Federal Reserve Board

Displaying 1-31 of 31 results

  • White Papers // Jun 2011

    Trade Credit And International Trade During The 2008-09 Global Financial Crisis

    This paper studies the role of the credit crunch in the severe contraction of trade and economic activity at the height of the 2008-09 global financial crisis, using firm-level data from six emerging market economies in Asia. The authors construct firm-specific measures of global demand, which allow them to disentangle...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Financial Capital And The Macroeconomy: Policy Considerations

    The authors develop a macroeconomic model in which the balance sheet/liquidity condition of financial institutions plays an important role in the determination of asset prices and economic activity. The financial intermediaries in the model are required to make investment commitments before a complete resolution of idiosyncratic funding risk that can...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Financial Capital And The Macroeconomy: A Quantitative Framework

    Financial intermediation transforms short-term liquid assets into long-term capital assets. As a result, risk taking, in the form of long-term commitments despite unresolved short-term funding risk, is an essential element of intermediation. If such funding risk must be addressed by costly recapitalization and/or distressed asset sales due to capital market...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Credit Supply To Personal Bankruptcy Filers: Evidence From Credit Card Mailings

    Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, the authors directly explore the supply of unsecured credit to consumers with the most conspicuous default risk - those with a bankruptcy history. On average, over...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Cointegration Test With Stationary Covariates And The CDS-Bond Basis During The Financial Crisis

    This paper proposes a residual based cointegration test with improved power. Based on the idea of Hansen (1995) and Elliott & Jansson (2003) in the unit root testing case, stationary covariates are used to improve the power of the residual based Augmented Dickey Fuller (ADF) test. The asymptotic null distribution...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Investment, Accounting, And The Salience Of The Corporate Income Tax

    This paper develops and tests the hypothesis that accounting rules mitigate the impact of tax policy on investment decisions by obscuring the timing of tax payments. The author models a firm that maximizes a discounted weighted average of after-tax cash flows and accounting profits. The cost of capital and the...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Surveying The Aftermath Of The Storm: Changes In Family Finances From 2007 To 2009

    From 2007 to 2009, wealth declined for most families across the initial 2007 wealth spectrum, and it declined very substantially for some. Yet many families saw only small changes and a non-negligible group of families saw substantial increases in their wealth. This diversity of outcomes is pervasive in the data....

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    The First Line Of Defense: The Discount Window During The Early Stages Of The Financial Crisis

    This paper develops a theoretical model of trading in the federal funds market that captures characteristics of discount window borrowing and the federal funds market during the first year of the financial crisis, including the narrowing of the spread between the discount rate and the target rate; the increased incidence...

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    Creating A Linchpin For Financial Data: Toward A Universal Legal Entity Identifier

    The financial industry runs on information and data. Although financial data are made up of innumerable complex and idiosyncratic components, a fundamental building block for analysis is reference data about companies, organizations, and firms (henceforth referred to collectively as entities). Reference data might include a number of things, but an...

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    Verifying The State Of Financing Constraints: Evidence From U.S. Business Credit Contracts

    Which of the strategies for financing constraints in economic models is the most empirically plausible? This paper tests two commonly used models of financing constraints, costly state verification (Townsend, 1979) and moral hazard (Holmstrom and Tirole, 1997), using a comprehensive data set of US small business credit contracts. The data...

    Provided By Federal Reserve Board

  • White Papers // Nov 2010

    Foreclosure's Wake: The Credit Experiences Of Individuals Following Foreclosure

    While a substantial literature has examined the causes of mortgage foreclosure, there has been relatively little work on the consequences of foreclosure for the borrowers themselves. Using a large sample of anonymous credit bureau records, observed quarterly from 1999Q1 through 2010Q1, the authors examine the credit experiences of almost 350,000...

    Provided By Federal Reserve Board

  • White Papers // Nov 2010

    Inflation Persistence, Backward-Looking Firms, And Monetary Policy In An Input-Output Economy

    This paper studies the implications of inflation persistence (generated by backward-looking price setters) for monetary policy in a New Keynesian "Input-output" model - a model with sticky prices in both intermediate and final goods sectors. Optimal policy under commitment depends on the degree of inflation persistence in both sectors. Under...

    Provided By Federal Reserve Board

  • White Papers // Oct 2010

    Does Credit Scoring Produce A Disparate Impact?

