Federal Reserve Bank of Dallas

About: Federal Reserve Bank of Dallas is a other organization based out in Dallas, Texas, United States. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 196 authors who have published 994 publications receiving 35508 citations.

Foreign Investment, Regulatory Arbitrage and the Risk of U.S. Financial Institutions

Abstract: This study investigates the extent to which cross-country differences in banking regulation and supervision are relevant for the international subsidiary locations of U.S. bank holding companies (BHCs). We find that U.S. BHCs are more likely to operate subsidiaries in countries with weak regulation and supervision. Further, financial institutions’ decisions to operate in locations with lax environments, while positively related to profitability, are associated with an increase in BHC risk and BHCs’ contribution to systemic risk. The quality of internal controls and risk management practices of financial institutions play an important role in such location choices and risk outcomes. Overall, our study suggests that financial institutions engage in regulatory arbitrage with potentially dangerous consequences.

Oil Price Shocks and Exchange Rate Management: The Implications of Consumer Durables for the Small Open Economy

Abstract: This paper examines exchange rate management issues when a small open economy is hit by an exogenous oil price shock. In this model consumer durables play an important role in the demand for oil and oil based products as opposed to the traditional role of oil as a factor of production. When prices are sticky, oil price shocks lead to reduced output, lower in ation, and real exchange rate deprecation. These recessionary e ects occur whether or not oil is in the production function because of the close relationship between consumer durables and oil. Tentative results suggest that exible exchange rates produce smaller output losses and less volatile in ation in the non-tradables sector than xed exchange rates but at the cost of front-loading real exchange rate movements. JEL Codes: E31, F41, E52

Fiscal Stabilization and the Credibility of the U.S. Budget Sequestration Spending Austerity

Abstract: Fiscal imbalances predating the Great Recession but aggravated by it prompted the U.S. Congress to enact in 2011 legislation that, in the absence of other measures, would trigger two years later a so-called “budget sequestration� procedure that implied reducing government discretionary spending to unprecedented low levels over the following decade. For that reason, economic agents may not have expected this “fiscal stabilization measure of last resort� to be sustainable when it was put into effect in 2013 as scheduled. This is exactly the issue this paper set out to explore, on the grounds that sizing up the expectations that economic agents had about the budget sequestration can provide powerful insights on how fiscal stabilization is likely to proceed in the U.S., going forward. The paper makes inferences about the credibility enjoyed by the budget sequestration with an adapted version of the Business Cycle Accounting approach, originally developed for other purposes. The main finding is that the evidence favors a scenario in which spending cuts are half the size of those actually implied by the sequester. The paper takes this result as an indication that the U.S. is unlikely to address its unresolved fiscal imbalances with just spending austerity, an interpretation consistent with existing literature that traces the seemingly anomalous behavior of economic variables during the Great Recession and its aftermath to alternative fiscal stabilization mechanisms.

The Heterogeneous Effects of Global and National Business Cycles on Employment in US States and Metropolitan Areas

Abstract: The growth of globalization in recent decades has increased the importance of external factors as drivers of the business cycle in many countries. Globalization affects countries not just at the macro level but at the level of states and metro areas as well. This paper isolates the relative importance of global, national and region-specific shocks as drivers of the business cycle in individual U.S. states and metro areas. We document significant heterogeneity in the sensitivity of states and metro areas to global shocks, and show that direct trade linkages are not the only channel through which the global business cycle impacts regional economies.