Federal Reserve System

About: Federal Reserve System is a other organization based out in Washington D.C., District of Columbia, United States. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 2373 authors who have published 10301 publications receiving 511979 citations.

Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy

Abstract: We investigate the possible existence of asymmetries among Euro Area countries reactions to the European Central Bank monetary policy. Our analysis is based on a Structural Dynamic Factor model estimated on a large panel of Euro Area quarterly variables. We find that, despite the single monetary policy has had the effect of reducing heterogeneity in impulse responses, member states still react asymmetrically in terms of prices and unemployment, while no difference appears in terms of output. These results are the consequence of country specific structures, rather than of European Central Bank policies.

The Liquidity Effect and Long-Run Neutrality

Abstract: The propositions that monetary expansion lowers short-term nominal interest rates (the liquidity effect), and that monetary policy does not have long-run real effects (long-run neutrality), are widely accepted, yet to date the empirical evidence for both is mixed. We reconsider both propositions simultaneously in a structural VAR context, using a model of the market for bank reserves due to Bernanke and Mihov (forthcoming). We find little basis for rejecting either the liquidity effect or long-run neutrality. Our results are robust over the space of admissible model parameter values, and to the use of long-run rather than short-run identifying restrictions.

Estate Taxation, Entrepreneurship, and Wealth

Abstract: This paper studies the estate tax in a quantitative framework with business investment, borrowing constraints, estate transmission, and wealth inequality. We find that the estate tax has little effect on the saving and investment decisions of small businesses, but does distort the decisions of larger firms, thereby reducing aggregate output and savings. Removing such distortions by eliminating the estate tax does not necessarily imply that everyone would be better off. If other taxes were raised to reestablish fiscal balance, those at the top of the wealth distribution would experience a large welfare gain, but most of the population would lose. (JEL D31, E21, H2)

Term Structure Models and the Zero Bound: An Empirical Investigation of Japanese Yields

Abstract: When Japanese short-term bond yields were near their zero bound, yields on long-term bonds showed substantial fluctuation, and there was a strong positive relationship between the level of interest rates and yield volatilities/risk premia. We explore whether several families of dynamic term structure models that enforce a zero lower bound on short rates imply conditional distributions of Japanese bond yields consistent with these patterns. Multi-factor "shadow-rate" and quadratic-Gaussian models, evaluated at their maximum likelihood estimates, capture many features of the data. Furthermore, model-implied risk premiums track realized excess returns during extended periods of near-zero short rates. In contrast, the conditional distributions implied by non-negative affine models do not match thier sample counterparts, and standard Gaussian affine models generate implausibly large negative risk premiums.

What are the effects of fiscal policy shocks? A VAR-based comparative analysis

Abstract: In recent years VAR models have become the main econometric tool used to study the eects of …scal policy shocks. Yet, the literature has so far failed to provide ro- bust stylized facts and there is currently strong disagreement on even the qualitative response of key variables such as private consumption and employment to government spending shocks. We identify three aspects of existing empirical work which may be responsible for the absence of robust stylized facts: dierences in speci…cation of the reduced-form VAR model, dierences in identi…cation approaches and lack of compa- rability of the …scal policy experiments considered in the literature. In order to assess the importance of each of these aspects we estimate a common reduced-form VAR model using data for the U.S. economy. Our main result is that speci…cation issues and lack of comparability of policy experiments rather than dierences in identi…cation approaches explain the disagreement in the literature. In particular, all approaches yield the result that the response of private consumption to a spending shock follows a hump-shaped pattern and is signi…cantly positive in the medium run. Moreover, the results suggest that a spending increase stimulates the economy in the medium run irrespective of whether it is de…cit-…nanced or tax-…nanced. However, in the long run neither spending increases nor tax cuts have signi…cant output eects.