March 13, 2025

The Hutchins Roundup brings the latest thinking in fiscal and monetary policy to your inbox. Have something you'd like us to include in the next Roundup? Email us and we'll take a look.

This edition was written by Sarah Ahmad, Alex Conner, Georgia Nabors, and David Wessel. 

Restaurant productivity increased due to increased take-out

Restaurant productivity in the U.S. rose by more than 15% during the COVID-19 pandemic—an increase that persisted even as economic conditions returned to pre-2020 norms. Using data from restaurant patrons’ cell phones at more than 100,000 fast-food establishments, Austan Goolsbee of the Federal Reserve Bank of Chicago and co-authors find that this spike in restaurant productivity is not the result of increased market power, pandemic-related demand changes, or economies of scale for businesses that survived COVID lockdowns. Instead, the productivity surge can be explained by substantial declines in the amount of time consumers spend in restaurants, especially a rise in the share of customers spending 10 minutes or less in such establishments because they are picking up takeout orders.

Neutral rate of interest less critical for monetary policy than previously thought

Why does monetary policy have strong effects on long-term real rates when theory suggests it should be neutral in the long run? One common explanation is that short-term policy changes affect long-term rates by revealing information to market participants, not because the policy itself has persistent effects on rates. Paul Beaudry of the University of British Columbia, Paolo Cavallino of the Bank for International Settlements, and Tim Willems of the Bank of England disagree: They argue that monetary policy directly affects long rates, but still only affects output and inflation only in the short run because of offsetting long-run effects. Their New Keynesian model, incorporating finitely lived agents who retire, demonstrates this. For example, a rate cut initially increases wealth and boosts consumption. Over time, however, lower rates reduce asset returns, requiring workers to increase savings to achieve the same level of consumption in retirement, largely offsetting the initial expansionary effects. The authors conclude that, “knowing the exact location of r* [neutral rate of interest] becomes less critical to central banks, as interest rates can be kept away from this level for prolonged periods of time, allowing monetary policy to unconsciously drive trends in real rates.”

Earnings mobility of immigrant children varies by gender and country

Leah Boustan of Princeton and co-authors use newly compiled administrative and survey data to analyze the intergenerational mobility of immigrants and their children across 15 developed countries. While first-generation immigrants earn less than natives, the gap significantly diminishes in the second generation, though the extent varies across countries. In countries where immigrant parents earn closer to what local parents earn, their children tend to have earnings closer to those of local children. In all countries in the database, daughters of immigrants experience smaller income gaps compared to locals than sons of immigrants. These earning patterns correlate with the characteristics of destination countries, not those of country of origin: Sons face larger income gaps in countries where the cost of education and vocational training are high as they are less likely to participate in these mobility-enhancing institutions. Both sons and daughters also achieve higher mobility in countries with more accessible pathways to citizenship and positive attitudes towards immigrants.

Price of steel near 12-month high in wake of steel and aluminum tariffs

Chart courtesy of Financial Times

Quote of the week

"The international trading system consists of a web of relationships – military, economic, political. One cannot take a single aspect in isolation. This is how President Trump sees the world, not as a zero-sum game, but as inter-linkages that can be reordered to advance the interest of the American people," says Treasury Secretary Scott Bessent.

"This is contrary to the last several decades, when other countries acted to advance their own interest, while our policymakers largely forgot about the tradeoffs of unconstrained trade misalignment. The result was the United States provided a source of massive demand, acted as arbiter of global peace, but did not receive adequate compensation. For example, today the United States finds itself subsidizing the rest of the world’s under-spending in defense.

This is not just a security issue. The United States also provides reserve assets, serves as a consumer of first and last resort, and absorbs excess supply in the face of insufficient demand in other country's domestic models. This system is not sustainable.

Access to cheap goods is not the essence of the American Dream. The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security. For too long, the designers of multilateral trade deals have lost sight of this. International economic relations that do not work for the American people must be re-examined.

This is what tariffs are designed to address – leveling the playing field such that the international trading system begins to reward ingenuity, security, rule of law, and stability, not wage suppression, currency manipulation, intellectual property theft, non-tariff barriers and draconian regulations. To the extent that another country's practices harm our own economy and people, the United States will respond. This is the America First Trade Policy."

About the Hutchins Center on Fiscal and Monetary Policy at Brookings

The mission of the Hutchins Center on Fiscal and Monetary Policy is to improve the quality and efficacy of fiscal and monetary policies and public understanding of them.