The Financial Market Effects of Unwinding the Federal Reserve’s Balance Sheet
By A. Lee Smith and Victor J. Valcarcel
RWP 20-23, December 2020

The gradual unwinding of the Federal Reserve’s balance sheet from 2017 to 2019 tightened financial conditions, though this tightening did not simply manifest as a reversal of the effects of the original balance sheet expansion.

Minimum Wage Increases and Vacancies
By Marianna Kudlyak, Murat Tasci and Didem Tuzemen
RWP 20-22, December 2020

Minimum wage increases during the 2005–18 period led to declines in vacancy postings among occupations with wages at or near the minimum wage.

Market Integration and Bank Risk-Taking
By Kaniska Dam and Rajdeep Sengupta
RWP 20-21, December 2020

Increased bank competition from market integration affects banks’ risk-taking behavior in ways beyond a simple increase in the number of competitor banks.

Mining for Oil Forecasts
By Charles W. Calomiris, Nida Cakir Melek and Harry Mamaysky
RWP 20-20, December 2020

Forecasting oil market outcomes remains a challenge even with novel text-based analysis.

Flight to Liquidity or Safety? Recent Evidence from the Municipal Bond Market
By Huixin Bi and W. Blake Marsh
RWP 20-19, December 2020

Policy interventions during the COVID-19 pandemic stabilized the municipal bond market and shifted the pricing of localized credit risks from short-maturity bonds to longer-dated bonds.

Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in the United States and Canada
By Fumiko Hayashi, Marie-Hélène Felt, Joanna Stavins and Angelika Welte
RWP 20-18, December 2020

Low-income consumers in the United States and Canada pay the highest net transaction costs as a percentage of their purchases.

Why Does Structural Change Accelerate in Recessions? The Credit Reallocation Channel
By Cooper Howes
RWP 20-17, November 2020

The loss of credit during recessions hit the U.S. manufacturing sector disproportionately, accelerating its long-term decline in its share of economic activity.

Money, Growth, and Welfare in a Schumpeterian Model with the Spirit of Capitalism
By Qinchun He, Yulei Luo, Jun Nie and Heng-fu Zou
RWP 20-16, October 2020

A new model incorporating the spirit of capitalism shows higher nominal interest rates could promote economic growth in the long run.

Death of Coal and Breath of Life: The Effect of Power Plant Closure on Local Air Quality
By Jason P. Brown and Colton Tousey
RWP 20-15, October 2020

The closure of a coal-fired power plant reduces local air pollution and mortality probabilities with an estimated local benefit of $1 to $4 billion.

Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements
By Taeyoung Doh, Dongho Song and Shu-Kuei Yang
RWP 20-14, October 2020

A new text-analysis method finds that the wording of FOMC statements can have significant effects on financial markets.

Household Financial Distress and the Burden of “Aggregate” Shocks
By Kartik Athreya, Ryan Mather, José Mustre-del-Río and Juan M. Sánchez
RWP 20-13, September 2020

Accounting for household financial distress helps explain large regional differences in spending responses during recessions.

Fiscal Implications of Interest Rate Normalization in the United States
By Huixin Bi, Wenyi Shen and Shu-Chun S. Yang
RWP 20-12, September 2020

Interest rate normalization is unlikely to pose an immediate threat to U.S. government debt sustainability at the current level of 90 to 100 percent of GDP.

Did the Federal Reserve Break the Phillips Curve? Theory and Evidence of Anchoring Inflation Expectations
By Brent Bundick and A. Lee Smith
RWP 20-11, September 2020

Communicating a longer-run inflation objective better anchored inflation expectations in the United States, which may explain the weaker relationship between inflation and unemployment in recent years.

Payments Crises and Consequences
By Qian Chen, Christoffer Koch, Gary Richardson and Padma Sharma
RWP 20-10, September 2020

Novel econometric analysis using U.S. state-level data shows that payments suspensions during banking crises lengthen and deepen downturns.

Forecasting U.S. Economic Growth in Downturns Using Cross-Country Data
By Yifei Lyu, Jun Nie and Shu-Kuei X. Yang
RWP 20-09, August 2020

Incorporating cross-country data helps forecast U.S. GDP growth in economic downturns.

Capital Flows in Risky Times: Risk-On / Risk-Off and Emerging Market Tail Risk
By Anusha Chari, Karlye Dilts Stedman and Christian Lundblad
RWP 20-08, July 2020

A sudden decrease in the risk appetite of global investors increases the probability of uncommonly large bond outflows from emerging markets.

Unemployment Insurance during a Pandemic
By Lei Fang, Jun Nie and Zoe Xie
RWP 20-07, August 2020

Recent expansions of unemployment insurance could raise unemployment by 3.7 percentage points but reduce cumulative deaths by 4.7 percent.

Public Pension Reforms and Fiscal Foresight: Narrative Evidence and Aggregate Implications
By Huixin Bi and Sarah Zubairy
RWP 20-06, July 2020

News about future pension retrenchments leads to a decline in the labor force participation rate for people close to retirement and an increase in old-age pension spending.

Housing Market Value Impairment from Future Sea-level Rise Inundation
By David Rodziewicz, Christopher J. Amante, Jacob Dice and Eugene Wahl
RWP 20-05, July 2020

Sea level rise will pose increased risks to U.S. coastal real estate markets in the coming decades, though the direct economic costs depend on the severity and uncertainty within climate-change scenarios.

The Unintended Consequences of Employer Credit Check Bans for Labor Markets
By Kristle Cortés, Andrew Glover and Murat Tasci
RWP 20-04, July 2020

Job vacancies decline significantly when laws forbid employers from using credit reports in the hiring process.

Health versus Wealth: On the Distributional Effects of Controlling a Pandemic
By Andrew Glover, Jonathan Heathcote, Dirk Krueger and José-Víctor Ríos-Rull
RWP 20-03, May 2020

A lockdown policy that mitigates the effects of COVID-19 for both older and younger people would be less extensive than in April but remain in place through the summer.

Examining the Relationships between Land Values and Credit Availability
By Ana Cláudia Sant’Anna, Cortney Cowley and Ani Katchova
RWP 20-02, May 2020

Considering factors that represent credit availability at agricultural banks together, rather than separately, can better capture their effects on farmland values.

Should We Be Puzzled by Forward Guidance?
By Brent Bundick and A. Lee Smith
RWP 20-01, April 2020

Forward guidance that lowers the expected path of policy continues to stimulate economic activity and prices.