Federal Reserve

FEDS Paper: A Look Back at "Look Through"

05/29/2025 Federal Reserve Central banks

Edward NelsonThis paper examines the place that a "look-through" approach to price shocks has acquired in inflation-targeting frameworks. The "look-through" approach reflects the fact that, in the event of a shock that is likely (on impact) to put a sizable share of consumer prices under upward pressure, one option available to the central bank is to accommodate the initial price rise. In doing so, it can also attempt to ensure that future inflation rates, and inflation expectations, are insulated from the shock.

FEDS Paper: (Re-)Connecting Inflation and the Labor Market: A Tale of Two Curves(Revised)

05/28/2025 Federal Reserve Central banks

Hie Joo Ahn and Jeremy B. RuddWe propose an empirical framework in which shocks to worker reallocation, aggregate activity, and labor supply drive the joint dynamics of the labor market and inflation, and where reallocation shocks take two forms depending on whether they result from quits or from job losses. We find that these structural shocks, which affect the Beveridge curve, have different effects on inflation.

IFDP Paper: Corporate Debt Maturity and Business Cycle Fluctuations

05/27/2025 Federal Reserve Central banks

Francesco Ferrante, Andrea Prestipino, Immo SchottLong-term debt is the main source of firm-financing in the U.S. We show that accounting for debt maturity is crucial for understanding business cycle dynamics. We develop a macroeconomic model with defaultable long-term debt and equity adjustment costs.

FEDS Paper: Scenario Synthesis and Macroeconomic Risk

05/20/2025 Federal Reserve Central banks

Tobias Adrian, Domenico Giannone, Matteo Luciani, and Mike WestWe introduce methodology to bridge scenario analysis and model-based risk forecasting, leveraging their respective strengths in policy settings. Our Bayesian framework addresses the fundamental challenge of reconciling judgmental narrative approaches with statistical forecasting.

FEDS Paper: Collateral Reuse and Financial Stability

05/20/2025 Federal Reserve Central banks

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.

FEDS Paper: Risk-averse Dealers in a Risk-free Market - The Role of Trading Desk Risk Limits

05/15/2025 Federal Reserve Central banks

Dan Li, Lubomir Petrasek, and Mary TianSelf-imposed risk limits effectively limit dealers' appetite for risks and their capacity to intermediate in Treasury markets in times of market stress.

IFDP Paper: Measuring Geopolitical Fragmentation: Implications for Trade, Financial Flows, and Economic Policy

05/14/2025 Federal Reserve Central banks

Florencia Airaudo, Francois De Soyres, Keith Richards, and Ana Maria SantacreuRecent geopolitical tensions have revived interest in understanding the economic consequences of geopolitical fragmentation.

IFDP Paper: Related Exposures to Distressed Borrowers and Bank Lending(Revised)

05/12/2025 Federal Reserve Central banks

Sumit Agarwal, Ricardo Correa, Bernardo Morais, Jessica Roldán and Claudia Ruiz-OrtegaWe study how banks’ exposure to a large set of related and suddenly-distressed borrowers impacts their commercial lending and risk taking. Using Mexican credit registry data, we examine the effect of the 2014 collapse in energy prices.

IFDP Paper: Measuring Shortages since 1900

05/09/2025 Federal Reserve Central banks

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: Cost of Banking for LMI and Minority Communities(Revised)

05/09/2025 Federal Reserve Central banks

Marco Migueis, Michael Suher, and Jessie XuWe test whether minimum account balances to avoid fees, maintenance fee amounts, and nonsufficient funds charges are systematically different in LMI and majority-minority communities relative to other communities and find that they are generally higher.

Pages