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.

Valuation Risk Revalued

Abstract: The recent asset pricing literature finds valuation risk is an important determinant of key asset pricing moments. Valuation risk is modelled as a time preference shock within Epstein-Zin recursive utility preferences. While this form of valuation risk appears to fit the data extremely well, we show the preference specification violates an economically meaningful restriction on the weights in the Epstein-Zin time-aggregator. The same model with the corrected preference specification performs nearly as well at matching asset pricing moments, but only if the risk aversion parameter is well above the accepted range of values used in the literature. When the corrected preference specification is combined with Bansal-Yaron long-run risk, the estimated model significantly downgrades the role of valuation risk in determining asset prices. The only significant contribution of valuation risk is to help match the volatility of the risk-free rate.

Trade Integration, Global Value Chains, and Capital Accumulation

Abstract: Motivated by increasing trade and fragmentation of production across countries, accompanied by income convergence by many emerging economies, we build a dynamic two-country model featuring sequential, multi-stage production and capital accumulation. As trade costs decline over time, global-value-chain (GVC) trade expands across countries, particularly more in the faster-growing country, consistent with the empirical pattern. Via Heckscher–Ohlin forces, GVC trade can generate back-and-forth feedback between comparative advantage and capital accumulation (growth). Moreover, GVC trade increases both steady-state and dynamic gains from trade.

The information content of the paper-bill spread

Abstract: In a series of articles, Benjamin M. Friedman and Kenneth N. Kuttner maintain that the difference between the commercial paper rate and the Treasury bill rate has highly significant predictive value for real output even in the presence of money and regardless of sample. The results presented in this paper do not support Friedman and Kuttner's claims.

The Double-Edged Sword of Global Integration: Robustness, Fragility & Contagion in the International Firm Network

Abstract: We estimate global inter-firm networks across all major industries from 1981 through 2016 and provide the first empirical tests for both robust (beneficial) and fragile (harmful) network behavior, relating firms' health with global integration More connected firms are less likely to be in distress and have higher profit growth and equity returns, but are also more exposed to direct contagion from distressed neighboring firms and network level crises Our analysis reveals the centrality of finance in the international firm network and increased globalization, with greater potential for crises to spread globally when they do occur

An Equilibrium Analysis Of Relative Price Changes And Aggregate Inflation

Abstract: Inflation is positively correlated with the variability of relative prices as measured by the standard deviation of the cross-section distribution of prices, and also with the third moment (skewness) of the cross-section distribution of prices. The conventional interpretation of these relationships is that they reflect sluggishness in the adjustment of individual prices in response to shocks. In this paper we question this interpretation. First, we show that similar correlations among the moments exist in alternative measures of underlying technology shocks. Second, when these shocks are fed into a general equilibrium model with multiple sectors and flexible prices, the resulting prices also display a positive correlation between aggregate inflation and skewness of the cross-section distribution. Keyword(s): Relative prices; Inflation; Cross-section distribution of prices