Articles providing critical insights and analysis on monetary policy issues impacting the U.S. economy and its deep financial and economic relationship with Mexico.
Research Department Working Papers
Tempting FAIT: Flexible Average Inflation Targeting and the Post-COVID U.S. Inflation Surge
In August 2020, the Federal Reserve replaced Flexible Inflation Targeting (FIT) with Flexible Average Inflation Targeting (FAIT), introducing make-up strategies that allow inflation to temporarily exceed the 2% target. Using a synthetic control approach, this paper estimates that FAIT raised CPI inflation by about 1 percentage point and core CPI inflation by 0.5 percentage points, suggesting a moderate impact net of food and energy and a largely temporary effect. The findings are consistent with the hypothesis of a steeper-than-expected post-pandemic Phillips curve in the New Keynesian model.
April 09, 2025
Globalization Institute Working Paper
Living Up to Expectations: The Effectiveness of Forward Guidance and Inflation Dynamics Post-Global Financial Crisis
This paper studies the effectiveness of forward guidance when central banks face private agents with heterogeneous expectations allowing for a degree of bounded rationality.
April 03, 2025
Texas economic outlook downbeat as uncertainty increases
The Texas economy grew slightly below trend through the first quarter of 2025. While job growth appears just off its long-term annual trend rate of about 2.1 percent, the Dallas Fed Texas Business Outlook Surveys (TBOS) point to slowing activity in both the services and manufacturing sectors.
April 03, 2025
Weighing Texas economic resilience amid tariffs, workforce challenges
Ray Perryman, principal of Waco-based The Perryman Group, has been an observer of the Texas economy for more than four decades. He offers his views of what has propelled Texas since the 1980s oil bust and the state’s future prospects, and he recounts how he grew his economics firm.
March 07, 2025
Research Department Working Papers
Trade Costs and Inflation Dynamics
This paper exploits bilateral trade flows of final and intermediate goods together with the structure of static trade models that deliver gravity equations to identify exogenous changes in trade costs between countries. The authors then use a local projections approach to assess the effects of trade cost shocks on consumer price (CPI) inflation.
March 04, 2025
Mexico Economic Update
Mexico’s economic growth slows in 2024; outlook weakens
Mexico’s GDP grew only 0.9 percent year over year in fourth quarter 2024, after expanding 2.4 percent in 2023 and 4.6 percent in 2022. Economic growth slowed, mainly due to lower investment, slowing consumption and a contracting energy sector.
March 04, 2025
Mexico, U.S. and China offer an evolving ‘triangular’ trade relationship
Enrique Dussel Peters, a professor at the Graduate School of Economics at the Universidad Nacional Autonóma de México and coordinator of the university’s Center for Chinese–Mexican Studies, discusses trade flows between the U.S., Mexico and China and their prospects.
March 03, 2025
Evidence suggests U.S. house price/rent ratio, real home prices to decline
The ratio of house prices to rents in the U.S. has risen 20 percent since first quarter 2020, coinciding with the beginning of the pandemic. The ratio is near its previous high in 2006. The future course of inflation may well be influenced by how this now-lofty ratio reverts to a more usual level.
February 25, 2025
Geopolitical oil price risk not a major driver of global macroeconomic fluctuations
Notwithstanding the attention geopolitical events in oil markets have attracted, we find that geopolitical oil price risk is unlikely to generate sizable recessionary effects.
February 18, 2025
Globalization Institute Working Paper
Unequal Climate Policy in an Unequal World
This paper studies climate policy in an economy with heterogeneous households, two types of goods (clean and dirty), and a climate externality from the dirty good.
January 31, 2025