Board of Governors of the Federal Reserve System

Displaying 1-40 of 120 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

    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 // 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 // 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

    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 // 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

    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

    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 // 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 // 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 // Jul 2009

    Ownership And Asymmetric Information Problems In The Corporate Loan Market: Evidence From A Heteroskedastic Regression

    In this paper, the authors examine whether asymmetric information problems exist in the corporate loan market, and whether ownership of loans provides lenders the incentive to mitigate asymmetric information problems. The authors attempt to identify asymmetric information problems by testing the prediction of Leland and Pyle (1977), that loan ownership...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2009

    Limitations On The Effectiveness Of Forward Guidance At The Zero Lower Bound

    The recent literature on monetary policy in the presence of a zero lower bound on interest rates has shown that forward guidance regarding the path of interest rates can be very effective in preserving macroeconomic stability in the face of a contractionary demand shock; moreover, that literature apparently leaves little...

    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 // 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 // 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 // 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 // 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

    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 // 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 // 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 // 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 // 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 // Jun 2009

    On the Solvency Of Nations: Are Global Imbalances Consistent With Intertemporal Budget Constraints?

    Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net foreign assets (NFA) are integrated of any finite order, or if net exports (NX) and NFA satisfy an errorcorrection specification with a residual integrated of any finite order. The author test these conditions using data for 21...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2009

    South Africa's Post-Apartheid Two-Step: Social Demands Versus Macro Stability

    During Apartheid, there was little need for redistributional policies or to borrow for public works since the vast majority of the population was underserved. With the arrival of a representative democracy in 1994, however, South Africa faced a unique problem - providing new and improved public services for the majority...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2009

    The Impact Of Macroeconomic Announcements On Real Time Foreign Exchange Rates In Emerging Markets

    This paper utilizes a unique high-frequency database to measure how exchange rates in nine emerging markets react to macroeconomic news in the U.S. and domestic economies from 2000 to 2006. The author find that major U.S. macroeconomic news have a strong impact on the returns and volatilities of emerging market...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2009

    Border Prices And Retail Prices

    The author analyze retail prices and at-the-dock (import) prices of specific items in the Bureau of Labor Statistics’(BLS) CPI and IPP databases, using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail. This identification allows them to measure the distribution...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2009

    Consumption Response To Expected Future Income

    This paper shows empirical evidence in favor of forward-looking household consumption - that consumption today depends directly on household-specific ex-ante expectations of future income. This analysis is unique in using a direct consumption measure combined with an exante household-specific measure of expected future income, constructed from detailed survey and administrative...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // May 2009

    Pitfalls In Estimating Asymmetric Effects Of Energy Price Shocks

    A common view in the literature is that the effect of energy price shocks on macroeconomic aggregates is asymmetric in energy price increases and decreases. The author shows that widely used asymmetric vector autoregressive models of the transmission of energy price shocks are misspecified, resulting in inconsistent parameter estimates, and...

    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 // Jul 2008

    How Long Can The Unsustainable U.S. Current Account Deficit Be Sustained?

    This paper addresses three questions about the prospects for the U.S. current account deficit. Is it sustainable in the long term? If not, how long will it take for measures of external debt and debt service to reach levels that could prompt some pullback by global investors? And if and...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2010

    Structural Shocks And The Comovements Between Output And Interest Rates

    Stylized facts on U.S. output and interest rates have so far proved hard to match with DSGE models. But model predictions hinge on the joint specification of economic structure and a set of driving processes. In a model, different shocks often induce different co-movements, such that the overall pattern depends...

    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 // Dec 2009

    Tips From TIPS: The Informational Content Of Treasury Inflation-Protected Security Prices

    TIPS breakeven inflation rate, defined as the difference between nominal and TIPS yields of comparable maturities, is potentially useful as a real-time measure of market inflation expectations. In this paper, the author provides evidence that a fairly large TIPS liquidity premium existed until recently, using a multifactor no-arbitrage term structure...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2010

    Using A Projection Method To Analyze Inflation Bias In A Micro-Founded Model

    Since Kydland and Prescott (1977) and Barro and Gordon (1983), most studies of the problem of the inflation bias associated with discretionary monetary policy have assumed a quadratic loss function. The author departs from the conventional linear-quadratic approach to the problem in favor of a projection method approach. The author...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2010

    General-Equilibrium Effects Of Investment Tax Incentives

    The past two U.S. recessions have seen the enactment of sizeable fiscal stimulus packages. In each case, these packages have included significant provisions for temporary partial expensing allowances on business equipment investment.1 Specifically, the 2002 Job Creation and Worker Assistance Act, which went into effect after the 2001 recession, contained...

    Provided By Board of Governors of the Federal Reserve System