Board of Governors of the Federal Reserve System

Displaying 1-40 of 187 results

  • White Papers // Jul 2011

    U.S. Domestic And International Financial Reform Policy: Are G20 Commitments And The Dodd-Frank Act In Sync?

    The Dodd-Frank Act of 2010 is the keystone policy response directed at reforming U.S. financial system activities and oversight in the wake of the 2007-2009 financial crisis. The United States also has financial system reform policy commitments in the international arena, including in particular by virtue of its membership in...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Mar 2011

    Where Are Global And U.S. Trade Heading In The Aftermath Of The Trade Collapse: Issues And Alternative Scenarios

    Global and U.S. trade declined dramatically in the wake of the global financial crisis in late 2008 and early 2009. The subsequent recovery in trade, while vigorous at first, gradually lost momentum in 2010. Against this backdrop, this paper explores the prospects for global and U.S. trade in the medium...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2011

    U.S. International Equity Investment And Past Prospective Returns

    Counter to extant stylized facts, using newly available data on country allocations in U.S. investors' foreign equity portfolios the authors find that U.S. investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and U.S. investors increase portfolio weights on a country's equity...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2011

    Explaining The Energy Consumption Portfolio In A Cross-section Of Countries: Are The BRICs Different?

    This paper uses disaggregated data from a broad cross-section of countries to empirically assess differences in energy consumption profiles across countries. The authors find empirical support for the energy ladder hypothesis, which contends that as an economy develops it transits away from a heavier reliance on traditional fuel sources towards...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2011

    International Capital Flows And The Returns To Safe Assets In The United States, 2003-2007

    A broad array of domestic institutional factors - including problems with the originate-to-distribute model for mortgage loans, deteriorating lending standards, deficiencies in risk management, conflicting incentives for the GSEs, and shortcomings of supervision and regulation - were the primary sources of the U.S. housing boom and bust and the associated...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2011

    Nonlinearities In The Oil Price-output Relationship

    It is customary to suggest that the asymmetry in the transmission of oil price shocks to real output is well established. Much of the empirical work cited as being in support of asymmetries, however, has not directly tested the hypothesis of an asymmetric transmission of oil price innovations. Moreover, many...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2010

    Asymmetric Shocks In A Currency Union With Monetary And Fiscal Handcuffs?

    This paper investigates the impact of the asymmetric shocks within a currency union in a framework that takes account of the zero bound constraint on policy rates, and also allows for constraints on fiscal policy. In this environment, the authors document that the usual optimal currency argument showing that the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2010

    Fiscal Positions And Government Bond Yields In OECD Countries

    The authors examine the impact of fiscal positions, both the level of debt and the fiscal balance, on long-term government bond yields in the OECD. In order to control for the endogenity of fiscal positions to the business cycle they utilize forward projections of fiscal positions from the OECD's Economic...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2010

    Could Asymmetric Information Alone Have Caused The Collapse Of Private-label Securitization?

    A key feature of the 2007-2008 financial crisis is that for some classes of securities trade has ceased. And where trade does occur, it appears that market prices are well below what one might believe to be the intrinsic value for that class of security. This seems to be especially...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2010

    An Analysis Of Government Guarantees And The Functioning Of Asset-Backed Securities Markets

    Mortgage securitization has been tried several times in the United States and each time it has failed amid a credit bust. In what is now a familiar recurring history, during the credit boom, underwriting standards are violated and guarantees are inadequately funded; subsequently, defaults increase and investors in mortgage-backed securities...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2010

    Oil Shocks And The Zero Bound On Nominal Interest Rates

    Beginning in 2009, in many advanced economies, policy rates reached their Zero Lower Bound (ZLB). Almost at the same time, oil prices started rising again. The authors analyze how the ZLB affects the propagation of oil shocks. As these shocks move inflation and output in opposite directions, their effects on...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2010

    Entry Dynamics And The Decline In Exchange-rate Pass-through

    The degree of exchange-rate pass-through to import prices is low. An average pass-through estimate for the 1980s would be roughly 50 percent for the United States implying that, following a 10 percent depreciation of the dollar, a foreign exporter selling to the U.S. market would raise its price in the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2010

    Offshoring Bias In U.S. Manufacturing: Implications For Productivity And Value Added

