Federal Reserve

FEDS Paper: Collateral Reuse and Financial Stability

Jin-Wook B. Chang and Grace ChuanThe isolated effects of collateral reuse on financial stability are ambiguous and understudied. While greater collateral reuse can guarantee more payments with fewer assets, it can also increase the exposure to potential drops in collateral price. To analyze these tradeoffs, we develop a financial network model with endogenous asset pricing, multiple equilibria, and equilibrium selection.

IFDP Paper: Measuring Shortages since 1900

Dario Caldara, Matteo Iacoviello, and David YuThis paper introduces a monthly shortage index spanning 1900 to the present, constructed from 25 million newspaper articles. The index captures shortages across industry, labor, food, and energy, and spikes during economic crises and wars. We validate the index and show that it provides information beyond traditional macroeconomic indicators.

FEDS Paper: Refining the Definition of the Unbanked

Elena Falcettoni and Vegard Mokleiv NygaardWe propose a new way to classify individuals without a bank account, accounting for their actual interest in being banked. Analogous to how unemployment statistics are defined and estimated, we differentiate the individuals that do not have a bank account and would like to have one (the “unbanked”) from individuals that do not have a bank account and are not interested in having one (the “out of banking population”).

IFDP Paper: Optimal Credit Market Policy

Matteo Iacoviello, Ricardo Nunes, and Andrea PrestipinoWe study optimal credit market policy in a stochastic, quantitative, general equilibrium, infinite-horizon economy with collateral constraints tied to housing prices. Collateral constraints yield a competitive equilibrium that is Pareto inefficient. Taxing housing in good states and subsidizing it in recessions leads to a Pareto-improving allocation for borrowers and savers.

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