    The widespread use of credit scoring in the underwriting and pricing of mortgage and consumer credit has raised concerns that the use of these scores may unfairly disadvantage minority populations. A specific concern has been that the independent variables that comprise these models may have a disparate impact on these...

    Provided By Federal Reserve Board

  • White Papers // Oct 2010

    Money And Inflation: Some Critical Issues

    The authors consider what, if any, relationship there is between monetary aggregates and inflation, and whether there is any substantial reason for modifying the current mainstream mode of policy analysis, which frequently does not consider monetary aggregates at all. They begin by considering the body of thought known as the...

    Provided By Federal Reserve Board

  • White Papers // Sep 2010

    The Cross Section Of Money Market Fund Risks And Financial Crises

    This paper examines the relationship between Money Market Fund (MMF) risks and outcomes during crises, with a focus on the ABCP crisis in 2007 and the run on money funds in 2008. The author analyzes three broad types of MMF risks: portfolio risks arising from a fund's assets, investor risk...

    Provided By Federal Reserve Board

  • White Papers // Mar 2010

    Integrating Tables and Graphs With ODS LAYOUT

    ODS layout of PDF output can arrange multiple tables and graphs on the same page, and even overlay tables onto graphs and vice versa. This can replace GREPLAY coding of multiple graphs with reduction of the most tedious aspects. It also provides easier and more flexible coding of certain elements...

    Provided By Federal Reserve Board

  • White Papers // Aug 2009

    Frequency Of Observation And The Estimation Of Integrated Volatility In Deep And Liquid Financial Markets

    Using two newly available ultrahigh-frequency datasets, one investigates empirically how frequently one can sample certain foreign exchange and U.S. Treasury security returns without contaminating estimates of their integrated volatility with market microstructure noise. Using the standard realized volatility estimator, it's found that one can sample dollar/euro returns as frequently as...

    Provided By Federal Reserve Board

  • White Papers // Jun 2009

    Constructive Data Mining: Modeling Australian Inflation

    This paper improves upon de Brouwer and Ericsson's (1998) model of Australian inflation in three directions: cointegration analysis, treatment of weak exogeneity, and model design. On the third issue, recent developments in computer-automated model selection help obtain a more parsimonious, empirically constant, data-coherent, encompassing error correction model for inflation in...

    Provided By Federal Reserve Board

  • White Papers // May 2009

    The 'Elusive' Capital-User Cost Elasticity Revisited

    This paper sheds new light on the estimation of the long-run elasticity of the demand for business capital-for a measure that includes both equipment and structures-to changes in its user cost using quarterly panel of two-digit manufacturing industries from South Africa from 1970 to 2000. For a variety of regression...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    Stock Market Participation, Portfolio Choice And Pensions Over The Life-Cycle

    The empirical evidence on stock market participation and portfolio choice defies the predictions of standard life-cycle theory. In this paper, the author develops and estimate a model of portfolio choice that can account for the limited stock market participation and substantial portfolio diversification seen in the data. The author presents...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    The Past, Present, And Future Of Subprime Mortgages

    This paper models the historical default and prepayment behavior for subprime mortgages using data on securitized mortgages originated from 2000 to 2007. It's found that more recently originated subprime loans are more likely to default, well ahead of their first mortgage rate resets, and less likely to prepay (i.e., refinance)....

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    Giving Credit Where Credit Is Due? The Community Reinvestment Act And Mortgage Lending In Lower-Income Neighborhoods

    The U.S. government has long intervened in credit markets to improve credit access. Economic and sociological theories suggesting that credit access and homeownership generate important individual and social benefits such as improved self-esteem and child outcomes, reduced crime and increased voter turnout often motivate such policies. Congress passed the Community...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    The Rise In Mortgage Defaults

    The mortgage market began suffering serious problems in mid-2005. According to data from the Mortgage Bankers Association, share of mortgage loans that were "seriously delinquent" (90 days or more past due or in the process of foreclosure) averaged 1.7 percent from 1979 to 2006, with a low of about 0.7...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    Lack Of Signal Error (LoSE) And Implications For OLS Regression: Measurement Error For Macro Data

    This paper proposes a simple generalization of the classical measurement error model, introducing new measurement errors that subtract signal from the true variable of interest, in addition to the usual classical measurement errors (CME) that add noise. The effect on OLS regression of these lack of signal errors (LoSE) is...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Evolving Relationship Between Community Banks And Small Businesses

