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mdown.html
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<title>Recent Federal Reserve Research</title>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/feddwp/1810.html" target="_blank">Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/anilkumar.html" target="_blank">Anil Kumar</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/cheyuanliang.html" target="_blank">Che-Yuan Liang</a></span>
<br>Federal Reserve Bank of Dallas
<br>Working Papers 1810
<br><a class="downloadlink" href="https://www.dallasfed.org/-/media/documents/research/papers/2018/wp1810.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We exploit the 1998 and 2003 constitutional amendment in Texas—allowing home equity loans and lines of credit for non-housing purposes—as natural experiments to estimate the effect of easier credit access on the labor market. Using state-level as well as county-level data and the synthetic control approach, we find that easier access to housing credit led to a notably lower labor force participation rate between 1998 and 2007. We show that our findings are remarkably robust to improved synthetic control methods based on insights from machine-learning. We explore treatment effect heterogeneity using grouped data from the basic monthly CPS and find that declines in the labor force participation rate were larger among females, prime age individuals, and the college-educated. Analysis of March CPS data confirms that the negative effect of easier home equity access on labor force participation was largely concentrated among homeowners, with little discernible impact on renters, as expected. We find that, while the labor force participation rate experienced persistent declines following the amendments that allowed access to home equity, the impact on GDP growth was relatively muted. Our research shows that labor market effects of easier credit access should be an important factor when assessing its stimulative impact on overall growth.</p>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fednsr/862.html" target="_blank">Insider networks</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/selmanerol.html" target="_blank">Selman Erol</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/michaeljunholee.html" target="_blank">Michael Junho Lee</a></span>
<br>Federal Reserve Bank of New York
<br>Staff Reports 862
<br><a class="downloadlink" href="https://www.newyorkfed.org/research/staff_reports/sr862.html" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper develops a model to study the formation and regulation of information transmission networks. We analyze a cat and mouse game between a regulator, who sets and enforces a regulatory environment, and agents, who form networks to disseminate and share insider information. For any given regulatory environment, agents adapt by forming networks that are sufficiently complex to circumvent prosecution by regulators. We show that regulatory ambiguity arises as an equilibrium phenomenon—regulators deliberately set broad regulatory boundaries in order to avoid explicit gaming by agents. As a response, we show that agents form a core-periphery network, with core members acting as conduits of information on behalf of their stakeholders, effectively intermediating all transmissions of information within the network.</p>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fednsr/863.html" target="_blank">Credit market choice</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/ninaboyarchenko.html" target="_blank">Nina Boyarchenko</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/annamcostello.html" target="_blank">Anna M. Costello</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/orshachar.html" target="_blank">Or Shachar</a></span>
<br>Federal Reserve Bank of New York
<br>Staff Reports 863
<br><a class="downloadlink" href="https://www.newyorkfed.org/research/staff_reports/sr863.html" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Which markets do institutions use to change exposure to credit risk? Using a unique data set of transactions in corporate bonds and credit default swaps (CDS) by large financial institutions, we show that simultaneous transactions in both markets are rare, with an average institution having an 11 percent probability of transacting in both the CDS and bond markets in the same entity in an average week. When institutions do transact in both markets simultaneously, they increase their speculative positions in CDS by 13 cents per dollar of bond transactions, and their hedging positions by 13 cents per dollar of bond transactions. We find evidence that, during the post-crisis rule implementation period, the incentive to use paired transactions is reduced but so is the incentive to take naked positions in the CDS market. When single name contracts become eligible for central clearing, globally systemically important institutions become more likely to use single name CDS contracts. Finally, we show that, in the aggregate, U.S. globally systemically important institutions reduce their exposure to corporate credit risk in the rule implementation period, primarily through reducing the amount of credit protection sold in the index CDS market.</p>
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<span class="date">04 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fednsp/291.html" target="_blank">Confidence in the implementation of U.S. monetary policy normalization: remarks at the 23rd EMEAP (Executives’ Meeting of East Asia-Pacific Central Banks) Governors’ Meeting, Manila, Philippines</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/simonmpotter.html" target="_blank">Simon M. Potter</a></span>
<br>Federal Reserve Bank of New York
<br>Speech 291
<br><a class="downloadlink" href="https://www.newyorkfed.org/newsevents/speeches/2018/pot180803" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Remarks at the 23rd EMEAP (Executives’ Meeting of East Asia-Pacific Central Banks) Governors’ Meeting, Manila, Philippines.</p>
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<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedlwp/2018-015.html" target="_blank">Financial Development and International Trade</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/fernandoleibovici.html" target="_blank">Fernando Leibovici</a></span>
<br>Federal Reserve Bank of St. Louis
<br>Working Papers 2018-15
<br><a class="downloadlink" href="https://s3.amazonaws.com/real.stlouisfed.org/wp/2018/2018-015.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the aggregate-level. These findings are consistent with estimates from cross-country industry-level and aggregate data.</p>
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<span class="date">01 Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/feddgw/342.html" target="_blank">Explosive Dynamics in House Prices? An Exploration of Financial Market Spillovers in Housing Markets Around the World</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/enriquemartinezgarcia.html" target="_blank">Enrique Martinez-Garcia</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/valeriegrossman.html" target="_blank">Valerie Grossman</a></span>
<br>Federal Reserve Bank of Dallas
<br>Globalization and Monetary Policy Institute Working Paper 342
<br><a class="downloadlink" href="https://www.dallasfed.org/~/media/documents/institute/wpapers/2018/0342.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Asset prices in general, and real house prices in particular, are often characterized by a nonlinear data-generating process which displays mildly explosive behavior in some periods. Here, we investigate the effect of asset market spillovers on the emergence of explosiveness in the dynamics of real house prices. The recursive unit root test of Phillips et al. (2015a, b) detects and date-stamps statistically-significant periods of mildly explosive behavior. With that methodology, we establish a timeline of periodically-collapsing episodes of explosiveness for a panel of 23 countries from the Federal Reserve Bank of Dallas’ International House Price Database (Mack and Martínez-García (2011)) between first quarter 1975 and fourth quarter 2015. Motivated by the theoretical notion of financial spillovers, we examine within a dynamic panel logit framework whether macro fundamentals—and, more specifically, financial variables—help predict episodes of explosiveness. Spreads in yields and real stock market growth together with standard macro variables (growth in personal disposable income per capita and inflation) are found empirically to be among the best predictors. We therefore conclude that financial developments in other asset markets play a significant role in the emergence of explosiveness in real house prices.</p>
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<div class="card-body">
<span class="date">19 Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedpwp/18-20.html" target="_blank">Market-making with Search and Information Frictions</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/benjaminlester.html" target="_blank">Benjamin Lester</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/alishourideh.html" target="_blank">Ali Shourideh</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/venkyvenkateswaran.html" target="_blank">Venky Venkateswaran</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/arielzetlinjones.html" target="_blank">Ariel Zetlin-Jones</a></span>
<br>Federal Reserve Bank of Philadelphia
<br>Working Papers 18-20
<br><a class="downloadlink" href="https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/2018/wp18-20.pdf?utm_campaign=WorkingPapers&utm_source=2018/08/07&utm_medium=E-mail" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We develop a dynamic model of trading through market-makers that incorporates two canonical sources of illiquidity: trading (or search) frictions, which imply that market-makers have some amount of market power; and information frictions, which imply that market-makers face some degree of adverse selection. We use this model to study the effects of various technological innovations and regulatory initiatives that have reduced trading frictions in over-the-counter markets. Our main result is that reducing trading frictions can lead to less liquidity, as measured by bid-ask spreads. The key insight is that more frequent trading—or more competition among dealers—makes traders’ behavior less dependent on asset quality. As a result, dealers learn about asset quality more slowly and set wider bid-ask spreads to compensate for this increase in uncertainty.</p>
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<div class="card-body">
<span class="date">01 Jan 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedbwp/18-3.html" target="_blank">News-driven uncertainty fluctuations</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/donghosong.html" target="_blank">Dongho Song</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jennytang.html" target="_blank">Jenny Tang</a></span>
<br>Federal Reserve Bank of Boston
<br>Working Papers 18-3
