2010 Publications and Other Research

Federal Reserve Bank of New York

Research and Statistics Group

www.newyorkfed.org/research Contents

1 Introduction 2 Economic Policy Review 4 EPR Executive Summaries 5 Current Issues in Economics and Finance 7 Research Update 8 Staff Reports 26 Outside Journals 35 Order Form

Federal Reserve Bank of New York Research and Statistics Group www.newyorkfed.org/research February 2011 1 I n t r o d u c t i The Research Group also offers two other o Introduction publications of interest to readers: n

The Federal Reserve Bank of New York’s I EPR Executive Summaries

Research and Statistics Group produces a wide online versions of selected Economic Policy P o

Review articles, in abridged form E variety of publications and discussion papers of l i c c o interest to business and banking professionals, I y Research Update n R policymakers, academics, and the general public. o

an online quarterly newsletter providing m e v i

summaries of studies and listings of recent i

This catalogue lists recent issues in our c e research series: publications in our research series. w

I the Economic Policy Review Members of the Group also publish papers a policy-oriented journal focusing on in many economic and finance journals, economic and financial market issues conference volumes, and scholarly books.

A list of these publications begins on page 26. C I u I Current Issues in Economics and Finance s s r u r

concise studies of topical economic and e e n s

financial issues t

I Second District Highlights a regional supplement to Current Issues

I Staff Reports technical papers intended for publication in R U

leading economic and finance journals. e s p e d a a r c t e h R e S p t a o f r f t s J O o u u t r s n i a d l e s Outside Staff Research Current Economic 2 Journals Reports Update Issues Policy Review Introduction duri and Cred Cris: of Conferenc Pa Spec No . res The Reviw E sani A Fina ncial Erhan Prov Step Cen Mathew Conferenc Ging and bankig, w .newyorkfe EPR Central and trica ea Pr conmi hen John 1, ng tral the Perspctives ison ial rc h Econ ocedings it Ce ticles ar S At r Aug ar A Facilty the G. C. Isue: Bank Bank F jo ur na l kar Dens, Spor Ng, uç Suc tr omic an edral Amplif of u Cechti Moser Finac st and d and vi Over Openig n are Li Jefrey Liqud 201 Central fin Tols tural Polic quidty Danie during Volume Selv th at Jefrey Res availb d.org/ esarch/epr an icaton on Shrad al and w e cial a y ity Analy and R fo cu se s l ver ’ s Demiral Reviw Cris Gren Remarks egula Policy Shrade Bank t an throug T P market he er, e ols it Mechan Liqudty d at Suply si Fina ncial Mi Disya Sumar wal tor on Liqudty r p is 1 chae h y d, 6 a topics. ma cr t ta Refo he pol ism Nicholas l of S Sh . P ockin y icy-orent oec Liqudt rm rim tages or To , yar ols nomic Klage, y ed , Pers the Pre N Jo Solvi Vi Syst Mathew Con Informatil In ajshri R Pro Evidenc the threatnd have of cor ef Wisc vou Florid contra for vou pri mak period only EPR City ticular par low ar vou in fects hn ticle o. ral the the vate an miu -income vou cher cher cher gram Florid espondig Leverag pectives ’s e emic 2, ditons V. on Geankopls if introduce d ng Executive ef studen a e st, study U an of of Octobe the chers ducationl Acha r schol sin, fotr s s. s nited progr chols Chakrtiabr the aly schol Pritsk were the four a D s Using schol Ri from schol with program th ze to esign public ya, e are s on to Presnt t threatnd k is hrou s ams. Staes: Cycl r —in reform years. i er schol e mposed two J therefore transfe Sy umar and Easi ligbe study 201 broadly oão Re vouc Educationl schol-evel schol in be , re reform gu gh Incetive Under e sc coming A. the ceived such some ng: Deposit have Un like he hol the y lator Cris K-1 shows C. the to in rs, Florida from vouchers— scholarip to aplicbe Improv public Milwauke educationl Sa had M tr U.S ts.efor 2 e the availbe s with private Re two xce ansfer tude ntos, eligb ed ilwauke Refor m the and tha dat s, the an leas Insu ucati Milwauke vIe nter schol de “F” program and schol studen nts an t Milwauke ing incetve outse, M the from from d schol. rance on, to becam o grade e. those for T angi Res Credit f and anju ventiosinter formanceper The Ne distrc. nti Inf p vouchers public Florida under olicymake e ponse: s of we s w on F o of Yorulmaz er or program, in to leson lorida In York a tha re eligb mation schol, s a avoid only to This and t al hat rs 3 I n t r o d u c t i

Policy Analysis Using DSGE Models: integrity and efficiency of the U.S. Treasury o An Introduction* market —to promote a change in the existing n market convention. The change —the introduction Argia M. Sbordone, Andrea Tambalotti, Krishna Rao, of the fails charge —was significant because it and Kieran Walsh mitigated an important dysfunctionality in the

Many central banks have come to rely on dynamic secondary market for U.S. Treasury securities and P o because it stands as an example of the value of E stochastic general equilibrium, or DSGE, models l c i c to inform their economic outlook and to help cooperation between the public and private sectors o y formulate their policy strategies. But while their in responding to altered market conditions in a n o R m use is familiar to policymakers and academics, these flexible, timely, and innovative fashion. e v models are typically not well known outside these EPR Executive Summary available i i c e

circles. This article introduces the basic structure, w logic, and application of the DSGE framework to a broader public by providing an example of its use in monetary policy analysis. The authors present Forthcoming and estimate a simple New Keynesian DSGE model, highlighting the core features that this basic Central Bank Dollar Swap Lines and Overseas C specification shares with more elaborate versions. I u s s They then apply the estimated model to study the Dollar Funding Costs r u r e sources of the sudden increase in inflation that Linda S. Goldberg, Craig Kennedy, and Jason Miu e n s

occurred in the first half of 2004. One important t Following a scarcity of dollar funding available lesson derived from this exercise is that the internationally to banks and financial institutions, management of expectations can be a more in December 2007 the Federal Reserve began to effective tool for stabilizing inflation than actual establish or expand temporary reciprocal currency movements in the policy rate. This result is arrangements with fourteen foreign central banks. consistent with the increasing focus on the The central banks had the capacity to use these pronouncements of central bankers regarding their

swap facilities to provide dollar liquidity to R future actions. U institutions in their jurisdictions. This article e p EPR Executive Summary available s e describes developments in the dollar swap facilities d a a r

through the end of 2009. The facilities were a t c

The Introduction of the TMPG Fails Charge e response to dollar funding shortages outside the h for U.S. Treasury Securities United States during a period of market Kenneth D. Garbade, Frank M. Keane, Lorie Logan, dysfunction. Formal research, as well as more Amanda Stokes, and Jennifer Wolgemuth descriptive accounts, suggests that the dollar swap The TMPG fails charge for U.S. Treasury securities lines among central banks were effective at provides that a buyer of Treasury securities can reducing the dollar funding pressures abroad and stresses in money markets. The dollar swap

claim monetary compensation from the seller if the R facilities are an important part of the central bank e seller fails to deliver the securities on a timely basis. S p toolbox for managing systemic liquidity disruptions. t a

The charge was introduced in May 2009 and o f r replaced an existing market convention of simply f t postponing —without any explicit penalty and at s an unchanged invoice price —a seller’s obligation to deliver Treasury securities if the seller fails to deliver the securities on a scheduled settlement date. This article explains how a proliferation of settlement fails following the insolvency of Lehman Brothers Holdings Inc. in September 2008 led the Treasury J O Market Practices Group (TMPG) —a group of o u u t market professionals committed to supporting the r s n i a d l e s

*A top download in 2010. Outside Staff Research Current Economic 4 Journals Reports Update Issues Policy Review Introduction vResr from The and range come facilty 208 ba rt esor facilty, cris dis Tobias Fundig The This rated the Fundig nk uptions r is oper Dina Fed uptcy r . Fed t ar eligb r unse o faciltes The el e Ad rcial f is and icl to ation policy vant eral Fa ral ria a Faci M cured e pro vide CPF liqud ci in docume of draws paer, n, archion vRe esr li isuer Res to of li ty money L Karin in actions ty ehman and the the (CPF) a fi ty conlu ver ’s s and liqu naces m nts th backstop C creation creatd as Kimbrough, arket-bas d m PF , rough set-backd u its aspect B dity Comerc arkets ta nder rothers sion in creation the di the to the p of scu to purchase ri f ke f th of ol wi or ma m th Co U.S se on e n finac com t id e lend h f ia y r was by mer ina CPF , st e S l usage eptmbr ng finac dealrs. is mercial Paper o the er-oflast t par sue f of ci al th se cial al Fedral higly rs s e rwsevi vere of ystem ial of syt of Paper T th paer a he 15, em. e . those e w .n Sumaries an published Vi time fule an to of Econmi published Sumaries Our The easy EPR xec sit d d Nw e policy r uti findgs others. ly, to su onli our under who mari ew vye_sumar .html po absor . York Executiv e makers, websit Policy licy-oren yorkfed.org/ e e sin i are n c a T st publicat ondes re the to ce Fed andi he es in a wor 20. make Reviw vailb seri Reviw educ a for econmist ng pos ted k. ion s of conis ators, many le the iton is su ticle ar our . EPR for Suma de Read s marie te e signe ar e chnial to re busine m of su Executive ch/epr more s. search any put the rs mar d s w to ti ar tha our ticlesar il ace re among ries foster leadrs, ies se cles find i are arch sible deas of a 5 I n t r o d u c t i

No. 2, February 2010 o Current Issues The Unemployment Gender Gap during n in Economics the 2007 Recession Ayşegül Şahin, Joseph Song, and Bart Hobijn

and Finance Women fared decidedly better than men during P o E

the most recent recession. By August 2009, the l i c c

unemployment rate for men had hit 11.0 percent, o

Current Issues in Economics and Finance offers y while that for women held at 8.3 percent. This n R concise studies of topical economic and o m 2.7 percentage point unemployment gender gap— e

financial issues. v i

the largest in the postwar era —appears to reflect i c e Second District Highlights —a regional two factors: First, men were much more heavily w represented in the industries that suffered the most supplement to Current Issues —covers important during the downturn. Second, there was a much financia l and economic developments in the sharper increase in the percentage of men who — Federal Reserve System’s Second District. prompted, perhaps, by a decline in household liquidity —rejoined the labor force but failed to

Both series are available at C

find a job. I u s

www.newyorkfed.org/research/current_issues . s r u r

No. 3, March 2010 e e n s

Bypassing the Bust: The Stability of t Volume 16 Upstate New York’s Housing Markets during the Recession* Jaison R. Abel and Richard Deitz No. 1, January 2010 Over the past decade, the United States has seen real estate activity swing from boom to bust. But

