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Chicago Fed Letter

The Recent Steepening of Phillips Curves

Bart Hobijn, Russell A. Miles, James Royal, and Jing Zhang

The Phillips curve captures the empirical inverse relationship between the level of inflation and unemployment. The reciprocal of its slope, sometimes referred to as the “sacrifice ratio,” represents the increase in the unemployment rate associated with a 1 percentage point reduction in the inflation rate. In this Chicago Fed Letter, we provide evidence that the Phillips curve has steepened in many industrialized countries since the start of the recovery from the Covid-19 pandemic. This suggests a lower sacrifice ratio now than before 2020.

Distributed Ledger Technology, Carbon Accounting, and Emissions Trading

Alessandro Cocco, Jesse Leigh Maniff, David Rodziewicz, and Michael Warner

The reduction of carbon emissions is a critical part of the transition to a more sustainable economy. Reducing carbon emissions is expected to lead to fewer natural disasters, lower energy transitions risk, and a lower impact on financial risks resulting from physical damage caused by climate change.

Why the Automotive Chip Crisis Isn’t Over (Yet)

Kristin Dziczek

New car buyers face limited inventory, long order wait times, and rising prices primarily because of lingering automotive supply chain disruptions. It is difficult for automakers to produce enough vehicles to meet demand, and the main culprit is reported to be the lack of semiconductors—or chips. Professional forecasters have ratcheted down their sales and production predictions as the months go by, and the supply-constrained conditions have not returned to pre-pandemic levels. In this article, I investigate why the chip crisis is still with us and why some forecasts suggest that it will continue at least into 2024.

What Is the Impact of Monetary Policy on Households’ Desired Labor Supply?

Cristiano Cantore, Filippo Ferroni, Haroon Mumtaz, and Angeliki Theophilopoulou

Do people adjust how much they want to work when the central bank’s monetary policy stance shifts? More specifically, does an interest rate hike induce individuals to work more or fewer hours? And does this effect differ across households with different levels of income (or earnings)? In this article, we discuss our recent research that explores these and related questions. One notable finding is that employed individuals at the bottom of the income distribution want to work more when monetary policy tightens.

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