<br><a class="downloadlink" href="https://www.bostonfed.org/publications/research-department-working-paper/2018/news-driven-uncertainty-fluctuations.aspx" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We embed a news shock, a noisy indicator of the future state, in a two-state Markov-switching growth model. Our framework, combined with parameter learning, features rich history-dependent uncertainty dynamics. We show that bad news that arrives during a prolonged economic boom can trigger a "Minsky moment"—a sudden collapse in asset values. The effect is greatly amplified when agents have a preference for early resolution of uncertainty. We leverage survey recession probability forecasts to solve a sequential learning problem and estimate the full posterior distribution of model primitives. We identify historical periods in which uncertainty and risk premia were elevated because of news shocks.</p>
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<div class="card-body">
<span class="date">03 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-53.html" target="_blank">Tapping into Financial Synergies : Alleviating Financial Constraints Through Acquisitions</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/rohanwilliamson.html" target="_blank">Rohan Williamson</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jieyang.html" target="_blank">Jie Yang</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-053
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018053pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The paper examines whether financially constrained firms are able to use acquisitions to ease their constraints. The results show that acquisitions do ease financing constraints for constrained acquirers. Relative to unconstrained acquires, financially constrained firms are more likely to use undervalued equity to fund acquisitions and to target unconstrained and more liquid firms. Using a propensity score matched sample in a difference-in-difference framework, the results show that constrained acquirers become less constrained post-acquisition and relative to matched non-acquiring firms. This improvement is more pronounced for diversifying acquisitions and constrained firms that acquire rather than issue equity and retain the proceeds. Following acquisition, constrained acquirers raise more debt and increase investments, consistent with experiencing reductions in financing constraints relative to matched non-acquirers. These improvements are not seen for unconstrained acquirers. Finally, the familiar diversification discount is non- existent for financially constrained acquirers.</p>
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<div class="card-body">
<span class="date">24 Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/feddwp/1811.html" target="_blank">A Closer Look at the Behavior of Uncertainty and Disagreement: Micro Evidence from the Euro Area</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/robertwrich.html" target="_blank">Robert W. Rich</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/josephtracy.html" target="_blank">Joseph Tracy</a></span>
<br>Federal Reserve Bank of Dallas
<br>Working Papers 1811
<br><a class="downloadlink" href="https://www.dallasfed.org/-/media/documents/research/papers/2018/wp1811.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper examines point and density forecasts of real GDP growth, inflation and unemployment from the European Central Bank’s Survey of Professional Forecasters. We present individual uncertainty measures and introduce individual point- and density-based measures of disagreement. The data indicate substantial heterogeneity and persistence in respondents’ uncertainty and disagreement, with uncertainty associated with prominent respondent effects and disagreement associated with prominent time effects. We also examine the co-movement between uncertainty and disagreement and find an economically insignificant relationship that is robust to changes in the volatility of the forecasting environment. This provides further evidence that disagreement is not a reliable proxy for uncertainty.</p>
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<div class="card-body">
<span class="date">Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedlwp/2018-016.html" target="_blank">Bank runs without sequential service</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/davidandolfatto.html" target="_blank">David Andolfatto</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/ednosal.html" target="_blank">Ed Nosal</a></span>
<br>Federal Reserve Bank of St. Louis
<br>Working Papers 2018-16
<br><a class="downloadlink" href="https://s3.amazonaws.com/real.stlouisfed.org/wp/2018/2018-016.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Banking models in the tradition of Diamond and Dybvig (1983) rely on sequential service to explain belief driven runs. But the run-like phenomena witnessed during the financial crisis of 2007-08 occurred in the wholesale shadow banking sector where sequential service is largely absent. This suggests that something other than sequential service is needed to help explain runs. We show that in the absence of sequential service runs can easily occur whenever bank-funded investments are subject to increasing returns to scale consistent with available evidence. Our framework is used to understand and evaluate recent banking and money market regulations.</p>
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<div class="card-body">
<span class="date">07 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-55.html" target="_blank">The Near-Term Forward Yield Spread as a Leading Indicator : A Less Distorted Mirror</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/ericengstrom.html" target="_blank">Eric Engstrom</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/stevenasharpe.html" target="_blank">Steven A. Sharpe</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-055
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018055pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The spread between the yield on a 10-year Treasury bond and the yield on a shorter maturity bond, such as a 2-year Treasury, is commonly used as an indicator for predicting U.S. recessions. We show that such "long-term spreads" are statistically dominated in recession prediction models by an economically more intuitive alternative, a ""near-term forward spread."" This latter spread can be interpreted as a measure of the market's expectations for the near-term trajectory of conventional monetary policy rates. The predictive power of our near-term forward spread indicates that, when market participants expected—and priced in—a monetary policy easing over the next 12-18 months, this indicated that a recession was quite likely in the offing. Yields on bonds beyond 18 months in maturity are shown to have no added value for forecasting either recessions or the growth rate of GDP.</p>
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<div class="card-body">
<span class="date">07 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-54.html" target="_blank">Financial Frictions, Financial Shocks, and Aggregate Volatility</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/cristinafuentesalbero.html" target="_blank">Cristina Fuentes-Albero</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-054
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018054pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The Great Moderation in the U.S. economy was accompanied by a widespread increase in the volatility of financial variables. We explore the sources of the divergent patterns in volatilities by estimating a model with time-varying financial rigidities subject to structural breaks in the size of the exogenous processes and two institutional characteristics: the coefficients in the monetary policy rule and the severity of the financial rigidity at the steady state. To do so, we generalize the estimation methodology developed by Curdia and Finocchiaro (2013). Institutional changes are key in accounting for the volatility slowdown in real and nominal variables and in shaping the transmission mechanism of financial shocks. Our model accounts for the increase in the volatility of financial variables through larger financial shocks, but the vulnerability of the economy to these shocks is significantly alleviated by the estimated changes in institutions.</p>
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<div class="card-body">
<span class="date">07 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedmoi/0011.html" target="_blank">Rethinking Detroit</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/raymondeowens.html" target="_blank">Raymond E. Owens</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/estebanrossihansberg.html" target="_blank">Esteban Rossi-Hansberg</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/pierredanielgsarte.html" target="_blank">Pierre-Daniel G. Sarte</a></span>
<br>Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute
<br>Working Papers 11
<br><a class="downloadlink" href="https://www.minneapolisfed.org/institute/working-papers-institute/iwp11.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We study the urban structure of the City of Detroit. Following many decades of decline, the city’s current urban structure is clearly not optimal for its size, with a business district immediately surrounded by a ring of largely vacant neighborhoods. We propose a model with residential externalities that features multiple equilibria at the neighborhood level. In particular, developing a residential area requires the coordination of developers and residents, without which it may remain vacant even if its fundamentals are sound. We embed this mechanism in a quantitative spatial economics model and use it to rationalize current city allocations. We then use the model to evaluate existing strategic visions to revitalize Detroit, and to design alternative plans that rely on ‘development guarantees’ to yield better outcomes. The widespread effects of these policies underscore the importance of using a general equilibrium framework to evaluate policy proposals.</p>
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<div class="card-body">
<span class="date">08 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedbsp/134.html" target="_blank">Working Cities Challenge: remarks at the MetroHartford Alliance breakfast event "Working Cities, Thriving Communities: How Cross-Sector Collaboration Helps Our Communities Thrive", Hartford, Connecticut, August 8, 2018</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/ericsrosengren.html" target="_blank">Eric S. Rosengren</a></span>
<br>Federal Reserve Bank of Boston
<br>Speech 134
<br><a class="downloadlink" href="https://www.bostonfed.org/news-and-events/speeches/2018/working-cities-thriving-communities.aspx" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Eric Rosengren presented an overview of the Working Cities Challenge covering, among other topics, the initiatives taking place in Connecticut.</p>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedreb/00067.html" target="_blank">The Impact of Higher Temperatures on Economic Growth</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/riccardocolacito.html" target="_blank">Riccardo Colacito</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/bridgethoffman.html" target="_blank">Bridget Hoffman</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/toanphan.html" target="_blank">Toan Phan</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/timothysablik.html" target="_blank">Timothy Sablik</a></span>
