Economic Perspectives
A quarterly journal of in-depth articles reporting on the Bank's economic research.
Second Quarter 2009 Edition:
From tail fins to hybrids: How Detroit lost its dominance of the U.S. auto market
Thomas H. Klier
This article explores the decline of the Detroit Three (Chrysler, Ford, and General Motors).
The author identifies three distinct phases of the decline—the mid-1950s to 1980, 1980 to 1996,
and 1996 to 2008—culminating in the bankruptcies of Chrysler and General Motors in 2009. In showing how
the U.S. auto industry has evolved since the mid-1950s, this article provides a historical frame
of reference for the ongoing debate about the future of this industry. (PDF,578KB)
Comparing patterns of default among prime and subprime mortgages
Gene Amromin
Anna L. Paulson
This article compares default patterns among prime and subprime mortgages, analyzes the factors
correlated with default, and examines how forecasts of defaults are affected by alternative assumptions
about trends in home prices. The authors find that extremely pessimistic forecasts of home
price appreciation could have generated predictions of subprime defaults that were closer to the
actual default experience for loans originated in 2006 and 2007. However, for prime loans one
would have also had to anticipate that defaults would become much more sensitive to home prices. (PDF,477KB)
Policymaking under uncertainty: Gradualism and robustness
Gadi Barlevy
Some economists have recommended the robust control approach to the formulation of monetary
policy under uncertainty when policymakers cannot attach probabilities to the scenarios that concern them.
One critique of this approach is that it seems to imply aggressive policies under uncertainty, contrary
to the conventional wisdom of acting more gradually in an uncertain environment. This article argues that
aggressiveness is not a generic feature of robust control. (PDF,495KB)
International Banking Conference
The International Financial Crisis: Have the Rules of Finance Changed? (PDF,53KB)
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