    The rapid growth of offshoring has sparked a contentious debate over its impact on the U.S. manufacturing sector, which has recorded steep employment declines yet strong output growth - a fact reconciled by the notable gains in manufacturing productivity. The authors maintain, however, that the dramatic acceleration of imports from...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2010

    Has International Financial Co-movement Changed? Emerging Markets In The 2007-2009 Financial Crisis

    Emerging Market (EM) assets have historically been regarded as inherently risky and particularly vulnerable to international shocks that result in a general increase in investor risk perceptions. In this paper, the authors assess the ongoing relevance of this view by examining the linkages between EM and non-EM stock and bond...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Aug 2010

    Capturing The Evolution Of Dealer Credit Terms Related To Securities Financing And OTC Derivatives

    In the period prior to the financial crisis, leverage in the financial system increased substantially. This buildup was likely facilitated by, among other factors, a loosening of credit terms related to OTC derivatives and securities financing transactions. However, little or no systematic data on these trends were available at the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Aug 2010

    The Effects Of Bank Capital On Lending: What Do We Know, And What Does It Mean?

    The effect of bank capital on lending is a critical determinant of the linkage between financial conditions and real activity, and has received special attention in the recent financial crisis. The author uses panel-regression techniques-following Bernanke and Lown (1991) and Hancock and Wilcox (1993, 1994)-to study the lending of large...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    Check In The Mail Or More In The Paycheck: Does The Effectiveness Of Fiscal Stimulus Depend On How It Is Delivered?

    Recent fiscal policies have aimed to stimulate household spending. In 2008, most households received one-time economic stimulus payments. In 2009, most working households received the Making Work Pay tax credit in the form of reduced withholding; other households, mainly retirees, received one-time payments. This paper quantifies the spending response to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    The Information Content Of High-Frequency Data For Estimating Equity Return Models And Forecasting Risk

    The author demonstrate that the parameters controlling skewness and kurtosis in popular equity return models estimated at daily frequency can be obtained almost as precisely as if volatility is observable by simply incorporating the strong information content of realized volatility measures extracted from high-frequency data. For this purpose, the author...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    A Semiparametric Characterization Of Income Uncertainty Over The Life Cycle

    Income uncertainty plays an important role in household decisions regarding consumption, saving, and investment. First, in the presence of incomplete financial markets, households facing uninsurable income risk have to save for precautionary reasons. How much they need to save crucially depends on their level of future income uncertainty. Second, people...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    Input And Output Inventories In General Equilibrium

    The authors build and estimate a two-sector (goods and services) dynamic stochastic general equilibrium model with two types of inventories: materials (input) inventories facilitate the production of finished goods, while finished goods (output) inventories yield utility services. The model is estimated using Bayesian methods. The estimated model replicates the volatility...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    Is There A Fiscal Free Lunch In A Liquidity Trap?

    This paper uses a DSGE model to examine the effects of an expansion in government spending in a liquidity trap. If the liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary costs minimal. But given this "Fiscal free lunch," it...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Fiscal Policy In The United States: Automatic Stabilizers, Discretionary Fiscal Policy Actions, And The Economy

    This paper examines the effects of the economy on the government budget as well as the effects of the budget on the economy. First, the author provides measures of the effects of automatic stabilizers on budget outcomes at the federal and state and local levels. For the federal government, the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Granularity Adjustment For Mark-To-Market Credit Risk Models

    The impact of undiversified idiosyncratic risk on value-at-risk and expected shortfall can be approximated analytically via a methodology known as granularity adjustment (GA). In principle, the GA methodology can be applied to any risk-factor model of portfolio risk. Thus far, however, analytical results have been derived only for simple models...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Financial Globalization And Monetary Policy

    This paper reviews the available evidence and previous research on potential effects of financial globalization, that is, the international integration of financial markets. In particular, the author addressed the questions: Has financial globalization materially increased the influence of external developments on domestic monetary conditions? And, has it reduced the influence...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Imperfect Credibility And The Zero Lower Bound On The Nominal Interest Rate

    When the nominal interest rate reaches its zero lower bound, credibility is crucial for conducting forward guidance. The authors determine optimal policy in a New Keynesian model when the central bank has imperfect credibility and cannot set the nominal interest rate below zero. In their model, an announcement of a...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Interpreting Investment-Specific Technology Shocks

