Board of Governors of the Federal Reserve System

Displaying 1-40 of 157 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

    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

    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

    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

    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

    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...

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  • 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 // 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 // Mar 2010

    Interest On Excess Reserves As A Monetary Policy Instrument: The Experience Of Foreign Central Banks

    This paper reviews the experience of eight major foreign central banks with policy interest rates comparable to the interest rate on excess reserves paid by the Federal Reserve. The author pursue two main lines of inquiry: 1) To what extent have these policy interest rates been lower bounds for short-term...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Mar 2010

    Offshore Production And Business Cycle Dynamics With Heterogeneous Firms

    Cross-country variation in production costs encourages the relocation of production facilities to other countries, a process known as offshoring through vertical foreign direct investment. The author examines the effect of offshoring on the international transmission of business cycles. Unlike the existing macroeconomic literature, the author distinguishes between fluctuations in the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    How Did A Domestic Housing Slump Turn Into A Global Financial Crisis?

    The global financial crisis clearly started with problems in the U.S. subprime sector and spread across the world from there. But was the direct exposure of foreigners to the U.S. financial system a key driver of the crisis, or did other factors account for its rapid contagion across the world?...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    Term Structure Forecasting Using Macro Factors And Forecast Combination

    The authors examine the importance of incorporating macroeconomic information and, in particular, accounting for model uncertainty when forecasting the term structure of U.S. interest rates. They start off by analyzing and comparing the forecast performance of several individual term structure models. Their results confirm and extend results found in previous...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    Technology Shocks: Novel Implications For International Business Cycles

    Understanding the joint dynamics of international prices and quantities remains a central issue in international business cycles. International relative prices appreciate when domestic consumption and output increase more than their foreign counterparts. In addition, both trade flows and trade prices display sizable volatility. This paper incorporates Hicks-neutral and investment-specific technology...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    Heterogeneous Firms And Import Quality: Evidence From Transaction-Level Prices

    A key emerging insight in international economics is that the scope for quality differentiation can help to explain patterns in export prices at the level of products or firms. In this paper, a unified theoretical framework of firm heterogeneity in cost and quality is brought to bear on an expansive...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2009

    Firm-Specific Capital, Nominal Rigidities And The Business Cycle

    This paper formulates and estimates a three-shock US business cycle model. The estimated model accounts for a substantial fraction of the cyclical variation in output and is consistent with the observed inertia in inflation. This is true even though firms in the model reoptimize prices on average once every 1.8...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Labor Market Search In Emerging Economies

    This paper shows that labor markets of emerging economies are characterized by large fluctuations in wages while employment fluctuations are subdued. The author find that a real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions can account for these aforementioned regularities. Moreover,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Asset Returns With Earnings Management

    This paper investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic revelations of the firm's underlying profitability. The return process generated...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Are Chinese Exports Sensitive To Changes In The Exchange Rate?

    This paper builds a model of two types of Chinese exports, those processed and assembled largely from imported inputs ("processed" exports) and "non-processed" exports. Based on this model, the sensitivity of Chinese exports to exchange rate changes is empirically examined. Unlike previous work, the estimation period includes the net real...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Diversification Across Characteristics

    The author study long-short portfolio strategies formed on seven different stock characteristics representing various measures of past returns, value, and size. Each individual characteristic results in a profitable portfolio strategy, but these single-characteristic strategies are all dominated by a diversified strategy that places equal weight on each of the single-characteristic...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Executive Compensation And Earnings Management Under Moral Hazard

    This paper analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. The author examines how the opportunity to manipulate affects the optimal pay contract, and establishes necessary and sufficient conditions under which earnings management occurs....

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2009

    Portfolio Inertia And The Equity Premium

    The author developed a DSGE model in which aggregate shocks induce endogenous movements in risk. The key feature of this model is that households rebalance their financial portfolio allocations infrequently, as they face a fixed cost of transferring cash across accounts. They show that the model can account for the...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2009

    The Effects Of Foreign Shocks When Interest Rates Are At Zero

    In a two-country DSGE model, the effects of foreign demand shocks on the home country are greatly amplified if the home economy is constrained by the zero lower bound for policy interest rates. This result applies even to countries that are relatively closed to trade such as the United States....

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2009

    The Market-Perceived Monetary Policy Rule

    The authors introduce a novel method for estimating a monetary policy rule using macroeconomic news. Market forecasts of both economic conditions and monetary policy are affected by news, and their estimation links the two effects. This enables them to estimate directly the policy rule agents use to form their expectations,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2009

    Characteristic-Based Mean-Variance Portfolio Choice

    The author study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a mean-variance analysis of assets with returns...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Oct 2009

    Rise Of The Machines: Algorithmic Trading In The Foreign Exchange Market

    The author study the impact that algorithmic trading, computers directly interfacing at high frequency with trading platforms, has had on price discovery and volatility in the foreign exchange market. Their dataset represents a majority of global interdealer trading in three major currency pairs in 2006 and 2007. Importantly, it contains...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Aug 2009

    Decomposing The U.S. External Returns Differential

    The author decomposed the returns differential between U.S. portfolio claims and liabilities into the composition, return, and timing effects. Their most striking and robust finding is that foreigners exhibit poor timing when reallocating between bonds and equities within their U.S. portfolios. The poor timing of foreign investors - caused primarily...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jun 2009

    The Puzzling Peso

    In the past decade, some observers have noted an unusual aspect of the Mexican peso's behavior: During periods when the U.S. dollar has risen (fallen) against other major currencies such as the euro, the peso has risen (fallen) against the dollar. Very few other currencies display this behavior. In this...