    The SSBFs provide extensive data on the types of financial services used by small businesses and the sources of those services. These data allow one to answer a number of interesting questions regarding small business usage of community banks, including the following: To what extent do small businesses rely on...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    Distress In The Financial Sector And Economic Activity

    This paper explores the relationship between the health of the financial sector and the rest of the economy. The author develops an indicator of financial sector health using a distance-to-default measure based on a Merton-style option pricing model. The measure spans over three decades and appears to capture periods when...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Incentives Of Mortgage Servicers: Myths And Realities

    As foreclosure initiations have soared over the past couple of years, many have questioned whether mortgage servicers have the right incentives to work out troubled subprime mortgages so that borrowers can avoid foreclosure and remain in their homes. Some critics claim that because servicers, unlike investors, do not bear the...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Rigidity Of Choice. Lifecycle Savings With Information-Processing Limits

    This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process concerning their financial possibilities, constrained by a Shan-non channel. The model...

    Provided By Federal Reserve Board

  • White Papers // Sep 2008

    Does Credit Supply Affect Small-Firm Finance?

    Relaxation of geographical restrictions on bank expansion was 'completed' in 1997 when Federal legislation - the Interstate Banking and Branching Efficiency Act (IBBEA) - permitted banks and bank holding companies to expand across state lines. This legislation seemingly ended the era of geographical restrictions on bank expansion that date back...

    Provided By Federal Reserve Board

  • White Papers // Sep 2008

    The Use Of Alternative Employment Arrangements By Small Businesses

    According to the CPS, employees in alternative work arrangements make up over 10 percent of U.S. workers. Because of the pervasiveness of these types of arrangements, it is important to understand why firms are choosing to use them. Using data from the 2003 Survey of Small Business Finances, the author...

    Provided By Federal Reserve Board

  • White Papers // May 2002

    What Drives the Persistent Competitiveness of Small Banks?

    Several trends in the financial industry could have weakened the competitiveness of small banks in the past. Despite those challenges, small banks have grown more rapidly than larger banks over the period from 1985 to 2001, and their profitability has been sustained at high levels. However, small banks have needed...

    Provided By Federal Reserve Board

  • White Papers // May 2002

    What Drives the Persistent Competitiveness of Small Banks?

    Several trends in the financial industry could have weakened the competitiveness of small banks in the past. Despite those challenges, small banks have grown more rapidly than larger banks over the period from 1985 to 2001, and their profitability has been sustained at high levels. However, small banks have needed...

    Provided By Federal Reserve Board

  • White Papers // Jun 2009

    Constructive Data Mining: Modeling Australian Inflation

    This paper improves upon de Brouwer and Ericsson's (1998) model of Australian inflation in three directions: cointegration analysis, treatment of weak exogeneity, and model design. On the third issue, recent developments in computer-automated model selection help obtain a more parsimonious, empirically constant, data-coherent, encompassing error correction model for inflation in...

    Provided By Federal Reserve Board

  • White Papers // Mar 2010

    Integrating Tables and Graphs With ODS LAYOUT

    ODS layout of PDF output can arrange multiple tables and graphs on the same page, and even overlay tables onto graphs and vice versa. This can replace GREPLAY coding of multiple graphs with reduction of the most tedious aspects. It also provides easier and more flexible coding of certain elements...

    Provided By Federal Reserve Board

  • White Papers // Aug 2009

    Frequency Of Observation And The Estimation Of Integrated Volatility In Deep And Liquid Financial Markets

    Using two newly available ultrahigh-frequency datasets, one investigates empirically how frequently one can sample certain foreign exchange and U.S. Treasury security returns without contaminating estimates of their integrated volatility with market microstructure noise. Using the standard realized volatility estimator, it's found that one can sample dollar/euro returns as frequently as...

    Provided By Federal Reserve Board

  • White Papers // May 2009

    The 'Elusive' Capital-User Cost Elasticity Revisited

    This paper sheds new light on the estimation of the long-run elasticity of the demand for business capital-for a measure that includes both equipment and structures-to changes in its user cost using quarterly panel of two-digit manufacturing industries from South Africa from 1970 to 2000. For a variety of regression...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    Stock Market Participation, Portfolio Choice And Pensions Over The Life-Cycle

    The empirical evidence on stock market participation and portfolio choice defies the predictions of standard life-cycle theory. In this paper, the author develops and estimate a model of portfolio choice that can account for the limited stock market participation and substantial portfolio diversification seen in the data. The author presents...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    The Past, Present, And Future Of Subprime Mortgages

    This paper models the historical default and prepayment behavior for subprime mortgages using data on securitized mortgages originated from 2000 to 2007. It's found that more recently originated subprime loans are more likely to default, well ahead of their first mortgage rate resets, and less likely to prepay (i.e., refinance)....