<br>Federal Reserve Bank of Richmond
<br>Richmond Fed Economic Brief
<br><a class="downloadlink" href="https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_brief/2018/pdf/eb_18-08.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">What happens to the economy when it gets hot outside? Despite long-standing assumptions that economic damage from rising global temperatures would be limited to the agricultural sector or developing economies, this Economic Brief presents evidence that higher summer temperatures hurt a variety of business sectors in the United States</p>
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<div class="card-body">
<span class="date">23 Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedrwp/18-12.html" target="_blank">A Composite Likelihood Approach for Dynamic Structural Models</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/fabiocanova.html" target="_blank">Fabio Canova</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/christianmatthes.html" target="_blank">Christian Matthes</a></span>
<br>Federal Reserve Bank of Richmond
<br>Working Paper 18-12
<br><a class="downloadlink" href="https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2018/pdf/wp18-12.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We describe how to use the composite likelihood to ameliorate estimation, computational, and inferential problems in dynamic stochastic general equilibrium models. We present a number of situations where the methodology has the potential to resolve well-known problems. In each case we consider, we provide an example to illustrate how the approach works and its properties in practice.</p>
</div>
</div>
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<div class="card-body">
<span class="date">19 Jul 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedrwp/18-13.html" target="_blank">Labor-Market Wedge under Engel Curve Utility: Cyclical Substitution between Necessities and Luxuries</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/yongsungchang.html" target="_blank">Yongsung Chang</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/andreashornstein.html" target="_blank">Andreas Hornstein</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/marioskarabarbounis.html" target="_blank">Marios Karabarbounis</a></span>
<br>Federal Reserve Bank of Richmond
<br>Working Paper 18-13
<br><a class="downloadlink" href="https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2018/pdf/wp18-13.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">In booms, households substitute luxuries for necessities, e.g., food away from home for food at home. Ignoring this cyclical pattern of composition changes in the consumption basket makes the labor-market wedge -- a measure of inefficiency that reflects the gap between the marginal rate of substitution and the real wage -- appear to be more volatile than it actually is. Based on the household expenditure pattern across 10 consumption categories in the Consumer Expenditure Survey, we show that taking into account these composition changes can explain 6-15% of the cyclicality in the measured labor-market wedge.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedker/00067.html" target="_blank">The Widening Divide in Business Turnover between Large and Small Urban Areas</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/jasonbrown.html" target="_blank">Jason Brown</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Economic Review
<br><a class="downloadlink" href="https://doi.org/10.18651/ER/3q18Brown" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Business turnover—the rate at which new firms enter and old firms exit the economy—has been declining for at least 40 years in the United States. Declining business turnover is potentially problematic, as it may signal a drop in innovation and productivity growth as well as a lower share of economic activity at new businesses. As a result, the economic fortunes of metropolitan areas are likely to be intertwined with the rate of business turnover they experience. As the U.S. economy continues to transition from producing goods to providing services, changes in business turnover are unfolding differently in small versus large metropolitan areas. Jason P. Brown documents recent trends in business turnover across metropolitan areas of various sizes and shows that business turnover has declined much more sharply in small than in large urban areas. In addition, he finds that this gap widened in the years following the Great Recession. His results may help explain the widening economic divide between urban and rural areas of the country.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2017</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedkpr/00038.html" target="_blank">Fostering a Dynamic Global Economy : a symposium, Jackson Hole, Wyoming, August 24-26, 2017</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/federalreservebankkansascity.html" target="_blank">Federal Reserve Bank Kansas City</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Proceedings - Economic Policy Symposium - Jackson Hole
<br><a class="downloadlink" href="https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2017" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;"></p>
</div>
</div>
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<div class="card-body">
<span class="date">2013</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedkpr/00039.html" target="_blank">Global Dimensions of Unconventional Monetary Policy</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/federalreservebankkansascity.html" target="_blank">Federal Reserve Bank Kansas City</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Proceedings - Economic Policy Symposium - Jackson Hole
<br><a class="downloadlink" href="https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2013" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;"></p>
</div>
</div>
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<div class="card-body">
<span class="date">13 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfn/2018-08-13-2.html" target="_blank">SOMA's Unrealized Loss : What does it mean?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/brianbonis.html" target="_blank">Brian Bonis</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/laurenfiesthumel.html" target="_blank">Lauren Fiesthumel</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jamienoonan.html" target="_blank">Jamie Noonan</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>FEDS Notes 2018-08-13
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/notes/feds-notes/somas-unrealized-loss-what-does-it-mean-20180813.htm" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This note discusses the various valuation measures of the Fed’s securities holdings, what these values mean, and the expected evolution of the value of the SOMA portfolio.</p>
</div>
</div>
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<div class="card-body">
<span class="date">13 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfn/2018-08-13-1.html" target="_blank">Are Income and Credit Scores Highly Correlated?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/rachaelbeer.html" target="_blank">Rachael Beer</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/feliciaionescu.html" target="_blank">Felicia Ionescu</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/gengli.html" target="_blank">Geng Li</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>FEDS Notes 2018-08-13
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/notes/feds-notes/are-income-and-credit-scores-highly-correlated-20180813.htm" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">To the best of our knowledge, statistical analysis on the relationship between income and credit scores using proper data remains scant. Using a unique proprietary data set, this note attempts to fill the gap in our understanding of this relationship.</p>
</div>
</div>
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<div class="card-body">
<span class="date">13 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-56.html" target="_blank">A Shadow Rate or a Quadratic Policy Rule? The Best Way to Enforce the Zero Lower Bound in the United States</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/martinmandreasen.html" target="_blank">Martin M. Andreasen</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/andrewcmeldrum.html" target="_blank">Andrew C. Meldrum</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-056
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018056pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We study whether it is better to enforce the zero lower bound (ZLB) in models of U.S. Treasury yields using a shadow rate model or a quadratic term structure model. We show that the models achieve a similar in-sample fit and perform comparably in matching conditional expectations of future yields. However, when the recent ZLB period is included in the sample, the models ' ability to match conditional expectations away from the ZLB deteriorates because the time-seriesdynamics of the pricing factors change. In addition, neither model provides a reasonable description of conditional volatilities when yields are away from the ZLB.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedles/00115.html" target="_blank">Developments in Household Debt in Eighth District MSAs</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/doneschlagenhauf.html" target="_blank">Don E. Schlagenhauf</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jamesdeubanks.html" target="_blank">James D. Eubanks</a></span>
<br>Federal Reserve Bank of St. Louis
<br>Economic Synopses
<br><a class="downloadlink" href="https://files.stlouisfed.org/research/publications/economic-synopses/2018/08/03/developments-in-household-debt-in-eighth-district-msas.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Growth in household debt, a major contributing factor to the Great Recession, has led many to worry that a debt crisis is on the horizon. Although the levels of certain types of debt are rising in the MSAs of the Eighth Federal Reserve District, serious delinquency rates have not yet reached alarming levels.</p>
</div>
</div>
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<div class="card-body">
<span class="date">14 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-57.html" target="_blank">Hidden Baggage : Behavioral Responses to Changes in Airline Ticket Tax Disclosure</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/sebastienbradley.html" target="_blank">Sebastien Bradley</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/naomiefeldman.html" target="_blank">Naomi E. Feldman</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-057
