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.

Stressed, not Frozen: The Federal Funds Market in the Financial Crisis

Abstract: We examine the importance of liquidity hoarding and counterparty risk in the U.S. overnight interbank market during the financial crisis of 2008. Our findings suggest that counterparty risk plays a larger role than does liquidity hoarding: the day after Lehman Brothers' bankruptcy, loan terms become more sensitive to borrower characteristics. In particular, poorly performing large banks see an increase in spreads of 25 basis points, but are borrowing 1% less, on average. Worse performing banks do not hoard liquidity. While the interbank market does not freeze entirely, it does not seem to expand to meet latent demand.

Monetary policy alternatives at the zero bound: an empirical assessment

Abstract: The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on \"non-standard\" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate \"no-arbitrage\" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset.

Now-Casting and the Real-Time Data Flow

Abstract: The term now-casting is a contraction for now and forecasting and has been used for a long-time in meteorology and recently also in economics. In this paper we survey recent developments in economic now-casting with special focus on those models that formalize key features of how market participants and policy makers read macroeconomic data releases in real time, which involves: monitoring many data, forming expectations about them and revising the assessment on the state of the economy whenever realizations diverge sizeably from those expectations. (Prepared for G. Elliott and A. Timmermann, eds., Handbook of Economic Forecasting, Volume 2, Elsevier-North Holland)