Nicholas Souleles - Faculty Research in Knowledge@Wharton

Economic Recovery: Are Happy Days Here Again?

Wed, 10 Jun 2009 17:08:51 EST

Stocks have rebounded on Wall Street during the past two months. The pace of job losses seems to be slowing down. Even quarterly reports from banks suggest that the banking sector is slowly struggling back to its feet. Do these signs portend the first indicators of an economic recovery? Not yet, according to experts at Wharton and elsewhere, who insist that despite some of the hopeful data, the recovery will be weaker and take longer to gain momentum than past slowdowns.

The 100-day Dash: An Ambitious but Worrisome Start for the Obama Administration

Wed, 29 Apr 2009 14:19:24 EST

As President Obama wraps up his first 100 days in office, he gets high marks from several Wharton and University of Pennsylvania faculty for his reassuring leadership skills. But they also worry about the cost of his ambitious agenda, and wonder when he will start establishing priorities for what gets tackled when.

Dear President-elect Obama: Here's How to Get the Economy out of the Ditch

Wed, 12 Nov 2008 15:57:28 EST

President-elect Barack Obama must lead a nation mired in a worsening recession and burdened by the costs, both financial and human, of two wars and rising debt. Wharton faculty offer some counterintuitive advice: Now may be the time for the government to spend a lot of money.

The Candidates on Taxes: Finding the Devil in the Details

Wed, 03 Sep 2008 17:03:03 EST

The two U.S. presidential candidates may paint themselves as agents for a new, more bipartisan attitude in Washington, but Republican Sen. John McCain and Democratic Sen. Barack Obama both tend to adhere to their parties' usual approaches to tax policy. Obama proposes to raise taxes on the wealthy and reduce them for the middle class; McCain proposes to sustain the tax cuts enacted by the Bush administration. But neither candidate fully explains how they will pay the bills. This is the first in a series of articles from Knowledge@Wharton examining economic and fiscal policies proposed by the candidates.

The Economic Stimulus Package: Will It Work, and for Whom?

Wed, 20 Feb 2008 15:24:45 EST

Congress and the White House recently settled on an economic stimulus package with unusual speed, pushing the throttle to pull the economy out of a nosedive. Is this just election-year grandstanding, or does economic stimulus really work? While some experts argue that priming the economy now is unnecessary or even counter-productive, others support the $168 billion package and its emphasis on low and moderate-income recipients. As for the health of the economy overall, experts agree that no economic boom is in the near-term forecast.

You've Worked Hard, Saved and Just Retired: How Do You Manage Your Finances Now?

Wed, 13 Jun 2007 14:33:58 EST

As baby boomers retire and start spending their nest eggs, they will need new financial products to make their money last, according to speakers at a recent Wharton Impact Conference titled, "Managing Retirement Payouts: Positioning, Investing and Spending Assets." The conference explored emerging patterns in spending during retirement and debated new ideas to help retirees manage their finances after leaving the workforce.

Do Americans Save Enough? It Depends on What Calculator You Use

Wed, 07 Feb 2007 15:59:14 EST

Every week one financial services firm or another releases findings of its latest retirement study: Americans aren't saving enough. Americans are saving too much. The savings rate is abysmal. People are borrowing against their homes to pay for luxuries, and so forth. Who's right? It turns out, not surprisingly, that the future is hard to predict, and that many calculators designed to make those predictions are flawed in their basic assumptions. Wharton experts try to help navigate the challenges of planning for retirement.

Enron Aside, Special Purpose Vehicles (SPVs) Are Legal, Innovative and Widely Used

Wed, 17 May 2006 15:28:37 EST

With this spring's criminal trial of former Enron executives Ken Lay and Jeffrey Skilling, the public was again seeing accounts of Raptors, Chewco and Osprey -- some of the shadowy "special purpose vehicles" the energy company used for improper purposes such as concealing its mushrooming debt. But while much of Enron's SPV use was illegal, most SPVs are proper and they can serve a variety of functions. Many are separate business-financing operations whose transactions do not appear on the parent company's books. They can be used to create easily traded asset-backed securities that allow their "sponsor" companies to convert cash flows expected over many years into immediate lump-sum payments, according to Wharton finance professor Gary B. Gorton, who, with colleague Nicholas Souleles, has written a paper on the topic titled, "Special Purpose Vehicles and Securitization."

Why Oil Prices Are Up, and What We Can, and Can't, Do about It

Wed, 03 May 2006 15:49:45 EST

Rising prices for crude oil and gasoline have alarmed many consumers and put President Bush and other U.S. politicians in a position where they feel they have to do something -- anything -- in response, especially in an election year. But members of Wharton's finance department and private-sector economists say it's a good time to look rationally at the reasons for the price hikes and their likely effect on the economy and on energy policy. They also say that as long as the United States continues to rely on oil producers in other parts of the world, high prices and price volatility will be the norm. Bolivian President Evo Morales's decision, announced this week, to nationalize the country's natural gas sector, only underscores that point.

Don't Sweat the Inverted Yield Curve: No One Really Knows What It Means

Wed, 25 Jan 2006 15:13:16 EST

Consider the inverted yield curve as the equivalent of an economic bogeyman. It's when the natural order up-ends and short-term interest rates are higher than long-term ones. The Treasury bond yield curve inverted December 27 for the first time in five years. That gave shudders to those who see the phenomenon as a harbinger of recession. And yet, the U.S. economy is strong, and surveys show most forecasters think it will stay that way. So what does the inverted yield curve really mean? Wharton professors offer some perspectives.