    Investment-specific technology (IST) shocks are often interpreted as multi-factor productivity (MFP) shocks in a separate investment-producing sector. However, this interpretation is strictly valid only when some stringent conditions are satisfied. Some of these conditions are at odds with the data. Using a two-sector model whose calibration is based on the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Monetary Policy And The Cyclicality Of Risk

    The author use a DSGE model that generates endogenous movements in risk premia to ex-amine the positive and normative implications of alternative monetary policy rules. As emphasized by the microfinance literature, variation in risk arises because households face fixed costs of transferring cash across financial accounts, implying that some households...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Immigration, Remittances And Business Cycles

    The authors use data on border enforcement and macroeconomic indicators from the U.S. and Mexico to estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of labor migration to the U.S. and documents how remittances to Mexico serve an insurance role to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    The Effect Of Gasoline Prices On Household Location

    Gasoline prices influence where households decide to locate by changing the cost of commuting. Consequently, the substantial increase in gas prices since 2003 may have reduced the demand for housing in areas far from employment centers, leading to a decrease in the price and/or quantity of housing in those locations...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Interagency Statement On Meeting The Credit Needs Of Creditworthy Small Business Borrowers

    The federal financial institutions regulatory agencies and the state supervisors are issuing this Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers to restate and elaborate their supervisory views on prudent lending to creditworthy small business borrowers. This statement builds upon principles in existing guidance, including the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Exports, Borders, Distance, And Plant Size

    The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. The author examines this fact using Census micro data on plant shipments from the Commodity Flow Survey, also show the fact is not entirely an...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Oil Shocks And External Adjustment

    In reaction to the oil crises of the 1970s and early 1980s, as well as the more recent run-up in oil prices that started in 2003, the oil component of the U.S. trade balance consistently deteriorated. However, the link between oil prices and the overall goods trade balance appears more...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    News And Sovereign Default Risk In Small Open Economies

    This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the future ability of the government to repay its debt. First,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Money, Reserves, And The Transmission Of Monetary Policy: Does The Money Multiplier Exist?

    With the use of nontraditional policy tools, the level of reserve balances has risen significantly in the United States since 2007. Before the financial crisis, reserve balances were roughly $20 billion whereas the level has risen well past $1 trillion. The effect of reserve balances in simple macroeconomic models often...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    The Bank Lending Channel Of Monetary Policy And Its Effect On Mortgage Lending

    The bank lending channel of monetary policy suggests that banks play a special role in the transmission of monetary policy. The author looks for this special role by examining the business strategies of banks as it relates to mortgage funding and mortgage lending. "Traditional banks" have a large supply of...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    The Depth Of Negative Equity And Mortgage Default Decisions

    A central question in the literature on mortgage default is at what point underwater homeowners walk away from their homes even if they can afford to pay. The author studies borrowers from Arizona, California, Florida, and Nevada who purchased homes in 2006 using non-prime mortgages with 100 percent financing. Almost...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Apr 2010

    How Has The Monetary Transmission Mechanism Evolved Over Time?

    The author discusses the evolution in macroeconomic thought on the monetary policy transmission mechanism and present related empirical evidence. The core channels of policy transmission - the neoclassical links between short-term policy interest rates, other asset prices such as long-term interest rates, equity prices, and the exchange rate, and the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Apr 2010

    Effects Of The 2003 Dividend Tax Cut: Evidence From Real Estate Investment Trusts

    Recent literature has estimated that the 2003 dividend tax cut caused a large in-crease in aggregate dividend payouts, which would imply that dividend taxation creates large efficiency costs relative to the amount of revenue raised. The author documents that dividend payouts by real estate investment trusts also rose sharply following...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Apr 2010

    Financial Statistics For The United States And The Crisis: What Did They Get Right, What Did They Miss, And How Should They Change?