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018057pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We examine the impact on air travelers of an enforcement action issued by the U.S. Department of Transportation in January 2012 that required U.S. air carriers and online travel agents to incorporate all mandatory taxes and fees into their advertised fares. Exploiting cross-itinerary ticket tax variation within international city market pairs, we provide evidence that the more prominent display of tax-inclusive prices is associated with a significant reduction in tax incidence on consumers and a decline in passenger volume along more heavily-taxed itineraries. Ticket revenues are commensurately reduced. These results suggest a pronounced degree of inattention to ticket taxes prior to the introduction of full-fare advertising and reinforces the theoretical predictions and experimental findings of the literature on tax salience in a quasi-experimental context where taxes average more than $100 per ticket and where firms may engage in price-setting behavior.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedfel/00170.html" target="_blank">The Financial Crisis at 10: Will We Ever Recover?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/regisbarnichon.html" target="_blank">Regis Barnichon</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/christianmatthes.html" target="_blank">Christian Matthes</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/alexanderziegenbein.html" target="_blank">Alexander Ziegenbein</a></span>
<br>Federal Reserve Bank of San Francisco
<br>FRBSF Economic Letter
<br><a class="downloadlink" href="https://www.frbsf.org/economic-research/files/el2018-19.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">A decade after the last financial crisis and recession, the U.S. economy remains significantly smaller than it should be based on its pre-crisis growth trend. One possible reason lies in the large losses in the economy’s productive capacity following the financial crisis. The size of those losses suggests that the level of output is unlikely to revert to its pre-crisis trend level. This represents a lifetime present-value income loss of about $70,000 for every American.</p>
</div>
</div>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fednsr/864.html" target="_blank">Is size everything?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/samuelantill.html" target="_blank">Samuel Antill</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/asanisarkar.html" target="_blank">Asani Sarkar</a></span>
<br>Federal Reserve Bank of New York
<br>Staff Reports 864
<br><a class="downloadlink" href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr864.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for each systemic risk measure, and find that, from 1963 to 2006, only our big-versus-huge threshold size factor, TSIZE, implies a positive implicit subsidy on average. Further, pre-2007 TSIZE-implied subsidies predict the Federal Reserve’s liquidity facility loans and the Treasury’s TARP loans during the crisis, both in the time series and the cross section. TSIZE-implied subsidies increase around the bailout of Continental Illinois in 1984 and the Gramm-Leach-Bliley Act of 1999, as well as around changes in Fitch Support Ratings indicating higher probability of government support. Since 2007, however, the relative share of TSIZE-implied subsidies falls, especially after Lehman’s failure, whereas complexity and interconnectedness-implied subsidies are substantial, resulting in an almost sevenfold increase in total implicit subsidies. The results, which survive a variety of robustness checks, indicate that the market’s perception of the sources of systemic risk changes over time.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedcec/00091.html" target="_blank">Parental Assistance after Job Loss</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/patrickcoate.html" target="_blank">Patrick Coate</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/pawelkrolikowski.html" target="_blank">Pawel Krolikowski</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/michaelazabek.html" target="_blank">Michael A. Zabek</a></span>
<br>Federal Reserve Bank of Cleveland
<br>Economic Commentary
<br><a class="downloadlink" href="https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/2018-economic-commentaries/ec-201807-parental-assistance-after-job-loss.aspx" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We have previously shown that young adults who live near their parents experience faster earnings recoveries after a job loss than young adults who live farther from their parents. In this analysis, we present evidence that demonstrates the relationship is causal; that is, there is something about living close to one’s parents that enables one to find another job that pays as well as the one lost. We also explore what type of parental help might be driving the relationship and find that it is possibly the provision of childcare and access to job networks, but likely not help with housing expenses.</p>
</div>
</div>
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<div class="card-body">
<span class="date">20 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedawp/2018-06.html" target="_blank">Bank Runs without Sequential Service</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/davidandolfatto.html" target="_blank">David Andolfatto</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/ednosal.html" target="_blank">Ed Nosal</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Working Paper 2018-6
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/research/publications/wp/2018/06-bank-runs-without-sequestial-service-2018-08-02.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Banking models in the tradition of Diamond and Dybvig (1983) rely on sequential service to explain belief-driven runs. But the run-like phenomena witnessed during the financial crisis of 2007–08 occurred in the wholesale shadow banking sector where sequential service is largely absent, suggesting that something other than sequential service is needed to help explain runs. We show that in the absence of sequential service runs can easily occur whenever bank-funded investments are subject to increasing returns to scale consistent with available evidence. Our framework is used to understand and evaluate recent banking and money market regulations.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedawp/2018-07.html" target="_blank">Fiscal Implications of the Federal Reserve's Balance Sheet Normalization</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/michelecavallo.html" target="_blank">Michele Cavallo</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/marcodelnegro.html" target="_blank">Marco Del Negro</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/wscottframe.html" target="_blank">W. Scott Frame</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jamiegrasing.html" target="_blank">Jamie Grasing</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/benjaminamalin.html" target="_blank">Benjamin A. Malin</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/carlorosa.html" target="_blank">Carlo Rosa</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Working Paper 2018-7
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/research/publications/wp/2018/07-fiscal-implications-of-the-federal-reserves-balance-sheet-normalization-2018-08-03.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to under 5 percent. Further reducing longer-run reserve balances from $1 trillion to precrisis levels has little effect on the likelihood of net losses.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedacd/2018-01.html" target="_blank">How Do Firms Respond to Hiring Difficulties? Evidence from the Federal Reserve Banks' Small Business Credit Survey</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/melsdezeeuw.html" target="_blank">Mels De Zeeuw</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/ellieterry.html" target="_blank">Ellie Terry</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Community and Economic Development Discussion Paper 2018-1
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/community-development/publications/discussion-papers/2018/01-how-do-firms-respond-to-hiring-difficulties-2018-06-07.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Using data from the Federal Reserve Banks' 2017 Small Business Credit Survey (SBCS), this paper investigates the various ways in which different types of firms with less than 500 employees experience and address hiring difficulties, including when they decide to increase compensation. The authors find significant variation in hiring difficulties by type of firm, and a firm's response appears to depend on the nature of the problem. The most common response is to increase compensation, with firms that experience competition from other employers being the most likely to do so. Other common responses were to engage in nonproduction activities—like training and job restructuring—that may boost longer-run productivity. The results provide insight for policymakers trying to understand the linkage between compensation, labor market tightness, and productivity. Further, the variation in hiring difficulties across firm industry, education requirement, and geographic location informs economic and workforce development practitioners and policymakers working to develop targeted interventions.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedacd/2018-02.html" target="_blank">Rental Housing Affordability in the Southeast: Data from the Sixth District</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/anncarpenter.html" target="_blank">Ann Carpenter</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/douglaswhite.html" target="_blank">Douglas White</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/maryhirt.html" target="_blank">Mary Hirt</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Community and Economic Development Discussion Paper 2018-2
