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.

Social Capital and Political Accountability

Abstract: In this paper, we investigate a channel through which social (or civic) capital may improve economic wellbeing and the functioning of institutions: political accountability. The main idea is that voters who share values and beliefs that foster cooperation are more likely to base their vote on criteria of social welfare rather than narrow personal interest. We frame this intuition into a simple model of political accountability with retrospective voting and heterogeneous endowments of civic attitudes. We then take this conjecture to the data using information on the Italian members of Parliament in the postwar period (1948–2001). The empirical evidence shows that the electoral punishment of political misbehavior is considerably larger in electoral districts with high social capital, where political misbehavior refers to receiving a request of criminal prosecution or shirking in parliamentary activity, and social capital is measured by blood donation (or by non-profit organizations and electoral turnout). Accordingly, political misbehaviors are less frequent in electoral districts where civic attitudes are widespread.

Credit Risk in Private Debt Portfolios

Abstract: Default, loss severity, and average loss rates for a large sample of privately placed bonds are presented and compared with loss experience for publicly issued bonds. The chance of very large portfolio losses is estimated and some determinants of such losses are analyzed. Results show ex ante riskier classes of private debt perform better on average than public debt. Both diversification and the riskiness of individual portfolio assets influence the bad tail of the portfolio loss distribution. Private placements are similar to corporate loans in that both are monitored private debt. The results are thus relevant to management and securitization of private debt portfolios generally. MORE THAN HALF OF NONFINANCIAL corporate debt finance is iss-ued privately, and decisions of the financial intermediaries that invest in such debt depend importantly on its credit risk. Regulators of such institutions are similarly attentive to portfolio credit risk, and it is an important consideration in the design of securitizations of pools of private debt. In spite of its importance, little is known empirically about private debt credit risk, especially ex ante risk as a function of portfolio characteristics. Many studies have examined the loan portfolio performance of banks, thrifts, and insurance companies, but the ex ante risk characteristics of the portfo

Small Business Loan Turndowns, Personal Wealth and Discrimination

Abstract: Extant literature finds large differences in loan denials between small firms owned by whites and other demographic groups. However, none of this literature focuses on the business owner's personal wealth, despite it being a potentially important part of the small business lending decision. We use newly available data to examine the role of personal wealth on small business loan turndowns, given the firm applied for credit, across demographic groups. We also provide a quantitative assessment of the impact of differences in personal wealth, as well as in the endowments of other key variables in the lending decision, on the differences in denial rates across race. We find that greater personal wealth is associated with a lower probability of loan denial. But personal wealth plays only a modest role in explaining the differences in African American- and white-owned denial rates. Differences in credit history explain most of the endowment effect between African Americans and whites. In contrast, variation in personal wealth accounts for a more substantial part of the difference in denial rates between Hispanic-/Asian-owned businesses and white-owned firms. However, even after controlling for personal wealth, large differences in denial rates across demographic groups remain.

Is there a fiscal free lunch in a liquidity trap

Abstract: This paper uses a DSGE model to examine the eects of an expansion in government spending in a liquidity trap. The spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent, and …scal stimulus can be rapidly implemented. Moreover, the budgetary costs may be minimal as the large response of output boosts tax revenues, allowing for something close to a "…scal free lunch." However, we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending,and/or if the liquidity trap lasts less than two years. In addition, because the marginal impact of …scal expansion decreases in the scale of the outlay, it is crucial to distinguish between average and marginal multipliers.