Is the International Role of the Dollar R U Changing?* upstate New York has been largely insulated from e s p

this volatility, with metropolitan areas such as e d Linda S. Goldberg a

Buffalo, Rochester, and Syracuse even registering a r c t e

Recently the U.S. dollar’s preeminence as an home price increases during the recession. An h international currency has been questioned. The analysis of upstate housing markets over the most emergence of the euro, changes in the dollar’s recent residential real estate cycle indicates that the value, and the financial market crisis have, in the region’s relatively low incidence of nonprime view of many commentators, posed a significant mortgages and the better-than-average performance challenge to the currency’s long-standing position of these loans contributed to this stability. in world markets. However, a study of the dollar Second District Highlights

across critical areas of international trade and R e finance suggests that the dollar has retained its No. 4, April 2010 S p t a standing in key roles. While changes in the global The Federal Reserve’s Foreign Exchange o f r f

status of the dollar are possible, factors such as Swap Lines* t s inertia in currency use, the large size and relative Michael J. Fleming and Nicholas J. Klagge stability of the U.S. economy, and the dollar pricing of oil and other commodities will help The financial crisis that began in August 2007 perpetuate the dollar’s role as the dominant disrupted U.S. dollar funding markets not only in medium for international transactions. the United States but also overseas. To address funding pressures internationally, the Federal Reserve introduced a system of reciprocal currency J O arrangements, or “swap lines,” with other central o u u t banks. The swap line program, which ended early r s n

this year, enhanced the ability of these central i a d l e

banks to provide U.S. dollar funding to financial s institutions in their jurisdictions. *A top download in 2010. Outside Staff Research Current Economic 6 Journals Reports Update Issues Policy Review Introduction Second to es usefl and Ri of The centag homeowner An The No. No . holds. Recnt and In both of likey dauntig. re more of multibon-dar Censu ofical t wor makeup heavy t par take and had their sector * A tai tablishng chard thi negative mak drew top the Nw e iculary n Joseph Charles to se 5, 6, h. step Recsion Home budge Nw e s —has on to download vice r rel their guide They wake an e make M June T ho ye Bureau, District poin F. De of t conver Yo them iance hes the ay ars meowner to Re lysi Haughwo Yor k Tracy itz, their t rk shi equity /July cuts. home from ownershi Steindl exacrbtd ir “rainy 201 of argue ts to gaps, cogniz t aver ha difcult home wners p tga mor and on l Andrew in below t calute es ve ’s the he St that but Highlts budgets t In 201. 201 hig Impact o pe ate or se home wne th s Nw e se d mos budget ship futre N uch rentrs the e ay” rsonal the nsitve at excludes purch t, n w e and th choies p -wage es F. R t the a th e fut budget York Gap* f rate saving revenu an ichard rec und s reveals Jers Haughwo than at ofic h Nw e on path ase gaps. inco ov er ef are arp “ef to th re, earns co nt s fective ey and rs negative about t es a or s the al he their include mpu ective ” —th ri the me of Pe J U.S quandries th time, w ne e tha An se tfal shor rate r ructrin estr ach, ho Nw e Sta the sey ey busi stae taxes in te ose t, rate house tax anly in meowner recsion —may m h the d have of th th e e ome rate nes ust th J qui by who — increas — ersy B e e in ical sta s. mig e s udgets auth number is 5.6 ty th ams of finac th by faced To cycle. are ar be es’ o e ow house g ht e e rat , s have f per- ors close tax are t a e he e. e to es - No. In Ove Wän Imp Emanuel Mtgaes or Why ARM Giorg have ad in rela Expecta low. residn rela uctrstr e an decison thoug Sup shaped expl of of in No . pla housing on qu an Nw e in To the cert cr to flation justable-r flation alys d estion grea tga mor y house help ainty , ting tive effec pl eas ain r acdemi 7, 8, roving di One acou a d Yor k the y-side is Is share roped role t ingly tial ed Augst/S eptmbr De B tgae mor T tions price s tiveness to suget in impro ve s gove to the uine r holds’ opa, expctaions, Mo and of pa about might ges tha ce by Ex terest nt recntly tgae mor the in play st has So mbe interest Svey ur factors, fav ench, Market pectaions rnmet-spo e the whe of about expecta e the and to sever consu ligbe de wil finacl tgaes mor ored Low? inflato be spendig diferent an to of speculat r tha les same existng n B choie low Wt ilber 20 James comm uin, r central yield al joined n ta impor de futre ltans in rates Meas fixed-rat tions 10 orignat tha to driv years, recnt S ter cu factors the ticular par hare —most cris. Vick be n r ent ming Simon more exp unications types en and vey sur about and ure van (ARMs). with tha to 201 10 bankers, inflato Fe se nt U.S trends of by e deral cur develop r c s percent ARM its d tha role saving. y, der How ever, taions, reliab tgaes mor the of of Poter, Adjustable-R other ” “one-f future s entrpis, notably, itze policy and measures , homebuy efcts a tgaes.mor Klauw Househld a vRe esr in have de rise can who Inde are near- ecord with sha d Diego cline instuo houseld ’ a They of Rob w informat by inflat in or set largey re genraly on age historcaly al a ta th the . ov er the factors the t er aseing l staicl of ers ke , of in Bank e Aragon the are c ion ARMs also han ter pu Rich, veysur the them share have be also m blic un ges of - . . 7 I n t r o d u c t i o

Research Update n Research Update is an online quarterly newsletter designed to keep you informed about the Research Group’s current work. P o E l

The newsletter —which complements this i c c o catalogue —offers summaries of selected studies y n R and listings of recent articles and papers in our o m e research series. v i i c e Research Update also reports on other news w within the Group, including:

I staff publication in outside journals, I presentations by economists at academic C

conferences and industry gatherings, I u s s I r

upcoming conferences at the Federal Reserve u r e e n

Bank of New York, s I calls for papers, and t I new publications and services. The publication is available at www.newyorfed.org/research/research_update . R U e p s e d a a r t c e h R e S p t a o f r f t s J O o u u t r s n i a d l e s Outside Staff Research Current Economic 8 Journals Reports Update Issues Policy Review Introduction *A an tha a strong No. fin w are fin Tob Fi term macroec Tob Monetar No . M discu res The Staf macroec the One The l an hyp The mar to rationl flatenig When balance the leading po a Fl and ead broad posible uc n top wer d d acroe exp ancil ancil ias ias ancil othe slo jo gin, i arch tuaions Hyu ing 42, 421, nted fina authors Macroecnmi th of seri Staf spread downloa .newyorkfed.org/ esarch/staf_rt epor int pe of A A mone predictve e ctaions e sheet the t si, on s dria dria whi n econ o Busin et cycles, intermd de for y pa of nomics nomic the Jy anur Jy anur cial of caus Song a Intermdiao, Rtsepor ed Cyc of te i most and Rts epor the ch pers the nom n, n, contrai s for d y tar provide this the in ma ter rminat omic y intermda avai in equity, for al Atur o r Emanuel reby in es les of Shin the term futre m na and 201. agregats. elict ter mech tighen design forecastin robust i power ics tu s 201 201 even labe iares gement , fut spr Cycle* seri m the agregat rn Fina an linkg the on em c str c ead, and Es spread, anism d re co orpate, makes r tual Dyn forecast eal uctur provid onl trel pircal of for Moe stylized busin in ncial finace ment intere featur of deriv g aset activy. Gr th to balnc y y monetar f T a, publ amic is nch, utre Aset f p f e. inanc e lending he balnce at or it es ower owth asocited a stimulae e Cycles, st ing t supor su This nd es prices reduc ng a and facts th auth s. icaton rates, p s jo cyc e window ex i techni e Hy Price po al T Th fro urnal usal sh ly forecas pa le ces Treasu he ors i w un in less es ets shet cycles, nt m . of an es per whic er for eco ermediaries. net s, doc Song with d the return c s. in y cal prof o c red p p on s f th y r on apels ting no h ropo apers in of umen t is he it itab tain afect bon mic a Shin terest . s s ses . on l d e, t guid macroe me mone N to fore y intermda t por inflato as Hou and seri consite alt cor espondig estima pe Sh owner of price Tobias Fundig The and resultin Jona th The uptions disr Th a facilty from Fundi rate 208. bank comerci al range vRe esr facilte and oper Th N relvant nd o. o. rsonal erna eltr c L t e is asure he los d cast abor folis. Dina ow ow draw ation an 423, 425, sing Fed uptcy r Fedral Meas p eligb i y tar uns by of s’ an nde ely T aper tance impor tive A ce conmi s g ne ne is g h ntly s he e to real drian, eral to in policy alternive as consumpti an Facilty ser quivalent ecured Staisc in Sve ur s thy McCar for a of rs’ rs’ Jy anur Jy anur as xes Facilt Marchion p of uremnt They conlusi p le owner s’ CPF the l describ a a olices in ies iqudty subtanil of amoun t pae ro inflato. lo posible. econmi equivalent equivalent vResr . the premptive lar marke isue v Res This we vide aribles mone Lehman y BL Karin creation is actions ge and dy y dat, also CPF , r, r (CPF) genraly veer ’s . finaces S rs 201 201 than (BLS) weight of namics and rent. e liqudty equivalent study t and seri. inflato -based y via backstop large of creatd aset-bckd aspe s Kimbroug h, finacg Their 0 0 how The m fo tha activy expnditures for unde s its rent rent Rent Brothers the dis of y prima Come ark Richard c l Mt hy cCar ud macropr utiny r estima cts de in owing in e creation However, the cus the and lendr-ofast tesor s consite tha nough finacl ets predict cor es tudy’s alternive scribe the take r based are to of the the rate Inflatio se to rent CPF , purchase fol and provide the t frictons s the measured midst of he W. BLS Comerc ial CPI dealrs. U.S s o rcial use n lo po comerci al findgs n to for on how inflato finacl tena exces how was wing finac variou by and same Peach ential ndig Septmbr deflat sytem. their hav e of methodlgy revi and with n Ame tena isuer Paper of the tena quantive pa tena the of Peach the in The t severe ial s he returns or, t r in in ws rent a and Fedral rican BLS higly the point facilty, B seri of sytem. cris the thes rent of the ure Paper re paer then and rent a 1 nt au 5, is 9 I n t r o d u c t i

significant effect on the overall inflation rate. This No. 434, February 2010 o result is driven by the inverse relationship between Correlated Disturbances and n rent inflation and the level of monthly housing cost U.S. Business Cycles evident in the American Housing Survey data. Vasco Cúrdia and Ricardo Reis P

No. 428, January 2010 The dynamic stochastic general equilibrium o E l

(DSGE) models used to study business cycles i c Macro Risk Premium and Intermediary c o typically assume that exogenous disturbances are y Balance Sheet Quantities n R

independent first-order autoregressions. This paper o m Tobias Adrian, Emanuel Moench, relaxes this tight and arbitrary restriction by e v i i

and Hyun Song Shin allowing for disturbances that have a rich c e The macro risk premium measures the threshold contemporaneous and dynamic correlation w return for real activity that receives funding from structure. The authors’ first contribution is a new savers. This paper bases its argument on the Bayesian econometric method that uses conjugate relationship between the macro risk premium and conditionals to allow for feasible and quick the growth of financial intermediaries’ balance estimation of DSGE models with correlated sheets. The spare capacity of their balance sheets disturbances. Their second contribution is a C I

reexamination of U.S. business cycles. They find u determines the intermediaries’ risk appetite, which s s r

that allowing for correlated disturbances resolves u in turn determines the real projects that receive r e some conflicts between estimates from DSGE e n funding and, hence, the supply of credit. Monetary s policy affects risk appetite by changing the ability models and those from vector autoregressions and t of intermediaries to leverage their capital. The that a key missing ingredient in the models is authors estimate the time-varying risk appetite of countercyclical fiscal policy. According to the financial intermediaries for the United States, authors’ estimates, government spending and Germany, the United Kingdom, and Japan, and technology disturbances play a larger role in the study the joint dynamics of risk appetite using business cycle than previously ascribed, while macroeconomic aggregates for the United States. changes in markups are less important. R U e p

They argue that risk appetite is an important s e indicator of monetary conditions. No. 435, February 2010 d a a r t