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/community-development/publications/discussion-papers/2018/02-rental-housing-affordability-in-the-southeast-2018-07-19.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Housing data are available for most large metropolitan regions in the Atlanta Fed's Southeast region. However, many midsized metropolitan, micropolitan, and nonmetro areas lack detailed data on rental housing affordability and housing supply needs by income level. These data are important for state and local governments, affordable housing developers, and housing advocates to inform housing policy. Therefore, the Atlanta Fed partnered with the Shimberg Center at the University of Florida to analyze census data using a methodology developed for Shimberg's periodic Rental Market Study for the state of Florida (Shimberg Center for Housing Studies, 2013, 2016). This paper covers the six states that are fully or partially in the Atlanta Fed's District: Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. In this paper, the authors provide a regional snapshot of housing affordability and the availability of affordable rental housing units at several scales for the Atlanta Fed's District, using data from the 2015 American Community Survey (ACS). They include figures for city, metropolitan, and state areas as well as regional figures for nonmetro areas. The authors segment the data by household income using the area median income (AMI) of each respective region. They provide estimates for renter households within five major income brackets: extremely low income (0 to 30 percent AMI), very low income (30.01 to 50 percent AMI), low income (50.01 to 80 percent AMI), moderate income (80.01 to 120 percent AMI), and upper income (more than 120 percent AMI). The authors use two measures of housing affordability: 1) the share of cost-burdened households and 2) affordable and available rental housing supply. Metrics include the percent of cost-burdened renter households (people who pay more than 30 percent of their income on housing) and extremely cost-burdened renter households (people who pay more than 50 percent of their income on housing). Metrics also include the deficit or surplus in rental units that are both available and affordable to households at each of the above area median-income brackets. These measures tend to correlate, with high percentages of cost-burdened households associated with significant deficits in affordable and available units for low- and moderate-income households.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgif/1234.html" target="_blank">International Spillovers of Monetary Policy : Conventional Policy vs. Quantitative Easing</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/stephanieecurcuru.html" target="_blank">Stephanie E. Curcuru</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/stevenbkamin.html" target="_blank">Steven B. Kamin</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/canlinli.html" target="_blank">Canlin Li</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/mariusdelgiudicerodriguez.html" target="_blank">Marius del Giudice Rodriguez</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>International Finance Discussion Papers 1234
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/ifdp/files/ifdp1234.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper evaluates the popular view that quantitative easing exerts greater international spillovers than conventional monetary policies. We employ a novel approach to compare the international spillovers of conventional and balance sheet policies undertaken by the Federal Reserve. In principle, conventional monetary policy affects bond yields and financial conditions by affecting the expected path of short rates, while balance-sheet policy is believed act through the term premium. To distinguish the effects of these two types of policies we use a term structure model to decompose longer-term bond yields into expected short-term interest rates and term premiums. We then examine the relative effects of changes in these two components of yields on changes in exchange rates and foreign bond yields. We find that the dollar is more sensitive to expected short-term interest rates than to term premia; moreover, the rise in the sensitivity of the dollar to monetary policy announcements since the GFC owes more to an increased sensitivity of the dollar to expected interest rates than to term premiums. We also find that changes in short rates and term premiums have similar effects on foreign yields. All told, our findings contradict the popular view that quantitative easing exerts greater international spillovers than conventional monetary policies.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgif/1236.html" target="_blank">Asset Price Learning and Optimal Monetary Policy</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/colincaines.html" target="_blank">Colin Caines</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/fabianwinkler.html" target="_blank">Fabian Winkler</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>International Finance Discussion Papers 1236
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/ifdp/files/ifdp1236.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We characterize optimal monetary policy when agents are learning about endogenous asset prices. Boundedly rational expectations induce inefficient equilibrium asset price fluctuations which translate into inefficient aggregate demand fluctuations. We find that the optimal policy raises interest rates when expected capital gains, and the level of current asset prices, is high. The optimal policy does not eliminate deviations of asset prices from their fundamental value. When monetary policymakers are information-constrained, optimal policy can be reasonably approximated by simple interest rate rules that respond to capital gains. Our results are robust to a wide range of belief specifications as well as to the inclusion of an investment channel.</p>
</div>
</div>
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<div class="card-body">
<span class="date">17 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-58.html" target="_blank">Oil, Equities, and the Zero Lower Bound</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/deepadhumedatta.html" target="_blank">Deepa Dhume Datta</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/benjaminkjohannsen.html" target="_blank">Benjamin K. Johannsen</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/hannahkwon.html" target="_blank">Hannah Kwon</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/robertjvigfusson.html" target="_blank">Robert J. Vigfusson</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-058
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018058pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">From late 2008 to 2017, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence and theoretical justification that these changes resulted from nominal interest rates being constrained by the zero lower bound (ZLB). Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment, with implications for the effectiveness of fiscal and monetary policy.</p>
</div>
</div>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedawp/2018-08.html" target="_blank">Unconventional Monetary Policy and Risk-Taking: Evidence from Agency Mortgage REITs</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/wscottframe.html" target="_blank">W. Scott Frame</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/evasteiner.html" target="_blank">Eva Steiner</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Working Paper 2018-8
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/research/publications/wp/2018/08-unconventional-monetary-policy-and-risk-taking-evidence-from-agency-mortgage-reits-2018-08-03.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We study how the Federal Reserve's quantitative easing (QE) influenced the behavior of Agency mortgage real estate investment trusts (REITs)—a set of institutions identified by the Financial Stability Oversight Council as posing systemic risk. We document that Agency mortgage REITs: [i] equity prices reacted to QE announcements and in a manner consistent with their business prospects; [ii] grew markedly during QE2 and receded during QE3 in relation to the Federal Reserve's Agency MBS purchase activity; and [iii] increased their leverage during QE3. Our findings are consistent with unconventional monetary policy actions crowding out private investment and "reaching for yield" behavior by financial institutions.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedker/00068.html" target="_blank">Energy Investment Variability Within the Macroeconomy</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/davidrodziewicz.html" target="_blank">David Rodziewicz</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Economic Review
<br><a class="downloadlink" href="https://doi.org/10.18651/ER/3q18Rodziewicz" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Over the past 10 years, the U.S. energy sector has exerted substantial influence—both positive and negative—on overall U.S. business fixed investment. From 2010 to 2014, a time when energy production in the United States was expanding, investment in the energy sector was a boon to aggregate investment. However, following the sharp oil price decline in 2014, the energy sector was a drag on aggregate investment. Assessing the energy sector’s contribution to aggregate investment requires an understanding of both the size of the sector as well as its individual segments. David Rodziewicz estimates how individual segments of the energy sector have contributed to U.S. aggregate investment activity over time. He finds that the share of energy investment in the United States increased during the last decade, and the concentration of investment shifted toward more volatile segments of the energy sector. Together, these changes contributed to higher aggregate investment variability.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedreq/00057.html" target="_blank">Self-Insurance and the Risk-Sharing Role of Money</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/russellwong.html" target="_blank">Russell Wong</a></span>
<br>Federal Reserve Bank of Richmond
<br>Economic Quarterly
<br><a class="downloadlink" href="https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2018/q1/wong.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Overcoming the lack of coincidence of wants is a well-acknowledged role of money. In this review, I illustrate that the use of money also promotes risk-sharing in the society: when individuals hold money, it helps other individuals mitigate their own liquidity risks.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedreq/00056.html" target="_blank">Cyclical Properties of Bank Margins: Small versus Large Banks</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/borysgrochulski.html" target="_blank">Borys Grochulski</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/danielschwam.html" target="_blank">Daniel Schwam</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/yuzhezhang.html" target="_blank">Yuzhe Zhang</a></span>
<br>Federal Reserve Bank of Richmond
<br>Economic Quarterly
<br><a class="downloadlink" href="https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2018/q1/grochulski.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We study cyclical properties of the net interest margin (NIM) in the US banking sector in the aggregate as well as separately for small and large banks. In the aggregate and among large banks, NIM is countercyclical. Among small banks, however, NIM is procyclical. Further, we find that this result is driven by differences in the cyclical dynamics of small and large banks' funding costs rather than asset yields.</p>
</div>
</div>
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<div class="card-body">
