscal Policy
Sylvain Leduc
Should fiscal policy be used to fight recessions? Most economists would answer that, for normal economic ups and downs, business cycle stabilization should be left to monetary policy and that fiscal policy should focus on long-term goals.