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Working Paper
Forecasting with the yield curve; level, slope, and output 1875-1997
Using the yield curve helps forecast real growth over the period 1875 to 1997. Using both the level and slope of the curve improves forecasts more than using either variable alone. Forecast performance changes over time and depends somewhat on whether recursive or rolling out of sample regressions are used.
Working Paper
U.S. intervention during the Bretton Wood Era:1962-1973
By the early 1960s, outstanding U.S. dollar liabilities began to exceed the U.S. gold stock, suggesting that the United States could not completely maintain its pledge to convert dollars into gold at the official price. This raised uncertainty about the Bretton Woods parity grid, and speculation seemed to grow. In response, the Federal Reserve instituted a series of swap lines to provide central banks with cover for unwanted, but temporary accumulations of dollars and to provide foreign central banks with dollar funds to finance their own interventions. The Treasury also began intervening in ...
Working Paper
Aggregate price shocks and financial instability: a historical analysis
This paper presents empirical evidence on the hypothesis that aggregate price disturbances cause or worsen financial distress. We construct two annual indexes of financial conditions for the United States covering 1790-1997, and estimate the effect of aggregate price shocks on each index using a dynamic ordered probit model. We find that price level shocks contributed to financial instability during 1790-1933, and that inflation rate shocks contributed to financial instability during 1980-97. Our research indicates that the size of the aggregate price shocks needed to qualitatively alter ...
Working Paper
Money Matters: Broad Divisia Money and the Recovery of Nominal GDP from the COVID-19 Recession
The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based Divisia aggregates can be modeled and that their growth rates provide useful information for future nominal GDP growth.Unlike M2 and Divisia-M2, whose velocities do not internalize shifts in liabilities across commercial and shadow banks, the velocities of broader Divisia monetary aggregates are more ...
Journal Article
The lender of last resort : alternative views and historical experience
Four views on the proper role of the lender of last resort are defined. Historical evidence is given on the causes of banking panics in the U.S. and other countries and the roles lenders of last resort played in resolving them.
Journal Article
The classical gold standard: some lessons for today
Working Paper
When do stock market booms occur? the macroeconomic and policy environments of 20th century booms
This paper studies the macroeconomic conditions and policy environments under which stock market booms occurred among ten developed countries during the 20th Century. We find that booms tended to occur during periods of above-average growth of real output, and below-average and falling inflation. We also find that booms often ended within a few months of an increase in inflation and monetary policy tightening. The evidence suggests that booms reflect both real macroeconomic phenomena and monetary policy, as well as the extant regulatory environment.
Working Paper
How New Fed Corporate Bond Programs Dampened the Financial Accelerator in the COVID-19 Recession
In the financial crisis and recession induced by the COVID-19 pandemic, many investment-grade firms became unable to borrow from securities markets. In response, the Fed not only reopened its commercial paper funding facility but also announced it would purchase newly issued and seasoned bonds of corporations rated as investment grade before the COVID pandemic. A careful splicing of different unemployment rate series enables us to assess the effectiveness of recent Fed interventions in these long-term debt markets over long sample periods, spanning the Great Depression, Great Recession and ...
Working Paper
Deep recessions, fast recoveries, and financial crises: evidence from the American record
Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? Moreover, does it matter if the recession is associated with a housing bust? We look at the American historical experience in an attempt to answer these questions. The answers depend on the definition of a financial crisis and on how much of the recovery is considered. But in general recessions associated with financial crises are generally followed by rapid recoveries. We find three exceptions to this pattern: the recovery from the Great Contraction in the 1930s; the ...
Journal Article
A brief history of central banks
One of the world?s foremost economic historians explains the forces behind the development of modern central banks, providing insight into their role in the financial system and the economy.