Labor-Dependent Capital Income Taxation c e No. 433, February 2010 that Encourages Work and Saving h The Paradox of Toil* Sagiri Kitao Gauti Eggertsson Kitao proposes a simple mechanism of capital This paper proposes a new paradox: the paradox of taxation that is negatively correlated with labor toil. Suppose everyone wakes up one day and supply. Using a life-cycle model of heterogeneous agents, she shows that this tax scheme provides a

decides they want to work more. What happens to R

strong work incentive when households possess S aggregate employment? Eggertsson shows that, e p large assets and high productivity later in the life t under certain conditions, aggregate employment a o f

cycle, when they would otherwise work less. This r

falls; that is, there is less work in the aggregate f t

because everyone wants to work more. The reformed system also adds to the saving motive and s conditions for the paradox to apply are that the raises aggregate capital. Moreover, the increased short-term nominal interest rate is zero and there economic activities expand the tax base, and the are deflationary pressures and output contraction, revenue-neutral reform results in a lower average much as during the Great Depression in the tax rate. The paper’s findings show that this tax United States and, perhaps, the 2008 financial scheme improves long-run welfare and that the majority of current generations would experience

crisis in large parts of the world. The paradox of J O toil is tightly connected to the Keynesian idea of a welfare gain from a transition to the o u reformed system. u t the paradox of thrift. Both are examples of a fallacy r s n of composition . i d a l e s

*A top download in 2010. Outside Staff Research Current Economic 10 Journals Reports Update Issues Policy Review Introduction consumpti A consumpti, overal save can lon es the tax sup red the ho No . earli Eq retirem red en in from tf shor This Sagir in Redistrbuon, St-Rhor Se Force Soci No. ticpaon par an mo İmroh u r retirem cur ent find stimu tempor pecialy c lahti n tempo dogenus d urs, the uilbrm reas uction uction g del ply, stimul impac tion crowd fis the more, 42, 436, al tha un, r pae st s late al l Kitao ixty-wo; cal Ptic ar e and of Securit Sh w y ar r ro but sy nt nt labor etiremnt n in un ra provides of elfare a ğlu overlap April March econmi st r polices t t or h b i i İ y r rai out n n r age age 50 the m enfits owe Social of quantifes em the the ebat Fi saving, ipaton and be e sing rohro rebat and of marginly. and arly input, Ap thre , percent sc caus y, of also capitl e signfcatly ver, ne S 201 to e and arlies ol al ocial fects ping 201 Benfit and —a a aggrega house f trans i Kit Se der sixty-egh claimng. mediat its low-incom age roach Long ing Pol higer ğ the r Soci is labor cu a lu aise 3) : primaly ao t ctivy. an temp the Security work genrat Ag A and mo rity are has c i fer welfare r an an debt c etiremnt ut d al us y: te Quanti olds, Run —tha d saving stly Both Cl ef payrol force smale tax e reg inc S in o r benfit y ora outpu ers, Welfare Sagir ed ecurit nly a raise ects Increas aimng acum A i th e io from rea ate saved ncetives gen uce to and to bu t red houseld and ns po e tic par hrough a and s r. are t s o tax scope detrioa. e eral neglib y dget taxes vice er Efe Ki age, lic ou f as an uction t claims Po t hat ulated in six r ing he , two iv reduc and set tao , ef i ies d cut tpu the nted stp ipaton e and equilbrm ty-six th orm ct ; c to throu rebat inco of the Genral onsum holdings impr hig 2) to e s sho oni the incr and labor es six in s. to and n t th e s: L work an o ormal . norm r t-r e In t e ty- d abor gh inc po er eas study e 1) ove They , he fin g f a polic ebt fect. wo t pti th th f o rate a ome a our an and t on e e al rk he ce y s . N and con Exp and wor inte eq mark cor elatd may sim incr fod Public Wändi Th The Sagir the Sub and relat subeq th mark and and gen th respon pay” pay.” respondt based great vey sur a Julie th higer N for as n o. o. e e an uil d w e ul eral” vey sur sider ker ra un “rate eas sidzn Gr ectaion el ively Oliver Pisarde empl elictd l l 43, 451, authors af ibr S. ik ik an et et Efect f an ate tance impor R ction or vey sur Kitao, em fect s ely ely e me and eat as ted epor uine Br d Downs, d polices condits ium s ent xp of the and the the p of for oy “prices pl more taion, transpo April May the asures ectaions les salient, ater w meas e Re diferent g more oyment, betwen me efcts Amantie r inflato,” conmi ir ith e of model to “rate equilbr anl hous Ay s “prices of Job xpe “rate cesion respon s (203) and de nt. 201 ns Questio alient. que şegül on 201 ures uch Bar expctaions the on consumer of ctaions in . yze . disp u Br ing, Creation of The but The Compared on personal at stion of job such is Perce expctd genral” c and of educationl inflow, firms you Ş ium inflato,” the r in, decison, ersd the calibrted inflato ” ah es actul T is whic not question authors inflato fra creation, Fischof, he n i use Wt ilber perceptions to expctaions efcts n, pay” ptions tha whic end efcts about worme k Wo and with result alternive and for d and price and in showing and inflato. price were to of with we rding focused worke “prices use of the with randomly and and “prices Jose ph to were expctaio of model outfl w van job 209, atinme. re o about Giorg pe exprincs have f re various of increas capture an a ques more rcep expctd Inflatio latively have “prices uction,destr of o der hirng rs “prices Mte or relative simlar can n Inter- in polices. resp Th Son inc im and in inf the “prices tions tions Re Klauw, Topa, rates genral” strongly erefore be plicato genral” asign g lation luding labor ns. ondets labor tedpor dynamic nse subidy, you to smal for you ly — T of price were about by hey in The large , l ns 11 I n t r o d u c t i a payroll tax reduction, and an employment stickiness and inattentiveness. Finally, the authors o subsidy. While calibrating parameters that consider versions of the price-setting problems in n characterize these policies, the authors try to mimic which firms continuously entertain partial the policies in the Hiring Incentives to Restore information. They characterize the optimal pricing Employment (HIRE) Act of 2010. They find that a rules and provide numerical solution algorithms hiring subsidy and a payroll tax deduction, as in and examples in a unified framework. P o E

the HIRE Act, can stimulate job creation in the l i c c short term, but can cause a higher equilibrium o No. 463, July 2010 y unemployment rate in the long term. Employment n R The Central Bank Balance Sheet as o m subsidies succeed in lowering the unemployment e

an Instrument of Monetary Policy v i

rate permanently, but the policy entails high fiscal costs. i c e

Vasco Cúrdia and Michael Woodford w No. 455, June 2010 Cúrdia and Woodford first extend a standard New State-Dependent Pricing under Infrequent Keynesian model to allow a role for the central Information: A Unified Framework bank’s balance sheet in equilibrium determination and then consider the connections between these Marco Bonomo, Carlos Carvalho, and René Garcia

alternative policy dimensions and traditional C I u

Bonomo, Carvalho, and Garcia characterize interest rate policy. They distinguish between s s r u optimal state-dependent pricing rules under various “quantitative easing” in the strict sense and targeted r e e n

forms of infrequent information. In all models, asset purchases by a central bank, arguing that, s infrequent price changes arise from the existence of according to their model, while the former is likely t a lump-sum “menu cost.” The authors entertain to be ineffective at all times, the latter can be various alternatives for the source and nature of effective when financial markets are sufficiently infrequent information, and show that, in all cases, disrupted. Neither is a perfect substitute for optimal pricing rules are both time- and state- conventional interest rate policy, but purchases of dependent, characterized by “trigger strategies” that illiquid assets are particularly likely to improve

depend on the time elapsed since the last date welfare when the zero lower bound on the policy R U when information was fully factored into the rate is reached. The authors also consider optimal e p s e pricing decision. After considering the case in policy with regard to the payment of interest on d a a which information arrives infrequently for reserves; in their model, this requires that the r t c e exogenous reasons, they address pricing problems interest rate on reserves be kept near the target for h in which gathering and processing information also the policy rate at all times. entails a lump-sum cost. When the information and adjustment costs must be incurred simultaneously, the optimal pricing policy is a fixed-price time-dependent rule. When the costs are dissociated, the optimal rule features price R e S p t a o f r f t s J O o u u t r s n i a d l e s Outside Staff Research Current Economic 12 Journals Reports Update Issues Policy Review Introduction the ter quar consumpti, sizable No . signfc ne pricng, fixed w match cit ofered in rev ov erlaping- red can of The and The de Dongh An Marco Tax No. in This Credit to Credit use sample ho poulati the credit changes natiol Fl from de eal ow ument str formatin taile riv ut usehold time trac enu zen, uction pre authors of Introd reduc Fabi th ral 479, 467, Buyouts paer pane ed pae pr the of rt epor on k d c Del s sent, ant Panel, increas . distrbuon, d redit by s, ice and Panel everal whereby rangi from ly F the indvuals’ The in informat ano esign, Amer l n unds e No vemb A in r i Le r the use n uc Negro , liabtes. f studie up various ugst fiscal epres i staic is raction provide ntroduces at introduc the a derive Schivardi at he informat authors ti their a a s fe politcay and front and gover the ican on Acounts the r a a w ne priv atures from panel entaive in the tax dist terly quar u 201 atio Fabr a same nique Wil d to panel welfare. a use labor r o ate Comunity nm spec i some fis and lo and rate and t or f c from tio n 201 on I conside ns itzen t the n the t ber ng c izo of cal th he exch of contra an ent n io aditon t ts eco consum e itu show viable estima im h s for w suply, consum o the ns of first sam amp include po FRBN pou com co ou f be FRBNY of Peri v ith f to ange dinal requncy. e , an the nom can the lic a nsumer r sehold ’ wit U.S ind can used ple each le ter quar those pres parison a th y der lation way. , United ch (tax buyout dynamic hout er y, d iv f umen instr i at, Svey ur er Y to datbse w ncome, or benfit esig inco pec id ose Klau to o calibr debt eigh indvual i C d Cons under n f describng bas a Th ual bu credit ebt on aces compute the n afect and ifed In given the of me you ts, of e ed Staes. to and su is and and and w e an 19 a levels umer ted st dat mer lead and reven pay an w on simple perio t), t ing rt epor y imate to ith t cr t d given abse, t hat he dat o edit. a the and t to the an ue o d s a s d dol aplictons stae The th fund comp finacl asym lose Kevin Com Los N Inte de prov fund inte The Tobias Ri Finacl com le expct dam dow inte th to mor com inv valho Car con foreign los-avers standrd le N ve ve o. o. e e co sk inve estor se lar tex ls ls rme rnatio benchmark orie e ntur pe ide 430, 461, mpos amentls amentl n r dif varibles, Aversi vemnts vemnt ove Premia one agents for of of le Amonlirdviman risk n Adrian, stor etr d-u ationl ferent equits dia ads s s of ting supor w risk risk ments, expct intermdas’ nts of l the Fy uar ebr ic: July anlyze s ing os-av ho Amp pre ries’ ti the investor than los-aver on, sytemic with l lity not to Cor asocited aver aver shock. gains diver in has miu. the utily and 201 in home Er ko balnce baln sytemic model ers in lifcaton pref returns. Asymetric d-utily in re perce sion? sion. interaol and hig to the U.S sifcaton lations a the s from 201 uptrns. evidnc se chose compnet investor. behave impact ce bias renc risk The Adrian, Etula, tfoli por ive the and They risk pre investor with dolar shet shet with risk balnce Per di pre large suget puzle senc are authors Home of Carlos versifcato n aversion. agents betwe haps and siml only than of might This fe macroecnmi mo for constrai Etula, risk higer Foreign amplify Market re Amonlirdvi stock wealth problem gains of nitorg. to nce Jan the asocited such shet. arly macroec surpingl tha valhoCar standrd asy premiu Bi with discu asymetric n behave not, s y and J. So as in markets home ymetr to and find from theoris finacl the gains J. Excha plausibe market relatively should becaus those Relative o Groen Gr oen amplify f plaus U.S man tha simlary n such and with y, in omic and nge are to in with by ible the and an the to 13 I n t r o d u c t i

No. 474, September 2010 No. 440, March 2010 o Firm Value and Cross-Listings: The Impact Productivity and the Density n of Stock Market Prestige of Human Capital Nicola Cetorelli and Stavros Peristiani Jaison R. Abel, Ishita Dey, and Todd M. Gabe

This study investigates the valuation impact of a Abel, Dey, and Gabe estimate a model of urban P o E firm’s decision to cross-list on a more (or less) productivity in which the agglomeration effect of l i c c o

prestigious stock exchange relative to its own domestic density is enhanced by a metropolitan area’s stock of y n R

market. Cetorelli and Peristiani use network analysis human capital. Estimation accounts for potential o m to derive broad market-based measures of prestige biases due to the endogeneity of density and e v i for forty-five country or regional stock exchange industrial composition effects. Using new i c e destinations between 1990 and 2006. They find that information on output per worker for U.S. w firms cross-listing in a more prestigious market enjoy metropolitan areas along with a measure of density significant valuation gains over the five-year period that accounts for the spatial distribution of following the listing. The authors also document a population, the authors find that a doubling of reverse effect for firms cross-listing in less density increases productivity by 2 to 4 percent. prestigious markets: These firms experience a Consistent with theories of learning and knowledge C significant decline in valuation over the five years spillovers in cities, they demonstrate that the I u s s following the listing. The reputation of the cross- elasticity of average labor productivity with respect r u r e border-listing destinations is therefore a useful to density increases with human capital. Metro- e n s signal of a firm’s value going forward. The study’s politan areas with a human capital stock one t findings are consistent with the view that cross- standard deviation below the mean realize no listing in a prestigious market enhances a firm’s productivity gain, while doubling density in visibility, strengthens corporate governance, and metropolitan areas with a human capital stock one lowers informational frictions and capital costs. standard deviation above the mean yields produc- tivity benefits that are about twice the average.

