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.

On the Sustainability of Exchange Rate Target Zones with Central Parity Realignments

Abstract: I show that parity realignments alone do not suffice to ensure the long-run sustainability of an exchange rate target zone with imperfect credibility due to the gambler's ruin problem. However, low credibility and frequent realignments can destabilize the exchange rate.

Understanding the Aggregate Effects of Credit Frictions and Uncertainty

Abstract: This paper integrates a financial accelerator mechanism a la Bernanke et al. (1999) and time-varying uncertainty into a Dynamic New Keynesian model. We examine the extent to which uncertainty and credit conditions interact with one another. The idea is that uncertainty aggravates the information asymmetry between lenders and borrowers, and worsens credit conditions. Already poor credit conditions amplify the effect of shocks (to both the mean and variance) on the aggregate economy. In our model, uncertainty modelled as time-varying stochastic volatility emerges from monetary policy (policy uncertainty), financial risks (micro-uncertainty), and the aggregate state of the economy (macro-uncertainty). Using a third order approximation, we find that micro-uncertainty has first order effects on economic activity through its direct impact on credit conditions. We also find that if credit conditions (as measured by the endogenous risk spread) are already poor, then additional micro-uncertainty shocks have even larger real effects. In turn, shocks to aggregate uncertainty (macro- and policy-uncertainty) have relatively small direct effects on aggregate economic activity.

Hedge Fund Dynamic Market Sensitivity

Abstract: Many hedge funds attempt to achieve high returns by employing leverage. However, it is difficult to track the degree of leverage used by hedge funds over time because detailed timely information about their positions in asset markets is generally unavailable. This article discusses how to combine shrinkage variable selection methods with dynamic regression to compute and track hedge fund leverage on a time-varying basis. The authors argue that their methodology measures leverage as well as hedge fund sensitivity to markets arising from other sources. The authors’ approach employs the lasso variable selection method to select the independent variables in equations of hedge fund excess returns. With the independent variables selected by the lasso method, a state space model generates the parameter estimates dynamically. The hedge fund market sensitivity indicator is the average of the absolute values of the parameters in the excess return equations. The indicator peaks at the time of the Long Term Capital Management meltdown in 1998 and again at a critical time in the 2008 financial crisis. In the absence of direct information from hedge fund balance sheets, this approach could serve as an important tool for monitoring market sensitivity and financial distress in the hedge fund industry.

The Macroeconomic Effects of Government Asset Purchases: Evidence from Postwar US Housing Credit Policy

Abstract: We document the portfolio activity of federal housing agencies and provide evidence on its impact on mortgage markets and the economy Through a narrative analysis, we identify historical policy changes leading to expansions or contractions in agency mortgage holdings Based on those regulatory events that we classify as unrelated to short-run cyclical or credit market shocks, we find that an increase in mortgage purchases by the agencies boosts mortgage lending and lowers mortgage rates Agency purchases influence prices in other asset markets and stimulate residential investment Using information in GSE stock prices to construct an alternative instrument for agency purchasing activity yields very similar results as our benchmark narrative identification approach

Spotlight: Mexico Development Bank Lending Rises Following Financial Reforms

Abstract: No abstract available.