Federal Reserve

FEDS Paper: Credit Surfaces and Economic Uncertainty

07/31/2026 Federal Reserve Central banks

John Geanakoplos and David E. RappoportThe Credit Surface along the leverage dimension gives the bond spread as a function of the loan-to-value ratio. Empirically, we show that uncertainty shocks typically increase spreads and steepen the credit surface, profoundly affecting the supply of credit. Theoretically, we derive necessary and sufficient conditions for the convexity of the credit surface, and for changes in the anticipated distribution of collateral prices that lead to steepening of the credit surface.

FEDS Paper: How Firms Form Beliefs and the Implications for Inflation

07/31/2026 Federal Reserve Central banks

Robert Minton and Hugo MonneryUsing survey data from U.S. firms, we study the primitive beliefs for pricesetting: firms’ forecasts of their own marginal costs. These forecasts are disconnected from CPI expectations, (over)react to current and past costs systematically, and underreact to aggregate shocks until costs move. We show that under empirically realistic cost beliefs the New Keynesian Phillips curve is steeper and less forward-looking. Supply shocks are more inflationary because they hit costs quickly.

IFDP Paper: Transmission Growth-at-Risk: How Foreign Financial Vulnerabilities Shape U.S. Growth Prospects

07/17/2026 Federal Reserve Central banks

Sai Ma, Viktors Stebunovs, Judit TemesvaryWe develop a Transmission Growth-at-Risk (TGaR) framework that incorporates foreign financial vulnerabilities as predictors of U.S. downside growth risk. We distinguish financial conditions, which measure current tightness in credit markets, from financial vulnerabilities, which measure structural fragilities that can amplify shocks.

FEDS Paper: The Last Taxi: LCR Buffers and Bank Liquidity Provision

07/17/2026 Federal Reserve Central banks

R. Matthew Darst, Lucia Gurrieri, Arazi Lubis, and Alexandros P. VardoulakisThis paper examines whether regulatory liquidity buffers enable banks to support corporate borrowers during financial stress.

FEDS Paper: Demand Shocks and Endogenous Uncertainty

07/17/2026 Federal Reserve Central banks

Diego VilánThis study examines how fluctuations in firm-level uncertainty arise over the business cycle and how they influence aggregate economic activity. To do so, it develops a general equilibrium incomplete-markets model in which heterogeneous, risk-averse firms face idiosyncratic demand uncertainty and aggregate shocks to consumer credit conditions.

IFDP Paper: Hidden Leverage in Nonfinancial Corporations

07/16/2026 Federal Reserve Central banks

Cody KallenA substantial portion of corporate debt remains hidden from balance sheets. I document two forms of off-balance-sheet leverage in nonfinancial corporations: operating leases (pre-2019) and intraperiod borrowing—short-term debt issued and repaid within reporting periods, which I am the first to study in nonfinancial firms.

IFDP Paper: Multi-Plant Firms, Variable Capacity Utilization, and the Aggregate Hours Elasticity

07/08/2026 Federal Reserve Central banks

Domenico Ferraro, Giuseppe Fiori, and Damian PierriWe develop a business cycle model with perfectly competitive product and labor markets in which production requires a minimum labor input, generating endogenous capacity utilization. The aggregate production function is kinked, featuring constant returns to scale below capacity—typically in recessions—and decreasing returns at capacity in expansions.

FEDS Paper: Capturing Heterogeneity: Machine Learning Approaches to Implied Volatility Forecasting

07/07/2026 Federal Reserve Central banks

Hyung Joo Kim and Dong Hwan OhDespite documented heterogeneity in volatility dynamics across the option surface, standard implied volatility forecasting models apply homogeneous parameters throughout. We introduce a machine-learning framework that uses regression trees to partition the surface along both moneyness and maturity dimensions, identifying data-driven regions where distinct forecasting models perform best.

FEDS Paper: The Standards Are in the Mail: Comparing Credit Card Supply Indicators

07/02/2026 Federal Reserve Central banks

John C. Driscoll, Benjamin S. Kay, Geng Li, and Cindy M. VojtechWe provide the first lender-level analysis linking two independently constructed credit supply measures: the Federal Reserve's Senior Loan Officer Opinion Survey (SLOOS) and credit card mail offers from Mintel Comperemedia.

FEDS Paper: Cyclical Fluctuations, Financial Frictions, and Productivity Differences across Firms

06/26/2026 Federal Reserve Central banks

Luca Guerrieri, Jinill Kim, and Arsenii MishinWithin narrowly defined industries, the most productive firms produce far more than the least productive from the same inputs, and this dispersion widens in downturns. We build a tractable representative-agent model in which financial frictions—adverse selection and moral hazard—make firms sort endogenously into lenders, strategic defaulters, and producers.

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