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Rigidity Of Choice. Lifecycle Savings With Information-Processing Limits

    This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process concerning their financial possibilities, constrained by a Shan-non channel. The model...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    Giving Credit Where Credit Is Due? The Community Reinvestment Act And Mortgage Lending In Lower-Income Neighborhoods

    The U.S. government has long intervened in credit markets to improve credit access. Economic and sociological theories suggesting that credit access and homeownership generate important individual and social benefits such as improved self-esteem and child outcomes, reduced crime and increased voter turnout often motivate such policies. Congress passed the Community...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Evolving Relationship Between Community Banks And Small Businesses

    The SSBFs provide extensive data on the types of financial services used by small businesses and the sources of those services. These data allow one to answer a number of interesting questions regarding small business usage of community banks, including the following: To what extent do small businesses rely on...

    Provided By Federal Reserve Board

  • White Papers // Nov 2008

    The Rise In Mortgage Defaults

    The mortgage market began suffering serious problems in mid-2005. According to data from the Mortgage Bankers Association, share of mortgage loans that were "seriously delinquent" (90 days or more past due or in the process of foreclosure) averaged 1.7 percent from 1979 to 2006, with a low of about 0.7...

    Provided By Federal Reserve Board

  • White Papers // Sep 2008

    Does Credit Supply Affect Small-Firm Finance?

    Relaxation of geographical restrictions on bank expansion was 'completed' in 1997 when Federal legislation - the Interstate Banking and Branching Efficiency Act (IBBEA) - permitted banks and bank holding companies to expand across state lines. This legislation seemingly ended the era of geographical restrictions on bank expansion that date back...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    The Incentives Of Mortgage Servicers: Myths And Realities

    As foreclosure initiations have soared over the past couple of years, many have questioned whether mortgage servicers have the right incentives to work out troubled subprime mortgages so that borrowers can avoid foreclosure and remain in their homes. Some critics claim that because servicers, unlike investors, do not bear the...

    Provided By Federal Reserve Board

  • White Papers // Sep 2008

    The Use Of Alternative Employment Arrangements By Small Businesses

    According to the CPS, employees in alternative work arrangements make up over 10 percent of U.S. workers. Because of the pervasiveness of these types of arrangements, it is important to understand why firms are choosing to use them. Using data from the 2003 Survey of Small Business Finances, the author...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    Distress In The Financial Sector And Economic Activity

    This paper explores the relationship between the health of the financial sector and the rest of the economy. The author develops an indicator of financial sector health using a distance-to-default measure based on a Merton-style option pricing model. The measure spans over three decades and appears to capture periods when...

    Provided By Federal Reserve Board

  • White Papers // Oct 2008

    Lack Of Signal Error (LoSE) And Implications For OLS Regression: Measurement Error For Macro Data

    This paper proposes a simple generalization of the classical measurement error model, introducing new measurement errors that subtract signal from the true variable of interest, in addition to the usual classical measurement errors (CME) that add noise. The effect on OLS regression of these lack of signal errors (LoSE) is...

    Provided By Federal Reserve Board

  • White Papers // Jun 2011

    Trade Credit And International Trade During The 2008-09 Global Financial Crisis

    This paper studies the role of the credit crunch in the severe contraction of trade and economic activity at the height of the 2008-09 global financial crisis, using firm-level data from six emerging market economies in Asia. The authors construct firm-specific measures of global demand, which allow them to disentangle...

    Provided By Federal Reserve Board

  • White Papers // Nov 2010

    Inflation Persistence, Backward-Looking Firms, And Monetary Policy In An Input-Output Economy

    This paper studies the implications of inflation persistence (generated by backward-looking price setters) for monetary policy in a New Keynesian "Input-output" model - a model with sticky prices in both intermediate and final goods sectors. Optimal policy under commitment depends on the degree of inflation persistence in both sectors. Under...

    Provided By Federal Reserve Board

  • White Papers // Oct 2010

    Money And Inflation: Some Critical Issues

    The authors consider what, if any, relationship there is between monetary aggregates and inflation, and whether there is any substantial reason for modifying the current mainstream mode of policy analysis, which frequently does not consider monetary aggregates at all. They begin by considering the body of thought known as the...