<span class="date">23 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedawp/2018-09.html" target="_blank">Decentralization and Overborrowing in a Fiscal Federation</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/siguo.html" target="_blank">Si Guo</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/yunpei.html" target="_blank">Yun Pei</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/zoexie.html" target="_blank">Zoe Xie</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Working Paper 2018-9
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/research/publications/wp/2018/09-decentralization-and-overborrowing-in-a-fiscal-federation-2018-08-13.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We build an infinite horizon equilibrium model of fiscal federation, where anticipation of transfers from the central government creates incentives for local governments to overborrow. Absent commitment, the central government over-transfers, which distorts the central-local distribution of resources. Applying the model to fiscal decentralization, we find when decentralization widens local governments’ fiscal gap, borrowings by both local and central governments rise. Quantitatively, fiscal decentralization accounts for from 19 percent to 40 percent of changes in general government debt in Spain during 1988–2006. A macroprudential tax on local borrowing that implements Pareto optimal allocation would reduce debt by 27 percent and raise welfare by 3.75 percent.</p>
</div>
</div>
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<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedkmb/00067.html" target="_blank">Auto Loan Delinquency Rates Are Rising, but Mostly among Subprime Borrowers</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/jasonbrown.html" target="_blank">Jason Brown</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/touseycolton.html" target="_blank">Tousey Colton</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Macro Bulletin
<br><a class="downloadlink" href="https://www.kansascityfed.org/~/media/files/publicat/research/macrobulletins/mb18browntousey0815.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Steady increases in U.S. auto debt over the past seven years have raised concerns over credit quality and delinquency in consumers’ repayment. We investigate these concerns and find that the credit quality of auto debt has actually improved throughout the current expansion. Delinquency rates have been rising mostly among subprime borrowers, who represent about a quarter of total outstanding auto debt. However, the potential risks to the financial sector are currently unknown and warrant close monitoring.</p>
</div>
</div>
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<div class="card-body">
<span class="date">22 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgif/1237.html" target="_blank">The Heterogeneous Effects of Government Spending : It’s All About Taxes</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/axelleferrière.html" target="_blank">Axelle Ferrière</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/gastonnavarro.html" target="_blank">Gaston Navarro</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>International Finance Discussion Papers 1237
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/ifdp/files/ifdp1237.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper investigates how government spending multipliers depend on the distribution of taxes across households. We exploit historical variations in the financing of spending in the U.S. since 1913 to show that multipliers are positive only when financed with more progressive taxes, and zero otherwise. We rationalize this finding within a heterogeneous-household model with indivisible labor supply. The model results in a lower labor responsiveness to tax changes for higher-income earners. In turn, spending financed with more progressive taxes induces a smaller crowding-out, and thus larger multipliers. Finally, we provide evidence in support of the model’s cross-sectional implications.</p>
</div>
</div>
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<div class="card-body">
<span class="date">20 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfn/2018-08-20.html" target="_blank">The Branch Puzzle : Why Are there Still Bank Branches?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/elliotanenberg.html" target="_blank">Elliot Anenberg</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/andrewcchang.html" target="_blank">Andrew C. Chang</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/serafinjgrundl.html" target="_blank">Serafin J. Grundl</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/kevinbmoore.html" target="_blank">Kevin B. Moore</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/richardwindle.html" target="_blank">Richard Windle</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>FEDS Notes 2018-08-20
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/notes/feds-notes/why-are-there-still-bank-branches-20180820.htm" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We provide evidence that the persistence of the large number of local bank branches across the country may be due to the fact that both depositors and small businesses continue to value local bank branches.</p>
</div>
</div>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedlwp/2018-017.html" target="_blank">A Search-Based Neoclassical Model of Capital Reallocation</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/fengdong.html" target="_blank">Feng Dong</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/pengfeiwang.html" target="_blank">Pengfei Wang</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/yiwen.html" target="_blank">Yi Wen</a></span>
<br>Federal Reserve Bank of St. Louis
<br>Working Papers 2018-17
<br><a class="downloadlink" href="https://s3.amazonaws.com/real.stlouisfed.org/wp/2018/2018-017.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">As a form of investment, the importance of capital reallocation between firms has been increasing over time, with the purchase of used capital accounting for 25% to 40% of firms total investment nowadays. Cross- firm reallocation of used capital also exhibits intriguing business-cycle properties, such as (i) the illiquidity of used capital is countercyclical (or the quantity of used capital reallocation across rms is procyclical), (ii) the prices of used capital are procyclical and more so than those of new capital goods, and (iii) the dispersion of firms' TFP or MPK (or the bene t of capital reallocation) is countercyclical. We build a search-based neoclassical model to qualitatively and quantitatively explain these stylized facts. We show that search frictions in the capital market are essential for our empirical success but not sufficient---fi nancial frictions and endogenous movements in the distribution of rm-level TFP (or MPK) and interactions between used-capital investment and new investment are also required to simultaneously explain these stylized facts, especially that prices of used capital are more volatile than that of new investment and the dispersion of firm TFP is countercyclical.</p>
</div>
</div>
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<div class="card-body">
<span class="date">23 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-59.html" target="_blank">Some Implications of Uncertainty and Misperception for Monetary Policy</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/christopherjerceg.html" target="_blank">Christopher J. Erceg</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jameshebden.html" target="_blank">James Hebden</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/michaeltkiley.html" target="_blank">Michael T. Kiley</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jdavidlopezsalido.html" target="_blank">J. David Lopez-Salido</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/robertjtetlow.html" target="_blank">Robert J. Tetlow</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-059
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018059pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">When choosing a strategy for monetary policy, policymakers must grapple with mismeasurement of labor market slack, and of the responsiveness of price inflation to that slack. Using stochastic simulations of a small-scale version of the Federal Reserve Board’s principal New Keynesian macroeconomic model, we evaluate representative rule-based policy strategies, paying particular attention to how those strategies interact with initial conditions in the U.S. as they are seen today and with the current outlook. To do this, we construct a current relevant baseline forecast, one that is loosely constructed based on a recent FOMC forecast, and conduct our experiments around that baseline. We find the initial conditions and forecast that policymakers face affects decisions in a material way. The standard advice from the literature, that in the presence of mismeasurement of resource slack policymakers should substantially reduce the weight attached to those measures in setting the policy rate, and substitute toward a more forceful response to inflation, is overstated. We find that a notable response to the unemployment gap is typically beneficial, even if that gap is mismeasured. Even when the dynamics of inflation are governed by a 1970s-style Phillips curve, meaningful response to resource utilization is likely to turn out to be worthwhile, particularly in environments where resource utilization is thought to be tight to begin with and inflation is close to its target level.</p>
</div>
</div>
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<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedawp/2018-10.html" target="_blank">Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/jamesconklin.html" target="_blank">James Conklin</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/wscottframe.html" target="_blank">W. Scott Frame</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/kristophersgerardi.html" target="_blank">Kristopher S. Gerardi</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/haoyangliu.html" target="_blank">Haoyang Liu</a></span>
<br>Federal Reserve Bank of Atlanta
<br>FRB Atlanta Working Paper 2018-10
<br><a class="downloadlink" href="https://www.frbatlanta.org/-/media/documents/research/publications/wp/2018/10-villains-or-scapegoats-the-role-of-subprime-borrowers-in-driving-the-us-housing-boom-2018-08-28.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002–06 U.S. house price boom. Contrary to this belief, we show that the house price and subprime booms occurred in different places. Counties with the largest home price appreciation between 2002 and 2006 had the largest declines in the share of purchase mortgages to subprime borrowers. We also document that the expansion in speculative mortgage products and underwriting fraud was not concentrated among subprime borrowers.</p>
</div>
</div>
