A new study by MIT researchers finds that Black homeowners in America continue to have to pay more to own a home, reports Reuters. The researchers found that “the annual difference of $743 in mortgage interest payments, $550 in mortgage insurance premiums and $390 in property taxes, when invested over 30 years results in lost retirement savings of $67,320 for Black homeowners.”
Researchers from MIT’s Digital Currency Initiative are teaming up with Boston’s Federal Reserve Bank to build and test a hypothetical central bank digital currency, reports Vipin Bharathan for Forbes.
In an excerpt from his new book published by The Atlantic, Prof. Thomas Levenson explores how even famed scientists such as Sir Isaac Newton are not immune to making disastrous financial decisions. “When financial markets offer the temptation of ever-rising values, not even the smartest people can resist,” writes Levenson.
Reuters reporter Ann Saphir writes that Prof. Athanasios Orphanides recommended the Federal Reserve adopt a new monetary policy rule to help guide decisions concerning interest rates. “Monetary policy is most effective when it is formulated in a systematic manner, following a clearly communicated monetary policy rule,” Orphanides explains.
Research by Prof. Athanasios Orphanides examines the Federal Reserve’s efforts to improve communications, reports Nick Timiraos for The Wall Street Journal. Orphanides found “the quarterly summary of economic projections from Fed officials and its accompanying interest-rate projections, sometimes referred to as a ‘dot plot,’ would be more valuable if it expressed changes in officials’ uncertainty or confidence in their projections.”
Writing for the Financial Times, graduate student Daniel Aronoff examines the impact of the FedNow banking service, which aims to process and settle individual payments within seconds. FedNow will have a “revolutionary impact on the banking industry and monetary policy,” writes Aronoff. “When depositors are able to move funds costlessly and instantaneously between accounts, it will become feasible to arbitrage between banks in real time.”
Writing for the Financial Times about financial training, Jonathan Moules spotlights the Sloan School of Management’s 18-month Master of Finance degree program. “This allows students an extra term to take additional courses and gain additional practical experience with a summer internship,” explains Heidi Pickett, assistant dean for the Master of Finance program.
Financial Times reporter Laura Noonan spotlights how the Sloan School developed programming aimed at increasing gender parity in the finance industry. “There is a part for academic institutions in terms of making sure women feel empowered to ask for a seat at the table,” says Heidi Pickett of the Master of Finance program.
A new paper co-authored by Prof. Lawrence Schmidt examines why investors tend to make good purchasing decisions, but poor selections when it comes to selling stocks, reports The Economist. The researchers found that the “disparity between sales and purchases is explained by the attention given to each.”
Axios reporter Kaveh Waddell writes that a group of economists led by Prof. Erik Brynjolfsson has proposed creating a new metric to measure GDP that accounts for the value of free digital goods and new technologies. The researchers estimate that “hidden benefits from Facebook alone have added 0.05–0.11 percentage points to GDP every year since its 2004 launch,” Waddell explains.
New York Times columnist David Leonhardt highlights Prof. Emeritus Olivier Blanchard’s address to the American Economic Association, in which he argued that governments are overly concerned with debt. “Blanchard’s case revolves around the fact that economic growth rates in modern times are usually higher than interest rates. This pattern means that governments can often repay their debts more easily than people expect,” Leonhardt explains.
Tom Loftus of The Wall Street Journal highlights a study co-authored by MIT Prof. Maryam Farboodi that finds big data plays an important role in raising capital from investors and could contribute to the growing divide between large and small companies.
Prof. Simon Johnson reviews Adam Tooze’s new book, “Crashed: How a Decade of Financial Crises Changed the World” for The Washington Post. Johnson writes that the book, “is an impressive narrative history, weaving together events from around the world with a light touch and a great deal of helpful explanation.”
In an article for the Financial Times, John Gapper highlights a study by Prof. John Van Reenen examining the increasing concentration of industries. Van Reenen explains that globalization and new technology foster superstar companies because “network effects mean that small quality differences can tip a market to one or two players.”
Axios reporter Dan Primack writes about a new study by Prof. Antoinette Schoar examining the performance of sidecar private equity funds. Primack explains that Schoar and her colleagues found that, “GP-directed sidecar funds had worse average performance than did the main funds raised at the same time by the same firms, while discretionary co-investment funds were basically a wash.”