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    Verifying The State Of Financing Constraints: Evidence From U.S. Business Credit Contracts

    Which of the strategies for financing constraints in economic models is the most empirically plausible? This paper tests two commonly used models of financing constraints, costly state verification (Townsend, 1979) and moral hazard (Holmstrom and Tirole, 1997), using a comprehensive data set of US small business credit contracts. The data...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Financial Capital And The Macroeconomy: Policy Considerations

    The authors develop a macroeconomic model in which the balance sheet/liquidity condition of financial institutions plays an important role in the determination of asset prices and economic activity. The financial intermediaries in the model are required to make investment commitments before a complete resolution of idiosyncratic funding risk that can...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Financial Capital And The Macroeconomy: A Quantitative Framework

    Financial intermediation transforms short-term liquid assets into long-term capital assets. As a result, risk taking, in the form of long-term commitments despite unresolved short-term funding risk, is an essential element of intermediation. If such funding risk must be addressed by costly recapitalization and/or distressed asset sales due to capital market...

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    The First Line Of Defense: The Discount Window During The Early Stages Of The Financial Crisis

    This paper develops a theoretical model of trading in the federal funds market that captures characteristics of discount window borrowing and the federal funds market during the first year of the financial crisis, including the narrowing of the spread between the discount rate and the target rate; the increased incidence...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Cointegration Test With Stationary Covariates And The CDS-Bond Basis During The Financial Crisis

    This paper proposes a residual based cointegration test with improved power. Based on the idea of Hansen (1995) and Elliott & Jansson (2003) in the unit root testing case, stationary covariates are used to improve the power of the residual based Augmented Dickey Fuller (ADF) test. The asymptotic null distribution...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Surveying The Aftermath Of The Storm: Changes In Family Finances From 2007 To 2009

    From 2007 to 2009, wealth declined for most families across the initial 2007 wealth spectrum, and it declined very substantially for some. Yet many families saw only small changes and a non-negligible group of families saw substantial increases in their wealth. This diversity of outcomes is pervasive in the data....

    Provided By Federal Reserve Board

  • White Papers // Jan 2011

    Creating A Linchpin For Financial Data: Toward A Universal Legal Entity Identifier

    The financial industry runs on information and data. Although financial data are made up of innumerable complex and idiosyncratic components, a fundamental building block for analysis is reference data about companies, organizations, and firms (henceforth referred to collectively as entities). Reference data might include a number of things, but an...

    Provided By Federal Reserve Board

  • White Papers // Mar 2011

    Investment, Accounting, And The Salience Of The Corporate Income Tax

    This paper develops and tests the hypothesis that accounting rules mitigate the impact of tax policy on investment decisions by obscuring the timing of tax payments. The author models a firm that maximizes a discounted weighted average of after-tax cash flows and accounting profits. The cost of capital and the...

    Provided By Federal Reserve Board

  • White Papers // May 2011

    Credit Supply To Personal Bankruptcy Filers: Evidence From Credit Card Mailings

    Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, the authors directly explore the supply of unsecured credit to consumers with the most conspicuous default risk - those with a bankruptcy history. On average, over...

    Provided By Federal Reserve Board

  • White Papers // Nov 2010

    Foreclosure's Wake: The Credit Experiences Of Individuals Following Foreclosure

    While a substantial literature has examined the causes of mortgage foreclosure, there has been relatively little work on the consequences of foreclosure for the borrowers themselves. Using a large sample of anonymous credit bureau records, observed quarterly from 1999Q1 through 2010Q1, the authors examine the credit experiences of almost 350,000...

    Provided By Federal Reserve Board

  • White Papers // Oct 2010

    Does Credit Scoring Produce A Disparate Impact?

    The widespread use of credit scoring in the underwriting and pricing of mortgage and consumer credit has raised concerns that the use of these scores may unfairly disadvantage minority populations. A specific concern has been that the independent variables that comprise these models may have a disparate impact on these...

    Provided By Federal Reserve Board

  • White Papers // Sep 2010

    The Cross Section Of Money Market Fund Risks And Financial Crises

    This paper examines the relationship between Money Market Fund (MMF) risks and outcomes during crises, with a focus on the ABCP crisis in 2007 and the run on money funds in 2008. The author analyzes three broad types of MMF risks: portfolio risks arising from a fund's assets, investor risk...

    Provided By Federal Reserve Board