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<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgif/1235.html" target="_blank">Why Has the Stock Market Risen So Much Since the US Presidential Election?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/olivierjeanblanchard.html" target="_blank">Olivier Jean Blanchard</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/christophergcollins.html" target="_blank">Christopher G. Collins</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/mohammadjahanparvar.html" target="_blank">Mohammad Jahan-Parvar</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/thomaspellet.html" target="_blank">Thomas Pellet</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/bethannewilson.html" target="_blank">Beth Anne Wilson</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>International Finance Discussion Papers 1235
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/ifdp/files/ifdp1235.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper looks at the evolution of U.S. stock prices from the time of the Presidential elections to the end of 2017. It concludes that a bit more than half of the increase in the aggregate U.S. stock prices from the presidential election to the end of 2017 can be attributed to higher actual and expected dividends. A general improvement in economic activity and a decrease in economic policy uncertainty around the world were the main factors behind the stock market increase. The prospect and the eventual passage of the corporate tax bill nevertheless played a role. And while part of the rise in stock returns came from a decrease in the equity risk premium, this decrease was relatively limited and returned the premium to the levels of the first half of the 2000s.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedkpr/00040.html" target="_blank">Changing Market Structures and Implications for Monetary Policy : Economic Policy Symposium, Jackson Hole, Wyoming, August 23-25, 2018</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/federalreservebankkansascity.html" target="_blank">Federal Reserve Bank Kansas City</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Proceedings - Economic Policy Symposium - Jackson Hole
<br><a class="downloadlink" href="https://www.kansascityfed.org/publications/research/escp/symposiums/escp-2018" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;"></p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">01 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fednsr/865.html" target="_blank">What to expect from the lower bound on interest rates: evidence from derivatives prices</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/thomasmmertens.html" target="_blank">Thomas M. Mertens</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/johncwilliams.html" target="_blank">John C. Williams</a></span>
<br>Federal Reserve Bank of New York
<br>Staff Reports 865
<br><a class="downloadlink" href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr865.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This paper analyzes the effects of the lower bound for interest rates on the distributions of expectations for future inflation and interest rates. We study a stylized New Keynesian model where the policy instrument is subject to a lower bound to motivate the empirical analysis. Two equilibria emerge: In the "target equilibrium," policy is unconstrained most or all of the time, whereas in the "liquidity trap equilibrium," policy is mostly or always constrained. We use options data on future interest rates and inflation to study whether the decrease in the natural rate of interest leads to forecast densities consistent with the theoretical model. We develop a lower bound indicator that captures the effects of the lower bound on the distribution of interest rates. Qualitatively, we find that the evidence is largely consistent with the theoretical predictions in the target equilibrium and find no evidence in favor of the liquidity trap equilibrium. Quantitatively, while the lower bound has a sizable effect on the distribution of future interest rates, its impact on forecast densities for inflation is relatively modest.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedcec/00092.html" target="_blank">The Evolution of the Labor Share across Developed Countries</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/robertopinheiro.html" target="_blank">Roberto Pinheiro</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/meifengyang.html" target="_blank">Meifeng Yang</a></span>
<br>Federal Reserve Bank of Cleveland
<br>Economic Commentary
<br><a class="downloadlink" href="https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2018-economic-commentaries/ec-201808-evolution-of-the-labor-share-across-developed-countries.aspx" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">In most developed countries, the share of output accruing to labor has declined over the last 20 years. However, the underlying reasons for the decrease may have differed in the United States and other developed countries. In this Commentary, we examine some of the explanations economists have proposed for the decline in the labor share and discuss how well these explanations account for the decline across developed countries.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedpei/00030.html" target="_blank">Banking Trends: Measuring Cov-Lite Right</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/edisonyu.html" target="_blank">Edison Yu</a></span>
<br>Federal Reserve Bank of Philadelphia
<br>Economic Insights
<br><a class="downloadlink" href="https://philadelphiafed.org/-/media/research-and-data/publications/banking-trends/2018/bt-cov_lite.pdf?la=en" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">More business loans today lack traditional covenants governing borrowers. Does that leave banks with fewer tools to ward off default?</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedpei/00031.html" target="_blank">Investing in Elm Street: What Happens When Firms Buy Up Houses?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/laurenlambiehanson.html" target="_blank">Lauren Lambie-Hanson</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/wenlili.html" target="_blank">Wenli Li</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/michaelslonkosky.html" target="_blank">Michael Slonkosky</a></span>
<br>Federal Reserve Bank of Philadelphia
<br>Economic Insights
<br><a class="downloadlink" href="https://philadelphiafed.org/-/media/research-and-data/publications/economic-insights/2018/q3/eiq318-elmstreet.pdf?la=en" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Since the onset of the mortgage crisis in 2007, a much larger than normal share of single-family houses listed for sale in the U.S. each year has been purchased by institutional investors—Wall Street firms, real estate trusts, international funds, and so on. This phenomenon has been easing since 2013, but investor activity remains widespread and is particularly prevalent in high-foreclosure areas such as Las Vegas and Atlanta, where prices had soared during the housing bubble and, after the crash, severe house price downturns occurred. This trend is also growing in areas of the country where real estate is highly priced such as Miami and New York City. In some cities, investors have bought more than a quarter of the houses sold since the early 2000s, far more than the less than 5 percent purchased by investors prior to the crisis.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedpbt/00007.html" target="_blank">Measuring Cov-Lite Right</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/edisonyu.html" target="_blank">Edison Yu</a></span>
<br>Federal Reserve Bank of Philadelphia
<br>Banking Trends
<br><a class="downloadlink" href="https://philadelphiafed.org/-/media/research-and-data/publications/banking-trends/2018/bt-cov_lite.pdf?la=en" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">More business loans today lack traditional covenants governing borrowers. Does that leave banks with fewer tools to ward off default?</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">29 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfn/2018-08-29.html" target="_blank">The Monetary Policy Response to Uncertain Inflation Persistence</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/robertjtetlow.html" target="_blank">Robert J. Tetlow</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>FEDS Notes 2018-08-29
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/notes/feds-notes/monetary-policy-response-to-uncertain-inflation-persistence-20180829.htm" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">This FEDS Note considers the implications of uncertainty regarding the persistence of inflation for the conduct of monetary policy.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">28 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-60.html" target="_blank">The Shift from Active to Passive Investing : Potential Risks to Financial Stability?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/kenechukwueanadu.html" target="_blank">Kenechukwu E. Anadu</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/mathiasskruttli.html" target="_blank">Mathias S. Kruttli</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/patrickemccabe.html" target="_blank">Patrick E. McCabe</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/emilioosambela.html" target="_blank">Emilio Osambela</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/chaeheeshin.html" target="_blank">Chae Hee Shin</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-060
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018060pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The past couple of decades have seen a significant shift in assets from active to passive investment strategies. We examine the potential effects of this shift for financial stability through four different channels: (1) effects on investment funds’ liquidity transformation and redemption risks; (2) passive strategies that amplify market volatility; (3) increases in asset-management industry concentration; and (4) the effects on valuations, volatility, and comovement of assets that are included in indexes. Overall, the shift from active to passive investment strategies appears to be increasing some types of risk while diminishing others: The shift has probably reduced liquidity transformation risks, although some passive strategies amplify market volatility, and passive-fund growth is increasing asset-management industry concentration. We find mixed evidence that passive investing is contributing to the comovement of assets. Finally, we use our framework to assess how financial stability risks are likely to evolve if the shift to passive investing continues, noting that some of the repercussions of passive investing ultimately may slow its growth.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">07 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedmoi/0012.html" target="_blank">Location as an Asset</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/adrienbilal.html" target="_blank">Adrien Bilal</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/estebanrossihansberg.html" target="_blank">Esteban Rossi-Hansberg</a></span>
<br>Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute
<br>Working Papers 12