Microeconomics R U

No. 450, May 2010 e p s e No. 432, February 2010 d Is Economics Coursework, or Majoring a a r t in Economics, Associated with Different c Subprime Mortgage Lending in New York City: e Prevalence and Performance Civic Behaviors?* h Ebiere Okah and James Orr Sam Allgood, William Bosshardt, Subprime mortgage lending expanded in New York Wilbert van der Klaauw, and Michael Watts City between 2004 and mid-2007, and delinquencies Using data collected from students who attended on these subprime loans have been rising sharply. This one of four public universities, the authors study uses a rich, loan-level data set of the city’s investigate the relationship between economics R e outstanding subprime loans as of January 2009 to coursework and civic behavior after graduation. S p t describe the main features of this lending and to They find that undergraduate coursework in a o f r model the performance of these loans. These subprime economics is strongly associated with political party f t loans represent a smaller share of total housing units affiliation and with donations to candidates or s in the city than is true nationwide. In addition, they parties, but not with the decision to vote or not are found to be clustered in neighborhoods where vote. Nor is studying economics correlated with the average borrower credit quality is low and, unlike prime likelihood (or intensity) of volunteerism. While the mortgage loans, where African Americans and Hispanics authors find that the civic behavior of economics constitute relatively large shares of the population. majors and business majors is similar, it appears The authors estimate a model of the likelihood that that business majors are less likely than general J O these loans will become seriously delinquent and find a majors to engage in time-consuming behaviors such o u significant role for credit quality of borrowers, debt-to- u t as voting and volunteering. Finally, the authors r s n income and loan-to-value ratios at the time of loan extend earlier studies that address the link between i a d l origination, and estimates of the loss of home equity. e

economics coursework and attitudes on public s policy issues, finding that graduates who studied *A top download in 2010. Outside Staff Research Current Economic 14 Journals Reports Update Issues Policy Review Introduction per The inferencs learni and Daniel Ba to more rank U.S learn learni anl No. econmis more public econmist. rank and Bayesian on Stubornes voters evidnc ambiguo whic when amou have those ye them yz Zafr 2) ing ings 453, h re rankigs: sian Coleg be nt. ec l rs. the ing ike are c the g g pol influec F. en o o , n expres us exi f Using Voters’ nomics impro ves of posteri ocu f St June but ranked t whet those Soc ic les t by on a the majors. ake noe one st and ut y signfcat Interesting se Fotbal atiu vin obser s: hors the the ial —tha re 1) top 201 this an dat ed more spon of Evidenc xpe on revis usaly the r Learnig, team are pol influec d in atribu genral indv ranki the twenty- des li Basi showing rim from si terau e way ions inf i natiol salient s, g ve a Pol, acury voter of ly, lose ental t ormative, th f indvuals duals rted epor w e to Z gs te voters bu are th the e m five fro af a is actions per to in e y sin t Confrmity, ajors het t sign literau e han w a e c hat m r auth Asociated les s ars are loser los a team ekly step veys ur es of ad notrival the rankigs rog als . vati obser se when atiude than t Bayesian as ors ju majors their han . of ther fur s, do to enity, st c subjective Th being AP ondit they fin of o Bayesian on th in the of thers. ey it est d U.S Top eir Pres de s wins, to aft so onal fin and imated t f w Bayesian c ion les and by so he ind lose cial e be ay; d cial r Stone 25 ing draw (AP) t t th r hey hat at majors rting epor of expctaions design rting epor 1) but debt compe in taking Th in debt seriou upd set their ext er bi as es Th Basit Ch Can form Patr Exec previous fin an in tha No . choie Co me there for executives debt pict the expctaions. me No. stiuon. de troduce alys cognitve ds w is is mparison asu asu t: of oi fina ure r ating, ick 2) hol hol 456, 45, h ted epor utive (pro p p 1) Subject subjective Z ce suf of no sem eth s is und re re pl ag u ing ape ape nsatio sharehold a afr mod in may coner Bolt ders ders of nd ment s in sugetin risk ficent Mo cial sy respon xied suget June June r r of of r ergaduts their compensati he the is princ Compen exe studie examins cognitve eithr els. , . e temaic to not de biase n, shiftng) A belifs: belifs; bel instuo. 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No . Tod Knowled No. aj R Ef Eviden Fi reform the impos constraied as ed senitvy vels vels e n uc de Think ociated cole ilab ect the asoci ance rop ar quality Kevin shri 471, 470, at s Gabe, ts, of o o tudy ing terized s io d grou loca er of f f ge purose was e hensive ce increasd , at ce—can help na lita Chakrti abr e e humanite ing, ing per those to Refo g conmi conmi Se Se ge limts In Constrai a atinme. ted with fr che Stolarick l nd ps—rangi ide the of from n sucefl Jaison t supor pte pte d outcmes. the om and Regions, aditon capit, in explain iscretion Enterpis by areas ck loca with rm ntifes Co of mbe mbe typ schol ne Cit higest s. on be the knowledg of Mic Roy dispart ting mfor other gative R. Lo es s, develop develop used wi hi pu r r regional loc wh es closey Michgan th 201 201 of higan, A oking clu inf and , gh th s in noted blic Regres over al b fi ing thes tud Thes e ile on places el programs er s ormati na ster by fro simla ef pendig types oturni ver governm , es. 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No. 478, September 2010 “charge-offs” on consumers’ credit reports, have o Double Majors: One for Me, One for the Parents? been similar, the authors find that debt pay-down n has been more pronounced than this simple Basit Zafar comparison might indicate. This paper investigates how students decide on the composition of their paired majors —that is, P Banking and Finance o E whether the majors are substitutes or comple- l i c c ments. Zafar collects innovative data on subjective o y

No. 424, January 2010 n

expectations from a sample of Northwestern R o m University sophomores and incorporates it in a Policy Perspectives on OTC Derivatives e v i choice model of double majors that also captures Market Infrastructure* i c e the notion of specialization. He finds that enjoying Darrell Duffie, Ada Li, and Theo Lubke w the coursework and gaining the approval of parents are the most important determinants in the choice In the wake of the recent financial crisis, over-the- of majors. The model’s estimates reject the counter (OTC) derivatives have been blamed for hypothesis that students major in one field to increasing systemic risk. Although OTC derivatives pursue their own interests and in another for their were not a central cause of the crisis, the complexity and limited transparency of the market C parents’ approval. Instead, Zafar finds that gaining I u reinforced the potential for excessive risk taking, as s s parental approval and enjoying a field of study both r u regulators did not have a clear view into how OTC r e academically and professionally are outcomes that e n derivatives were being used. This paper discusses s students feel are important for both majors. t However, the author does find that students act how the New York Fed and other regulators could strategically in choosing their majors, selecting two improve weaknesses in the OTC derivatives market that differ in their chances of completion and through stronger oversight and better regulatory difficulty and in finding a job upon graduation. incentives for infrastructure improvements to reduce counterparty credit risk and bolster market liquidity, efficiency, and transparency. Used No. 480, December 2010 responsibly with these reforms, over-the-counter R U e

The Financial Crisis at the Kitchen Table: p

derivatives can provide important risk management s e d

Trends in Household Debt and Credit and liquidity benefits to the financial system. a a r t c

Meta Brown, Andrew Haughwout, Donghoon Lee, e h and Wilbert van der Klaauw No. 426, January 2010 The Federal Reserve Bank of New York Consumer Repo Market Effects of the Term Securities Credit Panel, created from a sample of U.S. Lending Facility consumer credit reports, is an ongoing panel of Michael J. Fleming, Warren B. Hrung, quarterly data on individual and household debt. and Frank M. Keane The panel shows a substantial run-up in total consumer indebtedness between the first quarter of The Term Securities Lending Facility (TSLF) was R e S

introduced by the Federal Reserve to promote p 1999 and the peak in the third quarter of 2008, t a liquidity in the financing markets for Treasury and o f

followed by a steady decline through the third r f

other collateral. The authors evaluate one aspect of t quarter of 2010. During the same period, s delinquencies rose sharply: Delinquent balances the program —the extent to which it has narrowed peaked at the close of 2009 and then began to repo spreads between Treasury collateral and less decline again. This paper describes these trends and liquid collateral. They find that TSLF operations discusses their sources. It focuses particularly on the have precipitated a significant narrowing of repo decline in debt outstanding since mid-2008, which spreads. More refined tests indicate the market has been the subject of considerable policy and conditions and types of operations associated with J the program’s effectiveness. Various additional tests, O media interest. While the magnitudes of balance o u declines and borrower defaults, represented as including a split-sample test, suggest that the u t r s