    Although the instruments and transactions most closely associated with the financial crisis of 2008 and 2009 were novel, the underlying themes that played out in the crisis were familiar from previous episodes: Competitive dynamics resulted in excessive leverage and risk taking by large, interconnected firms, in heavy reliance on short-term...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Apr 2010

    Consumption Responses To Permanent And Transitory Shocks To House Appreciation

    The author estimates the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. Besides borrowing constraints, the author considers two different models under which those shocks may affect consumption. In the first one, treats housing as a risky asset. In the second one, housing...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Constructive Data Mining: Modeling Argentine Broad Money Demand

    This paper assesses the empirical merits of PcGets and Autometrics - two recent algorithms for computer-automated model selection - using them to improve upon Kamin and Ericsson's (1993) model of Argentine broad money demand. The selected model is an economically sensible and statistically satisfactory error correction model, in which cointegration...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2008

    Currency Crashes And Bond Yields In Industrial Countries

    This paper examines episodes of sudden large exchange rate depreciations (currency crashes) in industrial countries and characterizes the behavior of government bond yields during and after these crashes. The most important determinant of changes in bond yields appears to be inflationary expectations. When inflation is high and rising at the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2008

    International Asset Markets And Real Exchange Rate Volatility

    The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (Backus-Smith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2008

    Efficiency In Housing Markets: Do Home Buyers Know How To Discount?

    For the majority of households, the purchase of a home is the largest financial decision of their lives. One may therefore assume that housing market transactions are conducted by agents who have carefully evaluated all available information and that the resulting prices reflect that information. A growing number of studies,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2009

    Closing Large Open Economy Models

    In open economy models with incomplete asset markets the deterministic steady state depends on the initial conditions of the economy and the steady state is compatible with any level of international bond holdings. In a stochastic environment the linearized model generates non-stationary variables as international bond holdings follow a unit...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Oil Shocks And External Adjustment

    In reaction to the oil crises of the 1970s and early 1980s, as well as the more recent run-up in oil prices that started in 2003, the oil component of the U.S. trade balance consistently deteriorated. However, the link between oil prices and the overall goods trade balance appears more...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Financial Globalization And Monetary Policy

    This paper reviews the available evidence and previous research on potential effects of financial globalization, that is, the international integration of financial markets. In particular, the author addressed the questions: Has financial globalization materially increased the influence of external developments on domestic monetary conditions? And, has it reduced the influence...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Imperfect Credibility And The Zero Lower Bound On The Nominal Interest Rate

    When the nominal interest rate reaches its zero lower bound, credibility is crucial for conducting forward guidance. The authors determine optimal policy in a New Keynesian model when the central bank has imperfect credibility and cannot set the nominal interest rate below zero. In their model, an announcement of a...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Interpreting Investment-Specific Technology Shocks

    Investment-specific technology (IST) shocks are often interpreted as multi-factor productivity (MFP) shocks in a separate investment-producing sector. However, this interpretation is strictly valid only when some stringent conditions are satisfied. Some of these conditions are at odds with the data. Using a two-sector model whose calibration is based on the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Monetary Policy And The Cyclicality Of Risk

    The author use a DSGE model that generates endogenous movements in risk premia to ex-amine the positive and normative implications of alternative monetary policy rules. As emphasized by the microfinance literature, variation in risk arises because households face fixed costs of transferring cash across financial accounts, implying that some households...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Immigration, Remittances And Business Cycles

    The authors use data on border enforcement and macroeconomic indicators from the U.S. and Mexico to estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of labor migration to the U.S. and documents how remittances to Mexico serve an insurance role to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    News And Sovereign Default Risk In Small Open Economies

    This paper builds a model of sovereign debt in which default risk, interest rates, and debt depend not only on current fundamentals but also on news about future fundamentals. News shocks affect equilibrium outcomes because they contain information about the future ability of the government to repay its debt. First,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2009

    The Demand For Youth: Implications For The Hours Volatility Puzzle

    The employment and hours worked of young individuals fluctuate much more over the business cycle than those of prime-aged individuals. Understanding the mechanism underlying this observation is key to explaining the volatility of aggregate hours over the cycle. The authors argue that the joint behavior of age-specific hours and wages...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Mar 2009

    The Taylor Rule And Forecast Intervals For Exchange Rates

    This paper attacks the Meese-Rogoff (exchange rate disconnect) puzzle from a different perspective: out-of-sample interval forecasting. Most studies in the literature focus on point forecasts. In this paper, the author apply Robust Semi-parametric (RS) interval forecasting to a group of Taylor rule models. Forecast intervals for twelve OECD exchange rates...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2009

