The various regions of the United States, although linked, respond differently to changing economic circumstances. Traditional approaches to understanding these different reactions have relied on the assumption that long-run trends in regional income or employment are constant. Recently, many...

Certain events have raised concern about the risks associated with derivatives trading--witness Orange County, California or Procter & Gamble, both of which lost large sums of money using derivatives. However, the popular discussion often loses track of the benefits derivatives hold for firms,...

Uncertainty about how the economy will evolve is a key concern for households and firms. People’s views on how likely it is that the economy will be growing, stagnating, or in recession help shape the actions they take today. Consequently, how households and firms respond to uncertainty has...

The author examines the data on just how much risk-sharing currently takes place in both developed and developing countries. He also considers the question of whether significant unexploited gains from risk-sharing exist across borders.

When setting monetary policy, should policymakers target variables such as commodity prices or interest rate spreads, which are sensitive to the market's expectations of inflation? Or are variables such as money growth, which are tied to the underlying causes of inflation and economic growth,...

Recessions usually mean bad times for many workers and firms: companies close; jobs are lost. However, recessions can present certain opportunities for organizations. For example, restructuring can be less costly during a recession: workers can be retrained and machines upgraded. In turn, these...

To enact effective policies and spend resources efficiently, firms, policymakers, and markets need accurate economic forecasts. But even though economists generally work with similar models and data, their projections often range widely. To better understand why, Keith Sill explores what the...

In the late 1990s, as tech-stock prices were surging, we often heard discussion about a "new economy" in which advanced communications technologies would lead to higher future productivity growth and greater economic efficiency. But the boom times largely came to a halt after August 2000, and in...

A 1977 amendment to the Federal Reserve Act states that the Fed’s mandate is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Moderate long-term interest rates require low and stable inflation. Monetary policymakers use...

Interest rates change in response to a variety of economic events, such as changes in Fed policy, crises in financial markets, and changes in prospects for long-term economic growth and inflation. But such events are sporadic, and interest rates show a more regular pattern of volatility that...