    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 // Mar 2009

    Exchange Rates Dependence: What Drives It?

    Exchange rate movements are difficult to predict but there appear to be discernible patterns in how currencies jointly appreciate or depreciate against the dollar. In this paper, the author studied the dependence structure of a number of exchange rate pairs against the dollar. They employ a conditional copula approach to...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Feb 2009

    Markup Variation And Endogenous Fluctuations In The Price Of Investment Goods

    The two sector model presented in this note suggests a simple structural decomposition of movements in the price of investment goods into exogenous and endogenous sources. The endogenous fluctuations arise in the presence of countercyclical markups which vary differently across the consumption and investment sectors. In turn, the movements in...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Mar 2009

    Biofuels Impact On Crop And Food Prices: Using An Interactive Spreadsheet

    This paper examines the effect that biofuels production has had on commodity and global food prices. The innovative contribution of this paper is the interactive spreadsheet that allows the reader to choose the assumptions behind the estimates. By allowing the reader to choose the country, time period, supply and demand...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    Mergers And Sequential Innovation: Evidence From Patent Citations

    An extensive literature has investigated the effect of market structure on innovation. A persistent concern is that market structure may be endogenous to innovation. Firms may choose to merge so as to capture information spillovers or they may choose to merge so as to dampen competition in innovation. These two...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Aug 2009

    Managing Beliefs About Monetary Policy Under Discretion

    In models of monetary policy, discretionary policymaking often lacks the ability to manage public beliefs, which explains the theoretical appeal of policy rules and commitment strategies. But as shown in this paper, when a policymaker possesses private information, belief management becomes an integral part of optimal discretion policies and improves...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Nov 2009

    Pricing Counterparty Risk At The Trade Level And CVA Allocations

    The paper addresses the problem of allocating the counterparty-level credit valuation adjustment (CVA) to the individual trades composing the portfolio. The author shows that this problem can be reduced to calculating contributions of the trades to the counterparty-level expected exposure (EE) conditional on the counterparty's default, also proposes a methodology...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jul 2009

    Are Spectral Estimators Useful For Implementing Long-Run Restrictions In SVARs?

    No, not really, since spectral estimators suffer from small sample and misspecification biases just as VARs do. Spectral estimators are no panacea for implementing long-run restrictions. In addition, when combining VAR coefficients with non-parametric estimates of the spectral density, care needs to be taken to consistently account for information embedded...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    Distance Still Matters: The Information Revolution In Small Business Lending And The Persistent Role Of Location, 1993-2003

    During the past several decades, technological improvements have permitted banks to interact with customers more efficiently (e.g., online banking and automated teller machines) and to measure and manage risk more effectively (e.g., credit scoring). At the same time, deregulation has reduced restrictions on branching activity (both intrastate and interstate) and,...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    The Mechanics Of A Graceful Exit: Interest On Reserves And Segmentation In The Federal Funds Market

    To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    The Finances Of American Households In The Past Three Recessions: Evidence From The Survey Of Consumer Finances

    The downturn in economic activity in the U.S. that began in December 2007 (as determined by researchers with the National Bureau of Economic Research) has been noticeably deeper and has already lasted considerably longer than the prior two recessions - those beginning in July 1990 and in March 2001. In...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Sep 2009

    Constant Proportion Debt Obligations: A Post-Mortem Analysis Of Rating Models

    In its complexity and its vulnerability to market volatility, the CPDO might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex structured products. The author demonstrates...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Jan 2010

    Income Taxes, Compensating Differentials, And Occupational Choice: How Taxes Distort The Wage-Amenity Decision

    The link between taxes and occupational choices is central for understanding the welfare impacts of income taxes. Just as taxes distort the labor-leisure decision, they also distort the wage-amenity decision. Yet, there are no estimates of the full response on this margin. When tax rates increase, workers favor jobs with...

    Provided By Board of Governors of the Federal Reserve System

  • White Papers // Dec 2009

    The Impact Of Low-Skilled Immigration On The Youth Labor Market

    The employment-to-population rate of high-school aged youth has fallen by about 20 percentage points since the late 1980s. The human capital implications of this decline depend on the reasons behind it. In this paper, the author demonstrates that growth in the number of less-educated immigrants may have considerably reduced youth...

    Provided By Board of Governors of the Federal Reserve System