    Uncertainty Over Models And Data: The Rise And Fall Of American Inflation

    An economic agent who is uncertain of her economic model learns, and this learning is sensitive to the presence of data measurement error. The author investigates this idea in an existing framework that describes the Federal Reserve's role in U.S. inflation. This framework successfully fits the observed inflation to optimal...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2008

    Fiscal Policy In The European Monetary Union

    A country entering the EMU surrenders its monetary policy, and its debt becomes denominated in terms of a currency over which it has no direct control. A country's promise to uphold the fiscal limits in the Maastricht Treaty and the Stability and Growth Pact is implicitly a promise not to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2008

    Sudden Stops, Financial Crises And Leverage: A Fisherian Deflation of Tobin's Q

    This paper shows that the quantitative predictions of a DSGE model with an endogenous collateral constraint are consistent with key features of the emerging markets' Sudden Stops. Business cycle dynamics produce periods of expansion during which the ratio of debt to asset values raises enough to trigger the constraint. This...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2008

    The Fragility Of Sensitivity Analysis: An Encompassing Perspective

    Robustness and fragility in Leamer's sense are defined with respect to a particular coefficient over a class of models. This paper shows that inclusion of the data generation process in that class of models is neither necessary nor sufficient for robustness. This result holds even if the properly specified model...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2008

    Do Energy Prices Respond To U.S. Macroeconomic News?

    Models that treat innovations to the price of energy as predetermined with respect to U.S. macroeconomic aggregates are widely used in the literature. For example, it is common to order energy prices first in recursively identified VAR models of the transmission of energy price shocks. Since exactly identifying assumptions are...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2008

    A Non-Random Walk Revisited: Short- And Long-Term Memory In Asset Prices

    In this paper, the authors test for short and long memory in asset prices across 44 emerging and industrialized economies. Using methodology from Lo and MacKinlay (1988) and Lo (1991), they find that markets with a poor Sharpe ratio are more likely to reject the random walk than better performing...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2008

    Estimating The Parameters Of A Small Open Economy DSGE Model: Identifiability And Inferential Validity

    This paper estimates the parameters of a stylized dynamic stochastic general equilibrium model using maximum likelihood and Bayesian methods, paying special attention to the issue of weak parameter identification. Given the model and the available data, the posterior estimates of the weakly identified parameters are very sensitive to the choice...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2008

    Housing Market Risks In The United Kingdom

    House prices in the United Kingdom rose rapidly in recent years. The run-up, larger than any other in U.K. history, leveled off early last year. House prices are currently declining at rates faster than those seen in the early 1990's downturn. The housing downturn, however, is far from complete. Using...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2008

    Testing The Expectations Hypothesis When Interest Rates Are Near Integrated

    Nominal interest rates are unlikely to be generated by unit-root processes. Using data on short and long interest rates from eight developed and six emerging economies, the authors test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated. If the null hypothesis of no...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2008

    Do Fundamentals Explain The International Impact Of U.S. Interest Rates? Evidence At The Firm Level

    This paper analyzes the impact of U.S. monetary policy announcement surprises on U.S. and foreign firm-level equity prices. The authors find that U.S. monetary policy has important influences on foreign equity prices on average, but with considerable variation across firms. They have found that this differing response reflects a range...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2008

    Soft Information In Earnings Announcements: News Or Noise?

    This paper examines whether the "Soft" information contained in the text of management's quarterly earnings press releases is incrementally informative over the company's reported "hard" earnings news. The authors use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2008

    Assessing The Potential For Further Foreign Demand For U.S. Assets

    Since 2001, foreign investors have acquired roughly $5 trillion in U.S. securities - more than doubling their holdings of U.S. equities and bonds - as both official and private inflows have financed record U.S. current account deficits. Although the rapid growth of foreign holdings of U.S. securities raises concerns that...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Expected Consumption Growth From Cross-Country Surveys

    Survey data show that the expected growth rates of consumption across countries vary widely and are not highly correlated. This data contradicts the simplest of open-economy models in which there is a freely traded non state-contingent bond and purchasing power parity holds. The authors explore two alternative explanations for the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Exchange Rates And Fundamentals: A Generalization