authors’ findings are robust. n i a d l e s

*A top download in 2010. Outside Staff Research Current Economic 18 Journals Reports Update Issues Policy Review Introduction the desc dysfunctio. dea the lines were fa money fa presnt and of grow fr potenia equ enhacmt, maxizng ra fr pos fu Man Fol w swap No . from interao Linda Cent Paol P No. the impled Ra Thes Ara es in Oversa inst f er eq eq ciltes ciltes tablish tios. nd’ s tios any Decmbr ling itons ity Un ited dolar volaties ue ue riptv orm ngemts the 429, 427, ing utions aged among a ral hold f Gua ntly ntly acil S. c alph This ing indexes abilty tha re s mar entral with l le volaties the literau e an through are sp Bank Goldberg, or formance per e on Jy anur Jy anur naly ast soni, in fundig Dolar ties a is can Funds onse acounts ce kets Staes indcate paer e in g scarcity straegy an deve ty ce the xpand usaly sytemic For mal uper 207 to opt banks to Maximzton with pical of thereby their ntr are signfca Gur to . Dolar impor to The predict benchm lop provide ions the the al d 201 201 banks Fun derives sug us presures dolar Cr aig of uring the Tem Hub fo bound y , — jurisdc b ments the o had ed neglib. resarch , benchm central sug end anks tan f gest ap ur the liqu can ding a showin enh Swap dolar Fedral as ten st praise y pora man, er r varint tly and gest ark the Ke eturns a do fund the atis optins of idty be benc t par ancem were in perio on th tions. nedy enhac lar Cost abro 209. as bank capity f finac tical at ark s formance-per fun Line or th g tha ing ubstani as o s its hm of uch uptions. disr , Res Reciprocal ets The and f eign th liqud ev e of ef d h w ad , ent din returns. Act dolar pe This fective t are signfca at en o sh of and ar dolar s el he buy-write the or ve er The ld form per al formanc r and Zheny tag or a ks, enh g if f per central m from in ivel ing nd hige to as tradin tolb x ity inst availbe al dolar co Ja paer arket beg f the the swap anc mor use stres acilt orman son if y at swap mon to optins es u nc tradin Cur enc t r an utio r emn he absenc g anc Wa o banks t educin — e Miu e t sw hes e. utside ies han for to of ng ce e ns, ap A in g t a . e y g No. has during vReesr ’s relatively finacl with aset The sani A dur the Finacl a on empircal fedback shet liqudty literau e. during an literau e finacl risk pr amplifctons program potent ic d safe ing es. implcato Fedral a dis 431, smal th nd amplifctons relative Sar B cus e period diferent ones. ial th s y the fi programs amplifcton sytem. kar liqu be smal on Fe evid take They e comparis nacil d Amp withdrawal tw the eclin y uar br Cris extr vReesr ’s finacl and idty F s to ns enc en tha inal into of shock Fed lifcaton inte stage the for Sarkar nality Jefrey hig cr finacl in suply y, as tha 201 operat on, a rp et is the ral a large count the the ris working o amplifcton to of Suply mechanis, liqudty the f vReesr ’s imposed ing increas suget Shrader and im liqu value authors the propagte the reduc toal Mechani p Fed’s via constrai from adve act idit Shrade Fed’s cris to of increas lose o y on risk the rse-lction f later-s by inte ventiosinter in the pro vide dampen tgae-rmor elatd supply Liqudt early-stg in marke s through the risky . s mechanis presnc whic res ms rw evi posi Their asocited light tag and t Fedral in by and rates tive t bor ow ers wne e balnce prices credit of y alow as anlysi cris the the the of thi et Fe s of d. 19 I n t r o d u c t i

No. 437, March 2010 No. 439, March 2010 o n Stressed, Not Frozen: The Federal Funds The Changing Nature of Financial Market in the Financial Crisis Intermediation and the Financial Crisis Gara Afonso, Anna Kovner, and Antoinette Schoar of 2007-09* Tobias Adrian and Hyun Song Shin P This paper examines the impact of the financial o E l i crisis of 2008, specifically the bankruptcy of The financial crisis of 2007-09 highlighted the c c o

Lehman Brothers, on the federal funds market. y

changing role of financial institutions and the n R The authors find that amounts and spreads became growing importance of the “shadow banking o m more sensitive to a borrowing bank’s characteristics, e system,” which grew out of the securitization of v i i c lending rates increased, and banks became more assets and the integration of banking with capital e restrictive in their choice of counterparties. The market developments. This trend was most w market did not seem to expand to meet the pronounced in the United States, but it also had a increased demand predicted by the drop in other profound influence on the global financial system bank funding markets. Afonso, Kovner, and Schoar as a whole. In a market-based financial system, examine discount window borrowing as a proxy for banking and capital market developments are unmet fed funds demand and find that the fed inseparable, and funding conditions are tied closely C I u funds market is not indiscriminate. As expected, to fluctuations in the leverage of market-based s s r u borrowers who access the discount window have a financial intermediaries. Balance sheet growth of r e e

lower return on assets. On the lender side, the n market-based financial intermediaries provides a s characteristics of the lending bank do not seem to window on liquidity by indicating the availability t significantly affect the amount of interbank loans it of credit, while contractions of balance sheets have makes. In particular, the authors do not find that tended to precede the onset of financial crises. This worse-performing banks began hoarding liquidity study describes the changing nature of financial and indiscriminately reducing their lending. intermediation in the market-based financial system, charts the course of the recent financial

No. 438, March 2010 crisis, and outlines the policy responses that have R U

been implemented by the Federal Reserve and e p Liquidity-Saving Mechanisms in Collateral- s e other central banks. d a

Based RTGS Payment Systems a r t c e

Marius Jurgilas and Antoine Martin h This paper studies banks’ incentives for choosing the timing of their payment submissions in a collateral-based real-time gross settlement payment system and the way in which these incentives change with the introduction of a liquidity-saving mechanism (LSM). The authors show that an LSM allows banks to economize on collateral while also R e S p providing incentives to submit payments earlier. t a o f r

The reason is that, in their model, an LSM allows f t payments to be matched and offset, helping s to settle payment cycles in which each bank must receive a payment that provides sufficient funds to allow the settlement of its own payment. In contrast to fee-based systems —for which Martin and McAndrews (2008a) show that introducing an LSM can lead to lower welfare —in Jurgilas and J O

Martin’s model, welfare is always higher with an o u LSM in a collateral-based system. u t r s n i a d l e s

*A top download in 2010. Outside Staff Research Current Economic 20 Journals Reports Update Issues Policy Review Introduction * solven can for the limit, aset y mediar Res subtanil de y monetar of fun tradio Since and This and purchase ec Ant Repo long Jo Large- No. long-ast mec purchase on No . in w than tha reductio risk mark likey solven the whetr may mediar liqudty te riz the A er seph terest onmy. terio top z -mark n a ds oine e the ero. e prof hanism sel premius, Bri Er 41, 4, bor ow be v r r maturies. eta p genra lo not th ese if ange do Decmbr as can cy t rate, R aper Ga nst- Scale wer e: n stabi a but ated, a vulnerab as its bl rates. wnlo In Ma ns uns ing n s more s s al a can and et and includ gno, gener Di March April se e The form per elimnat Ludwig policy led were un r co ndi Sack of or policy in of quanties d has expctaions tin, r pricng, lize aset. ts ilqud. lity ad reductions t-e shor d ev through sel der As the liqudty solvency an interest securit, to to inte in They el al can authors be Mathew 201 imple them includg ed ti set of Thi op David e aset fores 201. y intermda as to 208, on s 201 mar ket Fedral en conmialy ument, instr von rmed Bec fin in s be to matu Purch the th fur this s uns r rm However , a efc fo r W ancil th tal to p whic u r o rate prevent ed aus model Thad constrai condit to aper presnt f entd Ske ec th iares in ork?* e and ns. an rity case o includg posiblty run aset aski R er Resr e tiv if a purchase onmic f s prevent e ase ter longer ie, is ola te th fu un, r p Th the F eas den ely expl instuo. invest trans they rim occurs, m edral es of ture fac and on in n, the and e ve nts bec ful meanig with by evidnc y intermda at premi . financia ains and arily the autho e s d whic Jul finacl Th form t purc can uns. r s ou its ause d problems. th erm t t are in sec hor derive in programs. arget he becom iscue vReesr ie mediu stan no ey at te r tlo our h lower refl ums, urites lon af Remach, agin has rs ow t-erm ation Fed me dia ry detrmin i of first int t nterest The l ce ect he tha end k fedra orign g-term in ed ct dist cash-in t erme in he and of rathe ’s s stituti boun in , the ral ch ara c the relvan lower ter ogeniz sale t les In th se is the an inc hat ter T al l - diayr ey rat and hes d the - t d of ons - es e t N pay transp ency SEC ty Many th CEOs ’ reactio Yermack Chenyag Valu De Nicola Transmi Gl volati w ne emrgin- G pensio by ban isolatn ad transmig in markets Loan introd Asia, exchan Polic y in afiltes cont direc th he chan reduction entrpis equity by th N comp loba pe o. o. at rou e ad vers value loan obal firms the fe king fundig top raction 45, 46, bond -ofice discloure t, e: of r ed dis and gh en sup el e uce ns come ns ven tions inter ty ge- toward declin Cetoreli cros-brder g insde banks In incetve s liqudty sation closure Banks exe efcts acros uply ocur thre sytem in whose loan inve ply or of to d Apr May sion trade vestor Latin Wei marke i Compensati value prices n cutive in em balnce both in defr ed companies’ shock firm the in of sti il ntaors debt pl suply : Eu rope, and separt d holdings in for loca 201 by Euro ules r on and 201 gate rgin and reforms Evi emrgin CEOs ebt, aye Ame defr ed t when 207-9 optins. and rise, shock Reactions s known interbak, securi econm risk, domestic credit emrgin David with to positn d denc , shet. lendig pe, Linda lendig and Inter stockhlder rica tok compensati. a s e from their have markets; their equity uch a have signfcat influec a chanels: tie Asia, are greatly intal defr ed CEO’s on default an transfe compensati. was n, as Ymacker The natio ie s markets efct. f from as S. suge relationshp inacl loan balnce drops s. large insde main banks, ov era sizable Ris by to by cros-brder prices markets in the Goldberg and afectd This result rts epor and foreign increasd k, CEO defr ed early foreign deman d . sted swap the The and al Viena compensati, of 1) l developd- upon Latin role the debt. and acros study resultin uction destr defin fal, shet 3) Shock cris value a Simlar Cr 207, tha bondhle of authors indc sign contr spreads lendig- Ince a of in banks; Company banks’ dis is and Am contrai Recnt shock to Wei I efcts. Europe, examins their to the lendig. from nita companies ifcantly induce c g ate ntives emrgin act erica, be losures when the changes from c and yountr find n ion and a tive 2) e of to r fit a a in 21 I n t r o d u c t i

No. 447, May 2010 No. 457, July 2010 o Quantifying the Benefits of a Liquidity- Resolving Troubled Systemically Important n Saving Mechanism Cross-Border Financial Institutions: Is a New Enghin Atalay, Antoine Martin, and James McAndrews Corporate Organizational Form Required?

This paper attempts to quantify the benefits Christine Cumming and Robert A. Eisenbeis P o E associated with operating a liquidity-saving l i

This paper explores the advantages of a new c c o mechanism (LSM) in Fedwire, the large-value financial charter for large, complex, internationally y n R payment system of the Federal Reserve. Calibrating active financial institutions that would address o m the model of Martin and McAndrews (2008), the the corporate governance challenges of such e v i i

authors find that potential gains are large compared c

organizations, including incentive problems in risk e with the likely cost of implementing an LSM, on decisions and the complicated corporate and w the order of hundreds of thousands of dollars per day. regulatory structures that impede cross-border resolutions. The charter envisions a single entity No. 449, May 2010 with broad powers in which the extent and timing MBS Ratings and the Mortgage Credit Boom of compensation are tied to financial results, senior

managers and risk takers form a new risk-bearing C

Adam Ashcraft, Paul Goldsmith-Pinkham, I u

stakeholder class, and a home-country-based s s r

and James Vickery u resolution regime operates for the benefit of all r e e

creditors. The proposal is offered: 1) to highlight n The authors study credit ratings on subprime and s Alt-A mortgage-backed-securities (MBS) deals the point that even in the face of a more efficient t issued between 2001 and 2007, the period leading and effective resolution process, incentives for up to the subprime crisis. The fraction of highly excessive risk taking will continue unless the costs rated securities in each deal is decreasing in of risk decisions are internalized by institutions; mortgage credit risk (measured either ex ante or 2) to suggest another avenue for moving toward a ex post), suggesting that ratings contain useful streamlined organizational structure and single global resolution process; and 3) to complement information for investors. However, they also find R U evidence of significant time variation in risk- other proposals aimed at preserving a large role for e p s e adjusted credit ratings, including a progressive market discipline and firm incentives in a post- d a a

