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.

Mismeasurement in the Consumer Price Index: An Evaluation

Abstract: A number of analysts have claimed recently that the Consumer Price Index overstates the annual increase in the cost of living. This paper develops a framework for studying measurement problems in the CPI and systematically analyzes the available evidence concerning the magnitude of these problems. The evidence suggests that the bias is centered on 1.0 percentage point per year. To take into account uncertainty about the extent of the bias, the paper presents a probability distribution for the bias rather than a point estimate or range. It is estimated that there is a 10% chance that the bias is less than 0.6 percentage point and a 10% chance that it is greater than 1.5 percentage points per year. CPI methodology overstates the price increase for medical procedures that are subject to technological improvement. To illustrate this point and to show how better to measure medical care prices, the paper presents a prototypical price index for cataract surgery. This index grows much more slowly than a price ind...

Financial Intermediation, Asset Prices, and Macroeconomic Dynamics

Abstract: We document that financial intermediary balance sheet aggregates contain strong predictive power for excess returns on a broad set of equity, corporate, and Treasury bond portfolios. Our results provide support to the hypothesis that financial intermediary balance sheet quantities matter in the determination of risk premia. We also explore the extent to which the intermediary variables that predict excess returns impact real economic activity. Our findings point to the importance of financing frictions in macroeconomic dynamics and asset pricing.

Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison

Abstract: This paper examines the effects of unconventional monetary policy by the Federal Reserve, Bank of England, European Central Bank and Bank of Japan on bond yields, stock prices and exchange rates. We use common methodologies for the four central banks, with daily and intradaily asset price data. We emphasize the use of intradaily data to identify the causal effect of monetary policy surprises. We find that these policies are effective in easing financial conditions when policy rates are stuck at the zero lower bound, apparently largely by reducing term premia.

Measuring treasury market liquidity

Abstract: This paper examines a comprehensive set of liquidity measures for the U.S. Treasury market. The measures are analyzed relative to one another, across securities, and over time. I find highly significant price impact coefficients, such that a simple model that explains price changes with net order flow produces an R² statistic above 30 percent for the two-year note. The price impact coefficients are highly correlated with bid-ask spreads and with episodes of reported poor liquidity (such as the fall 1998 financial markets turmoil). Quote and trade sizes correlate modestly with these episodes and with the other liquidity measures, as do yield spreads between on-the-run and off-the-run securities. In contrast, trading volume and trading frequency are only weakly correlated with these other measures, suggesting that they are poor liquidity proxies. The various measures are positively correlated across securities, almost without exception, especially for Treasury notes.