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Student Loan Debt and Economic Outcomes

December 16, 2014 Comments off

Student Loan Debt and Economic Outcomes
Source: Federal Reserve Bank of Boston

This policy brief examines the impact of student loan debt on individuals’ homeownership status and wealth accumulation, employing a rich set of financial and demographic variables that are not available in many of the existing studies that use credit bureau data. It is important to understand whether and, if so, how student loan debt affects households’ economic decisions because student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt.

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Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States

December 9, 2014 Comments off

Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States
Source: Federal Reserve Bank of Boston

Key Findings

+ A new payment technology like FPS could benefit participants in the payment system by reducing float, improving information flows, and helping to avoid late fees, for example. The FPS may also yield benefits beyond speeding up individual payments, including facilitating business-to-business payments, mobile payments, payment security, 24/7/365 availability, person-to-person payments, and/or faster international payments via standards such as ISO 20022.

+ The cost to U.K. banks of building, installing, and maintaining the British FPS was relatively modest. According to sources at the entity that operates the system’s infrastructure, it cost less than ₤200 million (0.014 percent of U.K. GDP, or $307 million) spread over seven years, plus investment costs borne by each participating bank to connect to the FPS, yielding an estimated maximum total cost of less than 0.06 percent of U.K. GDP in 2008.

+ U.K. decision-makers chose to build a new system to achieve their objective of faster payments rather than speeding up existing payment systems. A decision to separate the settlement stage from the authorization and clearing stages of the payment process and to allow banks to continue to settle three times daily via the Bank of England made it possible to build and implement the U.K. FPS so cost effectively. With this simplification, the cost of constructing a new payment network did not differ very much from the cost of enhancing an existing system.

Foreign Nurse Importation to the United States and the Supply of Native Registered Nurses

November 19, 2014 Comments off

Foreign Nurse Importation to the United States and the Supply of Native Registered Nurses (PDF)
Source: Federal Reserve Bank of Boston

Importing foreign nurses has been used as a strategy to ease nursing shortages in the United States. The effectiveness of this policy critically depends on the long-run response of native-born nurses. We examine how the immigration of foreign-born registered nurses (RNs) affects the occupational choice and long-run employment decisions of native RNs. Using a variety of empirical strategies that exploit the geographical distribution of immigrant nurses across U.S. cities, we find evidence of large displacement effects—over a 10-year period, for every foreign nurse that migrates to a city, between one and two fewer native nurses are employed in that city. We find similar results at the state level using data on individuals taking the nursing board exam—an increase in the flow of foreign nurses significantly reduces the number of natives sitting for licensure exams in the states that are more dependent on foreign-born nurses compared to those states that are less dependent on foreign nurses. Using data on self-reported workplace satisfaction among a sample of California nurses, we find evidence suggesting that some of the displacement effects could be driven by a decline in the perceived quality of the workplace environment.

Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data

August 20, 2014 Comments off

Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data
Source: Federal Reserve Bank of Boston

We measure consumers’ use of cash by harmonizing payment diary surveys from seven countries. The seven diary surveys were conducted in 2009 (Canada), 2010 (Australia), 2011 (Austria, France, Germany, and the Netherlands), and 2012 (the United States). Our paper finds cross-country differences — for example, the level of cash use differs across countries. Cash has not disappeared as a payment instrument, especially for low-value transactions. We also find that the use of cash is strongly correlated with transaction size, demographics, and point-of-sale characteristics such as merchant card acceptance and venue.

Walking a Tightrope: Are U.S. State and Local Governments on a Fiscally Sustainable Path?

February 12, 2014 Comments off

Walking a Tightrope: Are U.S. State and Local Governments on a Fiscally Sustainable Path?
Source: Federal Reserve Bank of Boston

This paper develops a new measure of state and local fiscal sustainability called the “trend gap,” which is based on socioeconomic and other fundamental factors and removes the short-term influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita trend gap has been on a growing path over the past three decades, a different conclusion than found in previous studies. Social insurance and income maintenance programs have played a major role in the growth of the trend gap, while pension and other post-employment benefits (OPEB) plans have become increasingly important in driving it up. In addition, there are large and growing disparities in the trend gap across states.

Shifting Confidence in Homeownership: The Great Recession

July 26, 2012 Comments off

Shifting Confidence in Homeownership: The Great Recession
Source: Federal Reserve Bank of Boston

The authors study the responses to several questions related to real estate that were added to the Michigan Survey of Consumers in July and August 2011. In particular, they asked about attitudes toward renting versus buying a home, about commuting, and about how much to spend on a mortgage. By matching the results to data (at the ZIP-code level) about relative house price declines during the recent crisis, they can study the relationship between the U.S. housing crash and the attitudes of individual consumers. They find that younger respondents are relatively less confident about homeownership after larger price declines, while older respondents are relatively more confident. In both cases, this is observed only for those with direct experience of loss (via themselves or someone close) during the crash. They find no effect on attitudes towards commuting, and they find that people who live in the high-decline areas believe it is appropriate to spend more on a mortgage.

Inflation Dynamics When Inflation is Near Zero

March 2, 2012 Comments off

Inflation Dynamics When Inflation is Near Zero
Source: Federal Reserve Bank of Boston

This paper discusses the likely evolution of U.S. inflation in the near and medium term on the basis of (1) past U.S. experience with very low levels of inflation, (2) the most recent Japanese experience with deflation, and (3) recent U.S. micro evidence on downward nominal wage rigidity. Our findings question the view that stable long-run inflation expectations and downward nominal wage rigidity will provide sufficient support to prices such that deflation can be avoided. We show that an inflation model fitted on Japanese data over the past 20 years, which accounts for both short- and long-run inflation expectations, matches the recent U.S. inflation experience quite well. While the model indicates that U.S. inflation might be subject to a lower bound, it does not rule out a prolonged period of mild deflation going forward. In addition, our micro evidence on wages suggests no obvious downward rigidity in the firm’s wage costs, downward rigidity in individual wages notwithstanding. As a consequence, downward nominal wage rigidity may provide little offset to deflationary pressures in the current U.S. situation, despite some circumstantial evidence that this channel might have been at work in the past.

+ Full Paper (PDF)

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