reform financial system. r

decline in standards around the MBS market t c e peak between the start of 2005 and mid-2007. h Conditional on initial ratings, the authors observe underperformance (high mortgage defaults and losses and large rating downgrades) among deals with observably higher risk mortgages based on a simple ex ante model and deals with a high fraction of opaque low-documentation loans. These findings hold over the entire sample period, not just for deal R e S p cohorts most affected by the crisis. t a o f r f t s J O o u u t r s n i a d l e s Outside Staff Research Current Economic 2 Journals Reports Update Issues Policy Review Introduction value re an the for An D No. The and St The largest The ofering. wr under fedra the to re Meril fal informat a co compa compa tan impor apered cent monit than No . wr under price vital te cap standrd proxy bank informe ma market st sult tu avros o lla l d the na rket ital tes almos y extrao dinar rns hel Near Van Un 459, 460, pse. authors f Bank lowe s infor Informati $3 ina decr of Ko l f would ac nie nie were ing . U.S or ped gaps rs, ban Peristan, Lynch, had writes der d esa The iter iter bilon, vner gov ademic R Cl event- model r t tha s s. Jul Jul eas mation the cial by Los su ep role theore k than 5 O w quel ients ’s There ernmt largey Savino bank reveal e y y as ge deman investiga re ith visor super stu the pe xpe have pacity role e cris their 201 201 was senting xpe market and in stud rce . o sting dy’s the the m liter riencd size The of the tica f about e Donald hold monitrg fol win cted nt, is ore capitl re an xam d, V deciph Mate Wach y pr equ Bear condital declin findgs at lated no l alue finacl of m tha tech bu price ovides o predicto Equi o ure ing a maker n inato gap, oni ity paque th b evidnc wh ban t loss in m St y averag, ovia niques th P. gaps er r? e under of to on co g toring wri under or earns the eth impact t 209, gap; ks. ed at bank w Morgan, y an Th in mpanies a e the t sug bank as or he saw n panic Uwrite nder er operatins naturl the negati m on before ns of Th equity int w e e , write , return m l g role the ark s endr. tha Stre of Lehm they es Impact th iven on of pr ey its ly m their ore with was opac t al ter e bank et. odu arket by the ve “stres public tha als the own o s ni cond th th s public value than exprim f find th might predict an Usin worse p abn producin o large stoc ity the Tes e ce e equ e lay et s. day a cont the st abn w d of whic Brot nd study ucte en an orm t res 1 t t k as of g ity hat an est,” it per ormal st d prices f wfe r ribut ed or more hers, d res nt al tes t ’s t he g - he by by e No. ban (mak proble Banks This baln private “pet” James Toni for A mange Viral Caught syte Reg for No . tgae mor or consite discu in of agins by Fan recive gov e and Is can authors anlysi may Antic inef featurin d n a m regulation by subtion to u nav u Pr Rent sha r T leve a owner making m the k ficently Residntal im ulatin BA, propse rk a m mutal rnmet 46, 469, m ailable h ivate ie D in study ce V. leve projects Vicke t pation eq av ms eho ld rage. d face pose echario, g and Ma re s be —the how the rial g Aya, char di e ui Seki frequnt betwen market efic risky, : organiz s rage sytemic t e Augst Sept nefits). remains scu no ty g aset with Le e requires of yr , two bank des to aset rent er apli Howeve signfcat e n i l p i c s i d los t and Bank hig insurace but a ca of he n optin s risky lend creditors and is and ng cr method ntly negative der onl Patric mber pital se the dife s ving presr ticular —par this sek ibes ne ation pol ubs Mtgae or subtion es also Fred debt Hamid The 201 le and mentio y pr a consumig Scyla Joshua risk ither Leverag debt Coperative tha them r ve the pros con tinge nt r, tiuon rent focus genrats requiremnt incples ing but coperative a 201 compromise 0 die r and privately when to age of Risk s i set mechanis up social in for Moser mark net a on to (investing and Mehr an, . d e s i m ro p m o c to kinds the Mac to Wright on and par whic of safe. of an to organi the but mangeril presnt bail F one ly Shiftng low cor elatd by et and fa six public cons t U.S fund Whe cost, inace explict, induce , an tha perquiste s ilur of ybdis?Char if “to-beanucd,” on Joseph The discplne of lit optimal share out design m. model nor al the utily. this zing Mod bank can tle equilbr e, and moral goo d of housing market n cor elatd in has governmts They value banks optimal policy a bank sutai Ther fixed-r holders to such nd Tracy, ule r model inefc priced ticpaonpar at Anja el ban so capitl ren princle for pe level A The be hazrd hig hig: ium impose also loans) rf o tha far . creditors. e ned discplne out chose a t i n i m k finace replacing ate avai seking mod capitl rma are failures Thakor of aset n le aset be yield It t labl - vels s and nce d el e . 23 I n t r o d u c t i

No. 473, September 2010 No. 477, November 2010 o Bailouts and Financial Fragility The Tri-Party Repo Market before n Todd Keister the 2010 Reforms How does the belief that policymakers will bail out Adam Copeland, Antoine Martin, investors in the event of a crisis affect the allocation and Michael Walker P o E of resources and the stability of the financial l i

This paper provides a descriptive and quantitative c c system? Keister studies this question in a model of o account of the tri-party repo market before the y financial intermediation with limited commitment. n R reforms proposed in 2010 by the Task Force on Tri- o m When a crisis occurs, the efficient policy response is Party Repo Infrastructure. The authors provide an e v i to use public resources to augment the private i c

extensive description of the mechanics of this e consumption of those investors facing losses. The market. They also use data from July 2008 to early w anticipation of such a “bailout” distorts ex ante 2010 to document quantitative features of the incentives, leading intermediaries to choose arrange- market. They find that both the level of haircuts me nts with excessive illiquidity and thereby and the amount of funding were surprisingly stable increasing financial fragility. Prohibiting bailouts is in this market. The stability of the margins is in not necessarily desirable, however: it induces

contrast to evidence from other repo markets. C intermediaries to become too liquid from a social I u

Perhaps surprisingly, the data reveal relatively few s s point of view and may, in addition, leave the economy r u

signs of stress in the market for dealers other than r e more susceptible to a crisis. A policy of taxing short- e

Lehman Brothers, on which the authors provide n s term liabilities, in contrast, can correct the incentive some evidence. This suggests that runs in the tri- t problem while improving financial stability. party repo market may occur precipitously, like traditional bank runs, rather than manifest No. 475, September 2010 themselves as large increases in margins. Equity Premium Predictions with Adaptive Macro Indexes R

Jennie Bai U e p s e

Fundamental economic conditions are crucial d a a determinants of equity premia. However, r t c e commonly used predictors do not adequately h capture the changing nature of economic conditions and hence have limited power in forecasting equity returns. To address the inadequacy, this paper constructs macro indexes from large data sets and adaptively chooses optimal indexes to predict stock returns. Bai finds that adaptive macro indexes explain a substantial R e S p fraction of the short-term variation in future stock t a o

returns and have more forecasting power than both f r f the historical average of stock returns and t s commonly used predictors. The forecasting power exhibits a strong cyclical pattern, implying the ability of adaptive macro indexes to capture time- varying economic conditions. This finding highlights the importance of using dynamically measured economic conditions to investigate J empirical linkages between the equity premium O o u and macroeconomic fundamentals. u t r s n i a d l e s 24 Outside Staff Research Current Economic 24 Journals Reports Update Issues Policy Review Introduction below com is genral un A Su Price Desi No. Quanti value to con of equilbr in rate con capi show through for implen precl capi manipult sue vestor. secur re iq contige exis ba ting ting tal tal sh is 48, ue ude gn n contige be nk Trige t, a se Sund t with with ity e e n equilbrm, ium lead o twe specifd of t y mandtor nt nt it mange equity May have This equal table ion, t robust from Co capitl capitl aresan the ve a a is to n fixed uniqe capitl f usaly ntige equity the 201 a y necsar a or in Me time to when rs capitl uniqe genrati uniqe threshold, to practie. Mandt and no-value-t r prices. with the and coup thods conversion price bu before ancho h equilbrm n risk-f e th Zhen olders t ot d a th equilbrm equilbr Capit e ng the em condi f For n mani at loating satifed banks’ or Althoug rs yu rate; and co the or prop mu y and ansf its a nversion, W tion al pulati “trige ,” Co r canot uniqe d st ate. from ang value h es osal with sto e co con is owev er, m c nve r b ir for t onver condit upo y This ck ro ed on if in conti ti for investor. cont rsion bust to uniqe tra the nge a equilbrm price ince equit making n must does Sto par ban st nsfer rat inget in n c uc r to gent oup t ck n to e y fals tives ks capit n h price tur m is an a ot to ve it ay n d e in al a tha Th Employ a Matis Bo impl Tobi Fu from sequ lower agins empirc in cond infer with w frame pricn interm pricn Adrian depn specifaton their sorted Aver are bots Stok av bots (209), and of indc No . th acco the No. nd e erag the ndig Stock e ot t found “ ban unt long- as ence Michael enc er 46, 452, employs rob res age iton ate a ca strapin thre-factor tra tra the g g t ave cros-ectin b ed Adrian k (198). ults D. tions ork a dwi al advers k model ing y de us ucialy cr p-based p-based for thi ernl- nd in ernl. iares’ D term pr rage “smal-bndwith” satife . indu July May Returns result Li t” rivatives to Catneo, s An oce tic par erivati of w of the Etula qui varia paer th Janso from be el a based and returns. Catn g styr , a and rev 201 dures l-k where exce 201 They “r In fundig choie shock “s di sma consite Den infe infe ob s u nce on er nown mal-bndwith” model a how de ty ves many lar tes an Er ko studie ption size sal. propsed ust” ticular par ll-scal of estimaor involving rive renc renc whetr Richard Risk eo, sity-We tes e the tha temporal inter stimator . , The can Funding ase stock to tha asset book-to- var constrai case, equil is umpCr , to Etula the tighnes e fundig procedures procedures the ts s an be with surpingly iance pricng ensit M stock this , pricin g returns. asymptoic K. by resu d the incl ighted onte ibr ameliorated a (asymptoic prope of the liquidity studentized the Cump,r the Pow ule r mar ket ium vity esti density-weightd udin lting bandwith and liqudty tha v Carl of for per asymptoic e alid Cros anoma li y theor ties r mato capitl el, nter ocurs T with pricng fi g Janso is asocited factor heir o he nacil , str ity tfolispor Stock, found can mo fr s ex of mance r dge -Se ong b worame k. respct the linearty) of derived es periment y and es. aset earn ment several for t ti ma to hus usin model ction acros to and of um, g to r 25 I n t r o d u c t i

No. 465, August 2010 No. 476, November 2010 o Jump-Robust Volatility Estimation Using Fitting Observed Inflation Expectations n Nearest Neighbor Truncation Marco Del Negro and Stefano Eusepi Torben G. Andersen, Dobrislav Dobrev, This paper provides evidence on the extent to and Ernst Schaumburg which inflation expectations generated by a P o E

standard Christiano et al. (2005)/Smets and l i

The authors propose two new jump-robust c c

Wouters (2003)–type DSGE model are in line with o estimators of integrated variance based on high- y what is observed in the data. The authors consider n R frequency return observations. These MinRV and o m MedRV estimators provide an attractive alternative three variants of this model that differ in terms of e v i

the behavior of, and the public’s information on, i c

to the prevailing bipower and multipower variation e measures. Specifically, the MedRV estimator has the central banks’ inflation target, allegedly a key w better theoretical efficiency properties than the determinant of inflation expectations. They find tripower variation measure and displays better that: 1) time variation in the inflation target is finite-sample robustness to both jumps and the needed to capture the evolution of expectations occurrence of “zero” returns in the sample. Unlike during the post-Volcker period; 2) the variant the bipower variation measure, the new estimators where agents have imperfect information is strongly C

rejected by the data; 3) inflation expectations appear I u

allow for the development of an asymptotic limit s s to contain information that is not present in the r u

theory in the presence of jumps. Finally, they retain r e other series used in estimation; and 4) none of the e