    Exchange rates have raised the ire of economists for more than 20 years. The problem is that few, if any, exchange rate models are known to systematically beat a naive random walk in out of sample forecasts. Engel and West (2005) show that these failures can be explained by the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Current Account Sustainability And Relative Reliability

    The sustainability of the large and persistent U.S. current account deficits is one of the biggest issues currently being confronted by international macroeconomists. Some very plausible theories suggest that the substantial global imbalances can continue in a benign manner, other equally plausible theories predict a disorderly resolution, and in general...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Emerging Market Business Cycles With Remittance Fluctuations

    This paper analyzes the implications of remittance fluctuations for various macroeconomic variables and Sudden Stops. The paper employs a quantitative two-sector model of a small open economy with financial frictions calibrated to Mexican and Turkish economies, two major recipients, whose remittance receipts feature opposite cyclical characteristics. The authors find that...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    Escape From New York: The Market Impact Of SEC Rule 12h-6

    The authors examine the stock market impact of SEC Rule 12h-6 which eased the ability of foreign firms to deregister with the SEC and as a result terminate their U.S. disclosure obligations under the 1934 Securities Exchange Act. They document that the market reacted negatively to the ability of firms...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2008

    The Macroeconomic Effect Of External Pressures On Monetary Policy

    Central banks, whether independent or not, may occasionally be subject to external pressures to change policy objectives. The authors analyze the optimal response of central banks to such pressures and the resulting macroeconomic consequences. They consider several alternative scenarios regarding policy objectives, the degree of commitment and the timing of...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    The Information Content Of High-Frequency Data For Estimating Equity Return Models And Forecasting Risk

    The author demonstrate that the parameters controlling skewness and kurtosis in popular equity return models estimated at daily frequency can be obtained almost as precisely as if volatility is observable by simply incorporating the strong information content of realized volatility measures extracted from high-frequency data. For this purpose, the author...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Aug 2010

    The Effects Of Bank Capital On Lending: What Do We Know, And What Does It Mean?

    The effect of bank capital on lending is a critical determinant of the linkage between financial conditions and real activity, and has received special attention in the recent financial crisis. The author uses panel-regression techniques-following Bernanke and Lown (1991) and Hancock and Wilcox (1993, 1994)-to study the lending of large...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2010

    Fiscal Policy In The United States: Automatic Stabilizers, Discretionary Fiscal Policy Actions, And The Economy

    This paper examines the effects of the economy on the government budget as well as the effects of the budget on the economy. First, the author provides measures of the effects of automatic stabilizers on budget outcomes at the federal and state and local levels. For the federal government, the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    A Semiparametric Characterization Of Income Uncertainty Over The Life Cycle

    Income uncertainty plays an important role in household decisions regarding consumption, saving, and investment. First, in the presence of incomplete financial markets, households facing uninsurable income risk have to save for precautionary reasons. How much they need to save crucially depends on their level of future income uncertainty. Second, people...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Money, Reserves, And The Transmission Of Monetary Policy: Does The Money Multiplier Exist?

    With the use of nontraditional policy tools, the level of reserve balances has risen significantly in the United States since 2007. Before the financial crisis, reserve balances were roughly $20 billion whereas the level has risen well past $1 trillion. The effect of reserve balances in simple macroeconomic models often...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2010

    Check In The Mail Or More In The Paycheck: Does The Effectiveness Of Fiscal Stimulus Depend On How It Is Delivered?

    Recent fiscal policies have aimed to stimulate household spending. In 2008, most households received one-time economic stimulus payments. In 2009, most working households received the Making Work Pay tax credit in the form of reduced withholding; other households, mainly retirees, received one-time payments. This paper quantifies the spending response to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    The Bank Lending Channel Of Monetary Policy And Its Effect On Mortgage Lending

    The bank lending channel of monetary policy suggests that banks play a special role in the transmission of monetary policy. The author looks for this special role by examining the business strategies of banks as it relates to mortgage funding and mortgage lending. "Traditional banks" have a large supply of...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2010

    Exports, Borders, Distance, And Plant Size

    The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. The author examines this fact using Census micro data on plant shipments from the Commodity Flow Survey, also show the fact is not entirely an...

    Provided By Board of Governors of the Federal Reserve System