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...

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...

There is tremendous disparity in the levels of individuals’ incomes across countries. However, this disparity in per capita income has not always existed. In “The Evolution of the World Income Distribution,” Keith Sill investigates some facts about the evolution of per capita income across...

For various reasons, oil-price increases may lead to significant slowdowns in economic growth. Five of the last seven U.S. recessions were preceded by significant increases in the price of oil. In “The Macroeconomics of Oil Shocks,” Keith Sill examines the effect of changes in oil prices on...

Our final article looks at the difference in wages between high-skill workers (such as those who might work in biotech) and low-skill workers. This skill premium has increased dramatically over the past 30 years. Although economists are still debating the causes of this increase, it seems likely...

Keith Sill examines the theory and evidence on the link between fiscal and monetary policy and, thus, between deficits and inflation. Sill concludes that whether deficits lead to inflation depends on the extent to which a country’s monetary policy is independent.

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,...