the local nature associated with the low-order n s multipower variation measures. This proves models fully captures the dynamics of this variable. t essential for alleviating finite sample biases arising from the pronounced intraday volatility pattern that afflicts alternative jump-robust estimators based on longer blocks of returns. An empirical investigation of the Dow Jones 30 stocks and an extensive simulation study corroborate the robustness R U and efficiency properties of the new estimators. e p s e d a a r t c e h R e S p t a o f r f t s J O o u u t r s n i a d l e s Outside Staff Research Current Economic 26 Journals Reports Update Issues Policy Review Introduction Ba Marco on J( uly Schivard T“ a scholary fin “Expectat and O Vari “Macro To Macroe publish Membrs Outside Econmi Shet Literacy,” no. End “If mper Carlos Affairs Dow Michae “Cr Vasco Bonm . li nki bias ance P vier x edit 5 ogenu W ubli ): ns, bles Buyouts,” (Augs Quantie s,” Cúrdi 44, il 576-9 g valhoCar Adrian Del l Armanti ectly ber Spreads Ri c c and i. journals, Wo 42, in , ions Policy. Reviw Jnal our with Pub Expe boks. no. sk J of t nal our s Negro a nomi odfrd. a no. van Buch ar t) Time-D epnd 5. Credibl Premiu wide of the 2 : and ctaion Wändi negi Car 79-831. with er, J( une) and Inflat 6 der lished 58, of Resarch of cs (Septm co with Giorg Eman Journals range Mone Jnal ou r Fisc Mone My onetar K Fabrizo n nferenc ion: and : Dis o. lau Formati Buine r e-Roche and 381- Hy hof uel 1 y, inf The y tar of w ber). Growth en (A un Topa, In C 402. of and in lation Moench e red t ug Peri . te de c ster Mone R E So on, Pricn volume Journal Po o rm u conmi ole Supl. it, nomic ng S 201 st): Buin, r li Confer ta y ediar and under cy,” and and of y, Shin. g,” 179-20. is C Demograph of cs tics Fi s, s1: w Ban Fabin re wit Julie and enc Co nac ith 57, Bal dit, and I 3-5. MF king Group h nsumer an no. Ser a Marc S. ial o nd ce ies 42, 5 ic o Stabilzon,” “Central Stefano “Ind Sag no. Tra “Central 235-71. Econmi “S (No vembr) “L (A Lab Mon Coment Jnal our Journal and Ant by (Oc (May) “ Dongh Econmis Matched Disagre Th “ Rt ober Ofermans. of Wolpin. th St Acoun atisc e t-Rhor un ugst): abor- L P p.” ir oin or U.S tobe 2-3 e abor Agre uriya ivd y etar Re : Kitao Suply.” Jnal our e 68-5. em Rich of Depnd t of (March-A pril): Euse r): ual ting lationshp Mtinar Jnal our 146, from Bank Bank Marke Point Jour Ec 197-20. Abas gate My onetar Policy and on 2109-5. nt, Le Retiremnt : onomic Fis pi and for Swis 95-74. nal: e no. “Interes 1968-20: of with Efects Staisc and Comunicat Comunicat cal and Econmis t W of i, Money, Imp Equil Joseph 1: Macro Policy: age Jnal ou r Dietr Econmetris Utainy: n cer yD n Capitl among Buc r Density Econm 341-8. lemntaio t in and brium,” 37-9. Rate am 92, Acounts, eco Tracy Credit, e the Welfare, Nautz, Letrs Preston. ics of A Employment nom Expe Income ics no. With Forecast.” Dy St hor Econmi Dynamic an 57, ics 1 with d na and 156, cte and and Evidenc 108, and (Fy uar e br C Dwe t i mics Sa 2, no. n Redistrbuon, and A d ont Taxtion.” Bank ving, merican Switz Expectaions the Kenth no. Infl n cs Chr no ro 8 o Model Long and and Reviw . l L ation, Changes . 3 Moser. 1 i 34, is erland,” iqu ng 2 and from J( uly): ): t ian 42, Run.” n 20-7. dit I. o. of J. y 10 in 27 I n t r o d u c t i

Ay şegül Şahin International o

“Aggregate Labor Market Outcomes: The Role of n Choice and Chance,” with Per Krusell, Toshihiko Carlos Carvalho Mukoyama, and Richard Rogerson. Quantitative “Loss Aversion, Asymmetric Market Comovements, Economics 1, no. 1 (July): 97-127. and the Home Bias,” with Kevin Amonlirdviman.

Journal of International Money and Finance 29, no. 7 P o

“The Labor Market in the Great Recession,” with (November): 1303-20. E l i c

Michael W. L. Elsby and Bart Hobijn. Brookings c o y Papers on Economic Activity, spring: 1-48. Andrea Ferrero n R o m

“Current Account Dynamics and Monetary Policy,” e

“Labor-Market Matching with Precautionary v

with Mark J. Gertler and Lars E. O. Svensson. In i i c

Savings and Aggregate Fluctuations,” with Per e

Jordi Galí and Mark J. Gertler, eds., International w Krusell and Toshihiko Mukoyama. Review of Dimensions of Monetary Policy , 199-244. NBER Economic Studies 77, no. 4 (October): 1477-1507. conference volume. Chicago: University of Chicago Press. Argia Sbordone “Globalization and Inflation Dynamics: The Impact “A Structural Decomposition of the U.S. Trade of Increased Competition.” In Jordi Galí and Mark Balance: Productivity, Demographics, and Fiscal C I u J. Gertler, eds., International Dimensions of Policy.” Journal of Monetary Economics 57, no. 4 s s r u Monetary Policy , 547-79. NBER conference (May): 478-90. r e e n volume. Chicago: University of Chicago Press. s Linda Goldberg t Andrea Tambalotti “The Sensitivity of the CPI to Exchange Rates: “Investment Shocks and Business Cycles,” with Distribution Margins, Imported Inputs, and Trade Alejandro Justiniano and Giorgio E. Primiceri. Exposure,” with José Manuel Campa. Review of Journal of Monetary Economics 57, no. 2 Economics and Statistics 92, no. 2 (May): 392-407. (March): 132-45. R

Rebecca Hellerstein U e p “Outsourcing and Pass-Through,” with Sofia B. s e d

Villas-Boas. Journal of International Economics 81, a a r t no. 2 (July): 170-83. c e h Paolo Pesenti Comment on “Current Account Dynamics and Monetary Policy,” by Andrea Ferrero, Mark J. Gertler, and Lars E. O. Svensson. In Jordi Galí and Mark J. Gertler, eds., International Dimensions of , 244-50. NBER conference Monetary Policy R e volume. Chicago: University of Chicago Press. S p t a o f

Comment on “The Zero Lower Bound and r f t

Monetary Policy in a Global Economy: A Simple s Analytical Investigation,” by Ippei Jujiwara, Nao Sudo, and Yuki Teranishi. International Journal of Central Banking 6, no. 1 (March): 135-41. J O o u u t r s n i a d l e s Outside Staff Research Current Economic 28 Journals Reports Update Issues Policy Review Introduction Mangemt Gi Pro spec Desig “R James Rajshr The “ July White “H Jaison Mi “Mate Urban Ferna Ro y. Erns Kat Coment Eric Education Operating Michael Dev elo Wil Petrson “H Joseph Univer 143-7. Kat (M A. ne. ainf Mro edonic ousing ay) croe harine harine t ber -D a t In n, Groshen Econmi R. : rnal . In yVicker al Abel ec sity do pmen Econmis Tr NBER z. i 21-8. ts Anals Eva H , va Har embr: C Berndt, Kenth ,” acy Insurace Jnal our , eds., onmi Fer eir Bust ouse Pr G. G. n hak Employ System of on vol. with Baker , , ice der per, t,” Chicago Abrahm Abrahm 14-5. tirab “Are confere hold of cs In nter 3, with Index es 78-0. and Kla a Rt ober eds y Cor Econmis of of 68, cs 367-. Tang and ment, y Bar the and in Econmet au Pticpaon, ar Parental ., Ho ationl Haiy ong n nce Labor w Lond S P o Joseph , W. Nw e , and emi-Ard P res. us . fo Townsed J ed., ames Migraton, roductiv McG 1 volume. r eh Mon Elsevir. J( uly): Personal on: a Jam Ency cl Jobs old i C nd We rics n Gy Liu aw, ho R. the roe, Risk ather es Sta Mobilty,” 156, our ice,” God I i Splet and ty op ndia: 34-5. and R. and Ch New and and istc Boks. e ko. and C Suites,” dia R Splet icago no. w ompu Futre ze Thom Penlop is Xav J Econ Cont ith Alan J k obs?” r, Child 79/80, of na our 1 zer. and : wit ier Joy ter omy wit as rac G. h I by dep l n of t h , Econmis no Frank Michae Credit, Enghi T “ T “ Tobias Bankig Chapmn “Whic It “Bu Ana Hu “Bankig Tod Mon Lendi “Repo (A Ashcraft “L Septm and Lendr T “ Mten or J( with “Pformance er Jo with Hyun Jnal our Schafr st s u uly pril): iqudty . he he he rna l Apli to ber y 2 the y etar ): Paul He Local? Toplgy C Fe (May): Ke K h M. S Market 418-37. of g Adrian and ber: l hangi of ovner ong of ein. 18-32. Ataly. cations deral y nr B F Bech iste Fleming and Facil Urb an M. inacl an Econmis Panics Kean. Gompers, Finacl Next-oLas 57, and and and Bankig 603-18. k r Jounr al Shin. Chen, The Enis. W. 591- ity,” Home Is Pers no. Efects Rodne 389, Physica Le Eco nom ics of the Nature Finace Scot and Geography A verag Cris 6. A istenc with 4 the Paul merican nual ‘Central’ of Jnal ou r Inter ( 57, 42, no. Josh Loan May): Policy y Fin of F Frame. A: J. War en edral Rt?” esor of ,” Gompers, no. of 2 no. mediaton the 6 ancial in Gar et. Lern , Reviw Stais with 7, Bank Finacl 207-9,” Econmi (No vembr of 40-19. Respon,” 3 4 Entreprenurship ,” Bank?” Term n of o. Myonetar Funds Jour (April) J( une): B. Hyun Venture Eco Sy 1 cal with and of Jnal our nal ( ung Hr Securits and stem: 19, Jan ua nomi Econmis Mechanis with Intermdiao : Market,” Reviw David 51-83. Adam of Song 352-6. no. ): Josh cs Capitl,” ry): Money , with with The J 523-46. ame and of 96, 3 Shin. 90 -10 2. Lern . 10, s no. 2, and with T. E 1 . 29 I n t r o d u c t i

Antoine Martin and James McAndrews Quantitative Methods o “Should There Be Intraday Money Markets?” n Contemporary Economic Policy 28, no. 1 (January): Simon Potter 110-22. “A Flexible Approach to Parametric Inference in Nonlinear and Time-Varying Time Series Models,”

“A Study of Competing Designs for a Liquidity- with Gary Koop. Journal of Econometrics 159, no. 1 P o

Saving Mechanism.” Journal of Banking and (November): 134-50. E l i c

Finance 34, no. 8 (August): 1818-26. c o y

“Modeling the Dynamics of Inflation Compensation,” n R Hamid Mehran and Stavros Peristiani with Markus Jochmann and Gary Koop. Journal of o m e

“Financial Visibility and the Decision to Go Empirical Finance 17, no. 1 (January): 157-67. v i i c Private.” Review of Financial Studies 23, no. 2 e w (February): 519-47.