<br><a class="downloadlink" href="https://www.minneapolisfed.org/institute/working-papers-institute/iwp12.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a ‘location asset’. This asset has a cost equal to the location’s rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Differently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent’s mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and confirm the core predictions of our theory with French individual panel data from tax returns.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">21 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedmoi/0013.html" target="_blank">Adjusting to Robots: Worker-Level Evidence</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/wolfgangdauth.html" target="_blank">Wolfgang Dauth</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/sebastianfindeisen.html" target="_blank">Sebastian Findeisen</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jenssuedekum.html" target="_blank">Jens Suedekum</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/nicolewoessner.html" target="_blank">Nicole Woessner</a></span>
<br>Federal Reserve Bank of Minneapolis, Opportunity and Inclusive Growth Institute
<br>Working Papers 13
<br><a class="downloadlink" href="https://www.minneapolisfed.org/institute/working-papers-institute/iwp13.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">We estimate the effect of industrial robots on employment, wages, and the composition of jobs in German labor markets between 1994 and 2014. We find that the adoption of industrial robots had no effect on total employment in local labor markets specializing in industries with high robot usage. Robot adoption led to job losses in manufacturing that were offset by gains in the business service sector. We analyze the impact on individual workers and find that robot adoption has not increased the risk of displacement for incumbent manufacturing workers. They stay with their original employer, and many workers adjust by switching occupations at their original workplace. The loss of manufacturing jobs is solely driven by fewer new jobs for young labor market entrants. Moreover, we find that, in regions with higher exposure to automation, labor productivity increases while the labor share in total income declines.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">22 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/feddgw/343.html" target="_blank">The Heterogeneous Effects of Global and National Business Cycles on Employment in U.S. States and Metropolitan Areas</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/alexanderchudik.html" target="_blank">Alexander Chudik</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/janetkoech.html" target="_blank">Janet Koech</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/markawynne.html" target="_blank">Mark A. Wynne</a></span>
<br>Federal Reserve Bank of Dallas
<br>Globalization and Monetary Policy Institute Working Paper 343
<br><a class="downloadlink" href="https://www.dallasfed.org/~/media/documents/institute/wpapers/2018/0343.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The growth of globalization in recent decades has increased the importance of external factors as drivers of the business cycle in many countries. Globalization affects countries not just at the macro level but at the level of states and metro areas as well. This paper isolates the relative importance of global, national and region-specific shocks as drivers of the business cycle in individual U.S. states and metro areas. We document significant heterogeneity in the sensitivity of states and metro areas to global shocks, and show that direct trade linkages are not the only channel through which the global business cycle impacts regional economies.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">30 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-61.html" target="_blank">Information and Liquidity of OTC Securities : Evidence from Public Registration of Rule 144A Bonds</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/songhan.html" target="_blank">Song Han</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/alanghuang.html" target="_blank">Alan G. Huang</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/madhukalimipalli.html" target="_blank">Madhu Kalimipalli</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/kewang.html" target="_blank">Ke Wang</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-061
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018061pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The Rule 144A private debt represents a significant and growing segment of the U.S. bond market. This paper examines the market liquidity effects of enhanced information disclosure induced by the public registration of 144A bonds. Using the regulatory version of TRACE data for the period 2002-2013, we find that following public registration of 144A bonds, dealer-specific effective bid-ask spreads narrow, especially for issues with higher ex-ante information asymmetry. Our results are consistent with existing theories that disclosure reduces information risk and thus improves market liquidity.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">31 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedgfe/2018-62.html" target="_blank">The Role of Expectations in Changed Inflation Dynamics</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/damjanpfajfar.html" target="_blank">Damjan Pfajfar</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/johnmroberts.html" target="_blank">John M. Roberts</a></span>
<br>Board of Governors of the Federal Reserve System (U.S.)
<br>Finance and Economics Discussion Series 2018-062
<br><a class="downloadlink" href="https://www.federalreserve.gov/econres/feds/files/2018062pap.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">The Phillips curve has been much flatter in the past twenty years than in the preceding decades. We consider two hypotheses. One is that prices at the microeconomic level are stickier than they used to be---in the context of the canonical Calvo model, firms are adjusting prices less often. The other is that the expectations of firms and households about future inflation are now less well informed by macroeconomic conditions; because expectations are important in the setting of current-period prices, inflation is therefore less sensitive to macroeconomic conditions. To distinguish between our two hypotheses, we bring to bear information on inflation expectations from surveys, which allow us to distinguish changes in the sensitivity of inflation to economic conditions conditioning on expectations from changes in the sensitivity of expectations themselves to economic conditions. We find that, with some measures, expectations are less tied to economic conditions than in the past, and thus that this reduced attentiveness can account for a significant portion of the reduction in the sensitivity of inflation to economic conditions in recent decades.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedker/00069.html" target="_blank">Mapping Stress in Agricultural Lending</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/cortneycowley.html" target="_blank">Cortney Cowley</a></span>
<br>Federal Reserve Bank of Kansas City
<br>Economic Review
<br><a class="downloadlink" href="https://doi.org/10.18651/ER/3q18Cowley" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Repayment rates for farm loans have declined every quarter since the second quarter of 2013, suggesting heightened stress in agricultural lending. If repayment rates continue to decline—and the outlook for the agricultural sector remains downbeat—agricultural banks could become less able to lend to creditworthy farm borrowers. Thus, declining repayment rates could lead to adverse outcomes for agricultural banks, farmers, and the rural economies they serve. Cortney Cowley uses data from the Federal Reserve Bank of Kansas City’s Ag Credit Survey to model and map areas with the highest probability of stress in agricultural lending. She finds that the largest increase in stress over the past decade occurred in 2016. She also finds that lower crop revenues, lower off-farm income, lower farmland values, lower concentrations of farm earnings, and higher interest rates are associated with higher stress in agricultural lending.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedlpo/00037.html" target="_blank">How Do Imports Affect GDP?</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/scottawolla.html" target="_blank">Scott A. Wolla</a></span>
<br>Federal Reserve Bank of St. Louis
<br>Page One Economics Newsletter
<br><a class="downloadlink" href="https://research.stlouisfed.org/publications/page1-econ/2018/09/04/how-do-imports-affect-gdp" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">Gross domestic product (GDP) is the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year. When compared with previous periods, GDP tells whether an economy is producing more output (expanding) or less output (contracting). As such, it is a useful measure of the health of the economy and among the most important and widely reported economic data. A variety of people, from business owners to policymakers, consider GDP when making decisions. Additionally, international trade is measured as part of GDP and is a large and growing component of our nation's economy. It's also an important, but controversial, political issue. However, the current textbook and classroom treatment of how international trade is measured as part of GDP can lead to misconceptions if not properly explained. This essay intends to correct misconceptions and provide clear instruction.</p>
</div>
</div>
<div class="card mb-12 border-0 separator-bottom">
<div class="card-body">
<span class="date">02 Aug 2018</span>
<a class="card-title" href="http://www.fedinprint.org/items/fedfwp/2018-10.html" target="_blank">Optimal Capital Account Liberalization in China</a>
<hr>
<p class="byline">
<span class="author"><a href="https://www.fedinprint.org/authors/zhengliu.html" target="_blank">Zheng Liu</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/markmspiegel.html" target="_blank">Mark M. Spiegel</a></span>
<span class="author"><a href="https://www.fedinprint.org/authors/jingyizhang.html" target="_blank">Jingyi Zhang</a></span>
<br>Federal Reserve Bank of San Francisco
<br>Working Paper Series 2018-10
<br><a class="downloadlink" href="https://www.frbsf.org/economic-research/files/wp2018-10.pdf" target="_blank">Download Link</a>
</p>
<p style="font-size: 18px;"><strong>Abstract</strong></p>
<p class="card-text" style="font-size: 18px;">China maintains tight controls over its capital account. Its prevailing regime also features financial repression, under which banks are often required to extend a fraction of funds to state-owned enterprises (SOEs) at below-market interest rates. We incorporate these features into a general equilibrium model. We find that capital account liberalization under financial repression incurs a tradeoff between aggregate productivity and intertemporal allocative efficiency. Along a transition path with a declining SOE share, the second-best policy calls for a rapid removal of financial repression, but gradual liberalization of the capital account.</p>
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