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 composite index of leading economic indicators: A comparison of approaches

Abstract: I compare the real-time recession predicting performance of the Conference Board Leading Index, the Stock and Watson Leading Index, and the yield curve in the period since 1988. I first calculate the real-time probability of recession for the yield curve and Conference Board Leading Index using a simple non-linear regime-switching model. I then compare these estimates to the probability of recession published by Stock and Watson. The Conference Board Leading Index gave the strongest signal of recession in the six months prior to the 1990–1991 recession and gave no false signals in the 1990s. The Stock and Watson Leading Index failed to give recession signals in the first half of 1990 and the yield curve may have given a false signal in early 1999. The results show that the traditional leading index is still a useful tool for monitoring the ebb and flow of regional and national economies.

Unemloyment and Unobserved Credit Risk in the FHA Single Family Mortgage Insurance Fund

Abstract: Empirical models of mortgage default typically find that the influence of unemployment is negligible compared to other well known risk factors such as high borrower leverage or low borrower FICO scores. This is at odds with theory, which assigns a critical role to unemployment status in the decision to stop payment on a mortgage. We help reconcile this divergence by employing a novel empirical strategy involving simulated unemployment histories to measure the severity of attenuation bias in loan-level estimations of default risk due to a borrower becoming unemployed. Attenuation bias results because individual data on unemployment status is unobserved, requiring that a market-wide unemployment rate be used as a proxy. Attenuation is extreme, with our results suggesting that the use of an aggregate unemployment rate in lieu of actual borrower unemployment status results in default risk from a borrower becoming unemployed being underestimated by a factor of 100 or more. Correcting for this indicates unemployment is more powerful than other well-known factors such as extremely high leverage or extremely low FICO scores in predicting individual borrower default. Our simulated data indicate that adding the unemployment rate as a proxy for the missing borrower-specific unemployment indicator does not improve the accuracy of the estimated model over the specification without the proxy variable included.

Who Supplied My Cheese? Supply Chain Management in the Global Economy

Abstract: Today, with an Internet connection and some specialized skills, individuals and companies located in the remotest ends of the earth can compete and collaborate globally. This paradigm shift has occurred as technological forces, the fracturing of political barriers, and a relentless drive for greater efficiencies changed how we work and where we work, ushering in the age of globalization in ways never imagined previously. While many factors can influence macroeconomic variables—including better monetary and fiscal policies, freer trade, and fewer economic shocks—evidence is presented here that better global supply chain management and a more global economy should not be overlooked. On the one hand, these new practices have likely helped to keep inflation lower, reduce economic volatility, strengthen productivity growth, and improve living standards. On the other hand, these new practices cause greater uncertainties and calls for protectionist policies, as outsourcing and offshoring move work to lower cost providers with little regard for geopolitical boundaries.