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FEDS Paper: The Effect of Liquidity Constraints on Labor Supply: Evidence from Interest Rate Ceilings

12/22/2025 Federal Reserve Central banks

Kabir Dasgupta, Brenden J. MasonWe exploit the spatiotemporal variation in US states’ interest rate ceilings on small-dollar loans to identify the effect of liquidity constraints on labor supply. Exogenously-capped interest rates lead to consumers being shut out of the market for cash loans. In response, labor supply increases by approximately 0.4 hours per week. We also find that the propensity to take personal leaves decreases.

FEDS Paper: Estimating Aggregate Data Center Investment with Project-level Data

12/22/2025 Federal Reserve Central banks

Eirik Eylands Brandsaas, Daniel Garcia, Robert Kurtzman, Joseph Nichols, and Adelia ZytekData center investment in the U.S. has increased rapidly in the post-pandemic era, and plans for future investment have surged further.

FEDS Paper: HANK Comes of Age: Monetary Policy with Heterogeneous Overlapping Generations(Revised)

12/19/2025 Federal Reserve Central banks

Bence Bardóczy, Ettore Savoia, and Mateo Velásquez-GiraldoWe study the transmission and distributional effects of monetary policy in an environment where consumption-saving choices reflect both precautionary motives and life-cycle considerations.

IFDP Paper: Inequality and Asset Prices during Sudden Stops(Revised)

12/17/2025 Federal Reserve Central banks

Sergio VillalvazoThis paper studies the cross-sectional dimension of Fisher's debt-deflation mechanism that triggers endogenous Sudden Stop crises-i.e., episodes with large reversals in the current account. Analyzing microdata from Mexico, we show that this dimension has macroeconomic implications that operate via opposing effects. First, an amplifying effect by which households with high leverage fire-sale their assets during crises, increasing downward pressure on asset prices.

IFDP Paper: Dollarization Waves: New Evidence from a Comprehensive International Bond Database

12/16/2025 Federal Reserve Central banks

Swapan-Kumar Pradhan, Eswar Prasad, Előd Takáts, and Judit TemesvaryWe investigate how the U.S. dollar’s prominence in the denomination of international debt securities has evolved in recent decades, using a comprehensive global dataset with far more extensive coverage than datasets used in prior literature. We find no monotonic dollarization or de-dollarization trend; instead, the dollar’s share exhibits a wavelike pattern. We document three dollarization waves since the 1960s.

FEDS Paper: Hysteresis and the Role of Downward Nominal Wage Rigidity: Evidence from U.S. States(Revised)

12/16/2025 Federal Reserve Central banks

Hie Joo Ahn and Yunjong EoThis paper empirically investigates the sources of hysteresis, emphasizing the role of downward nominal wage rigidity using U.S. state-level payroll employment growth. U.S. states exhibit heterogeneous recoveries, with L-shaped and U-shaped recessions corresponding to persistent hysteresis and full recovery. L-shaped recessions are importantly driven by demand shocks and reinforced by downward nominal wage rigidity, which prolongs employment losses by raising real wages and deepening downturns.

FEDS Paper: LLM on a Budget: Active Knowledge Distillation for Efficient Classification of Large Text Corpora*

12/15/2025 Federal Reserve Central banks

Viviana Luccioli, Rithika Iyengar, Ryan Panley, Flora Haberkorn, Xiaoyu Ge, Leland Crane, Nitish Sinha, and Seung Jung LeeLarge Language Models (LLMs) are highly accurate in classification tasks, however, substantial computational and financial costs hinder their large-scale deployment in dynamic environm

FEDS Paper: Rates of return on private and public businesses

12/15/2025 Federal Reserve Central banks

Jesse Bricker, Kevin B. Moore, and Alice H. VolzPrivately owned business assets are an important source of wealth for families across the world, but measurement issues are believed to hamper our understanding of these firms.

FEDS Paper: Funds of Funds' Portfolio Rebalancing during the COVID-19 Crisis

12/15/2025 Federal Reserve Central banks

Nathan Foley-Fisher and Jeongmin (Mina) LeeDuring the COVID-19 crisis, large outflows from bond mutual funds disrupted debt markets. We show that "funds of funds"-mutual funds that invest in other mutual funds-accounted for a third of those outflows in March 2020. They rebalanced their portfolios mechanically in response to equity market losses, selling bond funds and purchasing equity funds.

FEDS Paper: A Robust Risk Framework for Offline Payments

12/15/2025 Federal Reserve Central banks

Bikash Poudel, Sarah Carey, Robert Flynn, Chakrapani Narayan, Richard Payne, Eshwar Satrasala, Seaira Spooney, and James LovejoyThe capability to make offline digital payments is emerging as a vital component of the broader payments ecosystem, especially in scenarios in which internet connectivity is unavailable such as during a crisis or natural disaster. Offline digital payment services offer a secure and reliable alternative to cash. Even so, there are a limited number of viable offline payment protocols in production today.

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