What Lies Ahead for the U.S. Economy in 2006

Wed, 08 Feb 2006 16:49:21 EST

The economic growth that the United States enjoyed in 2005 will continue in 2006, as stronger business investment begins to pick up the slack on the part of consumers who will curtail the white-hot spending that has been a key factor in propelling the economy, according to Wharton faculty members and private-sector economists. In addition, these experts say, oil prices will remain high in 2006, but not much higher than they are now, the residential real estate boom will cool and American workers will be forced to deal with a volatile employment market.

In the Wake of the Latest 'No' Votes, Will Economic Growth in Europe Be a Go?

Wed, 29 Jun 2005 16:12:24 EST

The reasons why voters in France and the Netherlands rejected the European Constitution a few weeks ago were many. But two overarching themes of the referendums were discontent and fear: discontent with politicians' inability to revitalize the lagging economies of many EU countries, and fear of what the future may hold for people accustomed to secure jobs and generous benefits. Scholars at Wharton and at universities in Europe say that the 25-member EU must institute free-market, Anglo-Saxon-style reforms to reinvigorate the economies; in particular, they point to labor laws that make it difficult to hire and fire people. But some also say that Europe can achieve higher growth rates without completely abandoning the social welfare policies that have been in place since World War II.

The Next Four Years with George Bush

Wed, 17 Nov 2004 17:06:33 EST

President George W. Bush's re-election lifts a degree of uncertainty from business and the economy that could drive market rallies and stimulate growth. Eventually, however, a second Bush term that continues to fund tax cuts along with wars in Iraq and Afghanistan could ultimately weigh down the U.S. economy, according to Wharton faculty.

Who Cares About the Deficit, and Why?

Wed, 25 Feb 2004 14:34:23 EST

The numbers seem staggering: The U.S. federal budget deficit is projected to reach a record $521 billion this year, equaling about one-fourteenth of the federal debt accumulated over the nation’s history. Democrats accuse Bush and the Republican Congress of squandering the surplus achieved in the Clinton years and forcing future generations to pay for today’s spending excesses and tax cuts. But the White House and its supporters insist the deficit, while a record in dollar terms, is not so bad given the economy’s size. Is the deficit a ticking time bomb or not?

Analyzing Likely Tax Cuts in 2003: Can Bush Kickstart the Economy?

Wed, 18 Dec 2002 00:00:00 EST

When Congress returns from the holiday break, President Bush is expected to unveil his plan for using tax cuts to stimulate the economy. But would the proposals under discussion provide the kind of short-term economic boost the White House says the country needs? And will the final package constitute a new strategy, or just a continuation of the old one?

How Bush Can Avoid an Economic Meltdown

Wed, 20 Nov 2002 00:00:00 EST

The economy may not be recovering as strongly as some would like. But it is healthy enough at the moment that there is no need for the Bush administration to accelerate existing tax cuts or push for new cuts to stimulate economic activity, according to professors of finance and public policy at Wharton. They also say that the reemergence of federal budget deficits is reason enough to forego thinking about tax cuts.

How Design of Pension Plans Influences Employee Investments

Wed, 30 Jan 2002 00:00:00 EST

With the collapse of Enron, lawmakers, regulators, financial advisors and working people are taking a hard look at 401(k) plans, which employees in many U.S. companies use to save for retirement. In a recent study entitled �Defined Contribution Pensions: Plan Rules, Participant Choices, and the Path of Least Resistance,� Wharton finance professor Andrew Metrick and three co-authors analyze the impact of a plan�s design on the level of employee participation, the percentage of income employees contribute and the investment choices they make.

New Payment Methods Give Old-fashioned Checks and Credit Cards a Run for Their Money

Wed, 16 Jan 2002 00:00:00 EST

Anyone with a Starbucks �stored value� card knows how easy it is these days to pay for his or her café latte. But the stored value card - like its higher-tech cousin the smart card, where value is stored on the card�s computer chip rather than on a server � is just one of the emerging technologies now gaining momentum while paper check usage is in decline, according to a new study by the Federal Reserve System.

In Bush�s Economic Stimulus Package, Timing Is Key

Wed, 10 Oct 2001 00:00:00 EST

As the U.S. economy continues to feel the aftershocks of the terrorist attacks on Sept. 11, the focus now is on how to turn around the ensuing recession. The effect of President Bush�s recently proposed economic stimulus package is difficult to gauge given that consumer and corporate spending remain so unpredictable. Experts agree, however, that the timing of the stimulus will have a major impact on its success or failure.

Elastic Plastic: How Consumers Respond to Changes in Credit Card Limits and Rates

Wed, 30 Aug 2000 13:27:36 EST

When a credit card company changes interest rates or increases the credit limit of its consumers, how do these consumers respond? The answers are far from predictable, as David B. Gross of the University of Chicago and Wharton's Nicholas S. Souleles have found out. In a paper titled "Consumer Response to Changes in Credit Supply: Evidence from Credit Card Data," Gross and Souleles examine the effects of changes in the credit limits and interest rates. Their study found that people starting at near their credit limit respond most sharply to changes in credit limits but even those who are below their credit limits respond significantly.

Greenspan vs. Inflation: A Debate

Tue, 21 Mar 2000 17:03:52 EST

When Alan Greenspan frets, people take notice. The Federal Reserve chairman attracted widespread interest with recent comments about productivity increases being a potential harbinger of inflation. His line of thinking runs thus: Gains in productivity can lead investors to believe that corporate earnings will continue to grow. Stock prices are bid up, thus increasing the �wealth effect.� If people feel they will have more money in the future, they consume more today, and may take on a lot of debt in doing so. If demand outstrips supply, prices can shoot up. Is Greenspan right to be worried? Should the Fed continue to raise rates? Are those high-flying technology stocks headed for a come-uppance? To find out, Knowledge@Wharton interviewed three members of Wharton�s finance department and a well-known investment strategist.