Federal Reserve

FEDS Paper: Pre-LBO Credit Market Conditions and Post-LBO Target Behavior

Seung Kwak and Charles PressIn the context of leveraged buyouts (LBOs), this paper empirically studies the relation between pre-buyout credit market conditions and the post-buyout behavior of target companies, employing a supervisory dataset to overcome limited data availability for post-buyout target financial information. We propose an LBO-specific measure of (changes of) credit market conditions--the short-term (6-month) change of credit spreads leading up to buyout close.

FEDS Paper: Supply Chain Constraints and Inflation

Diego Comin, Robert Johnson, Callum JonesWe develop a multisector, open economy, New Keynesian framework to evaluate how potentially binding capacity constraints, and shocks to them, shape inflation. We show that binding constraints for domestic and foreign producers shift domestic and import price Phillips Curves up, similar to reduced-form markup shocks. Further, data on prices and quantities together identify whether constraints bind due to increased demand or reductions in capacity.

FEDS Paper: Uncovered interest rate, overshooting, and predictability reversal puzzles in an emerging economy

Rehim KilicBy using realized and survey-based expected exchange rate data, the paper presents five key findings regarding the Uncovered Interest rate Parity (UIP) and related puzzles in an Emerging Market (EM). First, Fama regressions, when not accounting for shifts in the UIP relationship, yield slopes that are statistically identical to one, irrespective of whether survey-based expected exchange rates or realized exchange rates are used.

IFDP Paper: Trade Uncertainty and U.S. Bank Lending

Ricardo Correa, Julian di Giovanni, Linda S. Goldberg, and Camelia MinoiuThis paper uses U.S. loan-level credit register data and the 2018–2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks’ ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face.

FEDS Paper: LCR Premium in the Federal Funds Market

Alyssa Anderson and Manjola TaseWe document the existence of a regulatory premium in the federal funds market related to the implementation of the Liquidity Coverage Ratio (LCR). We use difference-in-differences analysis and confidential bank level data on borrowing in the fed funds and Eurodollar markets to compare the interest rates paid by banks subject to daily reporting of their liquidity profile (daily reporters) relative to other banks.

IFDP Paper: Committing to Grow: Privatizations and Firm Dynamics in East Germany

Ufuk Akcigit, Harun Alp, André Diegmann, and Nicolas Serrano-VelardeThis paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates.


Subscribe to Federal Reserve