Donald Morgan Forthcoming Comment on “Banks’ Financial Conditions and the Transmission of Monetary Policy: A FAVAR C

Approach,” by Ramona Jimborean and Jean- Macroeconomics and Growth I u s s

Stéphane Mésonnier. International Journal of r u Tobias Adrian r e

Central Banking 6, no. 4 (December): 119-24. e n Comment on “Two Monetary Tools: Interest Rates s t Stavros Peristiani and João Santos and Haircuts,” by Adam Ashcraft, Nicolae “Has the U.S. Bond Market Lost Its Edge to Garleanu, and Lasse Heje Pedersen. With Erkko the Eurobond Market?” International Review Etula. NBER Macroeconomics Annual . of Finance 10, no. 2 (June): 149-83. Vasco Cúrdia Tanju Yorulmazer “The Central Bank Balance Sheet as an Instrument R

“Liquidity, Bank Runs, and Bailouts: Spillover of Monetary Policy,” with Michael Woodford. U e p Effects during the Northern Rock Episode,” with Journal of Monetary Economics . s e d a

Paul Goldsmith-Pinkham. Journal of Financial a r t Marco Del Negro c Services Research 37, no. 2 (June): 83-98. e “Bayesian Macroeconometrics,” with Frank h Schorfheide. In Handbook of Bayesian Econometrics . Oxford University Press.

Gauti Eggertsson “Fiscal Multipliers and Policy Coordination.” In

Jordi Galí, ed., Fiscal Policy and Macroeconomic R e Performance . Proceedings of the 14 th Annual S p t a

Conference of the Central Bank of Chile. o f r f t

Comment on “Price Level Targeting and s Stabilization Policy,” by Aleksander Berentsen and Christopher Waller. Journal of Money, Credit, and Banking. J O o u u t r s n i a d l e s Outside Staff Research Current Economic 30 Journals Reports Update Issues Policy Review Introduction “Has Jonath A Macr oecnmi “My onetar “Ev olving Linda Macr oecnmis “CO Cent with Stefano Fl “Expect Stefano Antoie Econmi Jn our Fi “Stabilzng Econmi Experinc e,” Consumpti “F Sagir Inte “Macro Econmy Violan Analysi,” confere Macroecnmis and Marke scal uc Compart in nat r tuaions,” anc Le NDI: ral Bt ar al the Policy Kitao t Goldb te ane nce econ ing o ations, ional Signals Eus Eus Bank: c c . . Mtinar f Respon Mt hycCar In Reviw Reviw. Chicago: Hobijn. the Pe with A volume Policy Medi epi epi Expectaions J. ive n John rce erg Cordinat with Macr oec mic Cost-fN Euro Taxes Usher The with Le and . . yna D Change ptions Orazio Analys . East care: arnig and S Implent pean Mich . America Eur o hov en, University of Andrea Buce r Rou i mics ern , n Inves A Re nomics ed is,” of io Atan d?” the Econmi ominal- ael , pean tledg G s., Econ distrbuonal . n,” the and under w e Preston. n ed., In K United tmen n Tam Rec i Econ th asio eral with lein Credibl e. ation Anual Central Busine omic Per of De Dtions istor Cyril nt baloti My onetar . Equilbr m Ch omic and sociatnA m Gunar NBER Bu r to De Stae Fram A Asoc ography icag . mer Finacl vel Monet. Gianluc ce Bank ty Jna our Cyc E s.” opments o wore ks: ican Prest fect of iato P Berglund and le Ja a r Index and . es p l: s on n a of . ne . the in ,” se Environmet: “F Emanuel “ VAR Primce. Inv Market Tobias natiol Inter of T“ Econmetris “Inv “F Econmi “ Carlos Econmi Risk “F Ay And Econmi Change “Bu Simon Apli Mode Jnal our “ Econmi Muk Eq A Agregatio A ore i i erm Cvature, ur ş uilbrm,” rms na Th Hie estm egül si rea es oya Premia,” ed nes cas Aproach.” l,” re tm cial ra chial S valhoCar A Poter and ,” Tambl of e- Dynamics,” ent,” Econ ma, uctrtr e ting Ş s drian wi ent Moe ahin Stae yTheor Reviw Reviw Inquir with Cycle Forecasting Re Amplifcaton th n Fle om and v Shocks the Jnalour and with iew Fer nad Leve nch with with A and xiblty,” oti Marcel Model etrics Facto y Monitrg . . . Yie No-Arbitage Surpise: . Rich J of the nal our l, Al Jan Erko Per ld . . Econmi with and and . ejandro r ard P of Cve ur Analysi Groen usel, Kr with Nechio. Chauvet. the Slope.” Worker of of Rogersn. Serena Etula. Puzle The Econmetris Foreign with Relative Justin Bt ar in ynamicsD Factor of Predictve Toshik a American Ng. Jour European Flows in Suctraltr Dat-Rich Hobijn. Inatiolnter U.S ano Exchange Jnal our a nal -Augmentd Pr Stic ice Housing . in an . o of ky-Price d Conte Genral of of Giorg 31 I n t r o d u c t i

Nicola Cetorelli and Linda Goldberg Adam Copeland o

“Global Banks and International Shock “Inventories and the Automobile Market,” with n Transmission: Evidence from the Crisis.” George Hall and Wendy Dunn. RAND Journal IMF Economic Review . of Economics .

Jan Groen and Paolo Pesenti “The Response of Prices, Sales, and Output to P o

Temporary Changes in Demand,” with George E “Commodity Prices, Commodity Currencies, and l i c

Hall. Journal of Applied Econometrics . c Global Economic Developments.” In Andrew Rose o y n

and Takatoshi Ito, eds., Commodity Prices and R o

Andrew Haughwout m Markets . NBER-East Asia Seminar on Economics. e v

“How Should the Suburbs Help Their Central i

Chicago: University of Chicago Press. i c City?” with Robert Inman. Annals of the American e w Academy of Political and Social Science .

Microeconomics Giorgio Topa “Neighborhood Effects: Accomplishments and Jaison Abel Looking beyond Them,” with Yannis Ioannides.

“Agglomeration of Knowledge,” with Todd M. C

Journal of Regional Science . I u

Gabe. Urban Studies . s s r u r e “Human Capital and Economic Activity in Urban Giorgio Topa and Wilbert van der Klaauw e n s

America,” with Todd M. Gabe. Regional Studies . “Measuring Consumer Uncertainty about Future t Inflation,” with Wändi Bruine de Bruin and Olivier Armantier Charles F. Manski. Journal of Applied Econometrics . “Alternative Pricing Rules for Treasury Auctions,” with Erwann Sbai. Annals of Economics Wilbert van der Klaauw and Statistics . “Economics Coursework and Long-Term Behavior and Experiences of College Graduates in Labor R

“Overbidding in First Price Auction: Risk Aversion Markets and Personal Finance,” with Sam Allgood, U e p versus Probability Weighting Function.” William Bosshardt, and Michael Watts. s e d

Economics Letters . a Economic Inquiry. a r t c e “Subjective Probabilities in Games: An Application “What Determines Family Structure?” with David h to the Overbidding Puzzle,” with Nicholas Treich. Blau. Economic Inquiry . International Economic Review .

Meta Brown “Real-Time Search in the Laboratory and the Market,” with Christopher Flinn and Andrew R e Schotter. American Economic Review . S p t a o f r f t s J O o u u t r s n i a d l e s 32 n o i t c u d o r t James Vickery Nicola Cetorelli n

I “Microinsurance: A Case Study of the Indian Comment on “Inflation and Financial Market Rainfall Index Insurance Market,” with Xavier Performance: What Have We Learned in the Last Gine, Lev Menand, and Robert Townsend. In Ten Years?” by John Boyd and Bruce Champ. Chetan Ghate, ed., Handbook of the Indian Journal of Money, Credit, and Banking . Economy . Oxford University Press. w

e Gauti Eggertsson c i i

v Basit Zafar “Dynamic Incentives and Optimal Delegation of e m “Can Subjective Expectations Data Be Used in Political Power,” with Eric Le Borgne. Journal of o R

n Choice Models? Evidence on Cognitive Biases.” Money, Credit, and Banking . y o c

c . i Journal of Applied Econometrics l

E “What Fiscal Policy Is Effective at Zero Interest o

P “Double Majors: One for Me, One for the Rates?” NBER International Seminar Parents?” Economic Inquiry . on Macroeconomics .

“How Do College Students Form Expectations?” Anna Kovner Journal of Labor Economics . “The Private Equity Advantage: Leveraged Buyout

t Firms and Relationship Banking,” with Victoria s n Ivashina. Review of Financial Studies . e e r u r

s Banking and Finance s u

I Antoine Martin C Gara Afonso “Liquidity-Saving Mechanisms in Collateral-Based “Liquidity and Congestion.” Journal of RTGS Payment Systems,” with Marius Jurgilas. Financial Intermediation . Annals of Finance .

“Precautionary Demand and Liquidity in Payment Antoine Martin and David Skeie Systems,” with Hyun Song Shin. Journal of Money, “Bank Liquidity, Interbank Markets, and Credit, and Banking . Monetary Policy,” with Xavier Freixas. h e c t Review of Financial Studies . r a

a Gara Afonso and Anna Kovner d e s

p “Stressed, Not Frozen: The Fed Funds Market in

e James McAndrews and David Skeie

U the Financial Crisis,” with Antoinette Schoar.

R “Precautionary Reserves and the Interbank . Journal of Finance Market,” with Adam Ashcraft. Journal of Money, Credit, and Banking . Morten Bech “The Mechanics of a Graceful Exit: Interest on Reserves and Segmentation in the Federal Funds Market,” with Elizabeth Klee. Carnegie-Rochester s

t Conference Series on Public Policy . f r f o a t p S e R s e l d a i n s r t u u o O J 33 I n t r o d u c t i

Hamid Mehran Joseph Tracy and James Vickery o

“Bank Capital and Value in the Cross-Section,” “A Private Lender Cooperative Model for Residential n with Anjan Thakor. Review of Financial Studies . Mortgage Finance,” with Toni Dechario, Patricia Mosser, and Joshua Wright. In Susan Wachter and “Regulation, Subordinated Debt, and Incentive Marty Smith, eds., Reinventing the American

Features of CEO Compensation in the Banking Mortgage System: Rethink, Recover, Rebuild . P o

Industry,” with Yiming Qian and Andrew John. E

Philadelphia: University of Pennsylvania Press. l i c

Journal of Corporate Finance . c o y n

Zhenyu Wang R o

João Santos m “Performance Maximization of Actively Managed e v

“Bank Corporate Loan Pricing Policy following the i

Funds,” with Paolo Guasoni and Gur Huberman. i c Subprime Crisis.” Review of Financial Studies . e Journal of Financial Economics . w “Investors’ Home-Country Bias: Does Learning at Home Help Enter Foreign Markets?” with Tanju Yorulmazer Margarida Abreu and Victor Mendes. Journal of “Crisis Resolution and Bank Liquidity,” with Banking and Finance . Viral Acharya and Hyun Song Shin. Review of Financial Studies . C I u Asani Sarkar s s

“Rollover Risk and Market Freezes,” with Viral r u “Credit Default Swap Auctions,” with Jean r e

Acharya and Douglas Gale. Journal of Finance . e n Helwege, Samuel Maurer, and Yuan Wang. Journal s of Fixed Income . t “The Microstructure of Cross-Autocorrelations,” Quantitative Methods with Tarun Chordia and Avanidhar Subrahmanyam . Journal of Financial and Quantitative Analysis . Richard Crump “Robust Data-Driven Inference for Density-

Til Schuermann Weighted Average Derivatives,” with Matias D. R U

“Global Business Cycles and Credit Risk,” with Cattaneo and Michael Jansson. Journal of the e p s e

M. Hashem Pesaran and Björn-Jakob Treutler. In American Statistical Association . d a a Mark Carey and René M. Stulz, eds., The Risks of r t c e Financial Institutions . NBER conference volume. Ernst Schaumburg h Chicago: University of Chicago Press. “Jump-Robust Volatility Estimation Using Nearest Neighbor Truncation,” with Torben G. Andersen “How Do Banks Manage Liquidity Risk? Evidence and Dobrislav Dobrev. Journal of Econometrics . from the Equity and Deposit Markets in the Fall of 1998,” with Evan Gatev and Philip E. Strahan. In Mark Carey and René M. Stulz, eds., The Risks of

Financial Institutions . NBER conference volume. R e S

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