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.

The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis

Abstract: This paper examines the effects of the U.S. shale oil boom in a two-country DSGE model where countries produce crude oil, refined oil products, and a non-oil good. The model incorporates different types of crude oil that are imperfect substitutes for each other as inputs into the refining sector. The model is calibrated to match oil market and macroeconomic data for the U.S. and the rest of the world (ROW). We investigate the implications of a significant increase in U.S. light crude oil production similar to the shale oil boom. Consistent with the data, our model predicts that light oil prices decline, U.S. imports of light oil fall dramatically, and light oil crowds out the use of medium crude by U.S. refiners. In addition, fuel prices fall and U.S. GDP rises. We then use our model to examine the potential implications of the former U.S. crude oil export ban. The model predicts that the ban was a binding constraint in 2013 through 2015. We find that the distortions introduced by the policy are greatest in the refining sector. Light oil prices become artificially low in the U.S., and U.S. refineries produce inefficiently high amount of refined products, but the impact on refined product prices and GDP are negligible.

Monetary Policy News and Systemic Risk at the Zero Lower Bound

Abstract: This paper employs a recent contribution to the construction of the shadow nominal interest rate during the zero lower bound episode of the Great Recession of 2008-2009 and the Greenbook forecasts to obtain a measure of monetary policy shocks over that time period. It then identifies monetary policy news shocks as a novel measure of the forward-looking conduct of monetary policy in the U.S. Using the data from 1987-2010 and impulse responses from the method of local projections, it shows that contractionary monetary surprise and news shocks tended to reduce systemic risk measures over the full sample. In contrast, expansionary monetary news shocks reduced systemic risk at the zero lower bound, whereas surprises had little effect. These findings suggest that the Federal Reserve's efforts at providing expansionary forward guidance at the zero lower bound were successful in stabilizing measures of systemic risk during the Great Recession.

Some Unpleasant General Equilibrium Implications of Executive Incentive Compensation Contracts

Abstract: We consider a simple variant of the standard real business cycle model in which shareholders hire a self-interested executive to manage the firm on their behalf. A generic family of compensation contracts similar to those employed in practice is studied. When compensation is convex in the firm’s own dividend (or share price), a given increase in the firm’s output generated by an additional unit of physical investment results in a more than proportional increase in the manager’s income. Incentive contracts of sufficient yet modest convexity are shown to result in an indeterminate general equilibrium, one in which business cycles are driven by self-fulfilling fluctuations in the manager’s expectations that are unrelated to the economy’s fundamentals. Arbitrarily large fluctuations in macroeconomic variables may result. We also provide a theoretical justification for the proposed family of contracts by demonstrating that they yield first-best outcomes for specific parameter choices.

COVID-19 Time-varying Reproduction Numbers Worldwide: An Empirical Analysis of Mandatory and Voluntary Social Distancing

Abstract: This paper estimates time-varying COVID-19 reproduction numbers worldwide solely based on the number of reported infected cases, allowing for under-reporting Estimation is based on a moment condition that can be derived from an agent-based stochastic network model of COVID-19 transmission The outcomes in terms of the reproduction number and the trajectory of per-capita cases through the end of 2020 are very diverse The reproduction number depends on the transmission rate and the proportion of susceptible population, or the herd immunity effect Changes in the transmission rate depend on changes in the behavior of the virus, re-flecting mutations and vaccinations, and changes in peoples behavior, reflecting voluntary or government mandated isolation Over our sample period, neither mutation nor vaccination are major factors, so one can attribute variation in the transmission rate to variations in behavior Evidence based on panel data models explaining transmission rates for nine European countries indicates that the diversity of outcomes resulted from the non-linear interaction of mandatory containment measures, voluntary precautionary isolation, and the economic incentives that gov-ernments provided to support isolation These effects are precisely estimated and robust to various assumptions As a result, countries with seemingly different social distancing policies achieved quite similar outcomes in terms of the reproduction number These results imply that ignoring the voluntary component of social distancing could introduce an upward bias in the estimates of the effects of lock-downs and support policies on the transmission rates JEL ClassificationD0, F6, C4, I120, E7