Abhik Bhatt, Anthony M. Diercks, Benjamin Eyal, and Arsenios SkaperdasThis paper uses a natural experiment to measure the causal effect of an expected debt-financed fiscal stimulus on interest rates. We find that a 1 percentage point increase in the expected US debt-to-GDP ratio leads to an increase of about 1-2 basis points in the longer-run neutral rate (r∗) and of about 2–3 basis points in the 10-year Treasury term premium.
Celso Brunetti, Christoph FreiWe study the rise of nonbank financial intermediation and its implications for systemic risk. We develop a structural network model of banks and nonbank financial institutions (NBFIs) that decomposes intermediation into a capacity channel, driven by bank balance-sheet constraints, and a reliance channel, reflecting NBFI funding reliance. Using U.S. banking confidential supervisory data, we estimate key structural parameters and quantify both channels.
Ryan Byun, Bennett Fees, Margaret M. Jacobson, and Todd B. WalkerCentral bank communications, particularly FOMC statements and press conferences, play a crucial role in shaping financial market expectations. Using large language models to quantify central bank content, this paper demonstrates how sentiment aligns with traditional market-based monetary policy measures. We show that press conferences correlate with future policy to a greater extent than other communications.
Sai MaUsing microdata from the Michigan Survey of Consumers, we study how within-household reallocations of attention across news affect inflation expectation bias, measured relative to a real-time, machine-learning full-information benchmark. Shifting attention toward unfavorable (favorable) economic news increases (decreases) forecast bias substantially, while dropping attention to an unfavorable topic has little effect.
Sriya Anbil, Sebastian Infante, Zeynep SenyuzIn an ample-reserves framework, administered rates anchor money markets but suppress information from unsecured interbank trading. We recover that information by isolating the small interbank segment of the federal funds market.
Celso Brunetti, Jeffery H. Harris, Ioannis SpyridopoulosNo, in the mortgage market. Using confidential micro-level data combining mortgage contracts with credit and repayment records for 44 million loans spanning 5,000 bank mergers over nearly three decades, we find no changes to mortgage rates, approval rates, or delinquency rates. Local mortgage markets remain remarkably competitive despite consolidation, averaging over 100 active lenders in each county every post-merger quarter.
Eric EngstromIn January 2012, the Federal Reserve began publishing the Summary of Economic Projections (SEP) "dot plot," revealing FOMC participants' projections for the federal funds rate. This paper documents a dual role for SEP projections in the formation of private interest-rate expectations. On one hand, SEP projections contain valuable information, achieving lower forecast errors than consensus surveys, VAR models, and several market-based measures at many horizons.
Nils Gornemann, Eugenio Rojas, Felipe SaffieDoes global financial risk affect long-run growth? Using a panel state-space model for emerging and advanced small open economies, we measure the effects of U.S. monetary policy uncertainty shocks. A one-standard-deviation shock lowers the level of the stochastic trend in emerging markets by at least 25 basis points after three years, with little effect in advanced economies.
Ece Fisgin, Johannes Fleck, Keith RichardsWe show that the EU’s 2018 retaliation against US steel and aluminum tariffs targeted goods with low US import dependence and high substitutability. For the majority of tariffed goods, the US share of EU imports declined notably and remained below pre-2018 levels even after the retaliatory tariffs were lifted, reflecting asymmetric effects of tariffs on trade diversion.
David Splinter and Jeff LarrimoreCirculation into and out of the top one percent is pronounced in the U.S. One third exit after a year and two-thirds exit after a decade. This mobility lowers top income shares when shifting from annual to multi-year income measures. Intragenerational mobility over two decades lowers recent top one percent fiscal income shares by over 10 percent. Two-decade mobility reduces top 0.1% shares by over 20 percent, top 0.01% shares by 30 percent, and top 0.001% shares by 40 percent.
