Search Results
Discussion Paper
The Effects of Post-Crisis Banking Reforms
Crump, Richard K.; Santos, Joao A. C.
(2018-10-01)
The financial crisis of 2007-08 exposed many limitations of the regulatory architecture of the U.S. financial system. In an attempt to mitigate these limitations, there has been a wave of regulatory reforms in the post-crisis period, especially in the banking sector. These include tighter bank capital and liquidity rules; new resolution procedures for failed banks; the creation of a stand-alone consumer protection agency; greater transparency in money market funds; and a move to central clearing of derivatives, among other measures. As these reforms have been finalized and implemented, a ...
Liberty Street Economics
, Paper 20181001b
Report
On binscatter
Cattaneo, Matias D.; Crump, Richard K.; Farrell, Max H.; Feng , Yingjie
(2019-02-01)
Binscatter is a popular method for visualizing bivariate relationships and conducting informal specification testing. We study the properties of this method formally and develop enhanced visualization and econometric binscatter tools. These include estimating conditional means with optimal binning and quantifying uncertainty. We also highlight a methodological problem related to covariate adjustment that can yield incorrect conclusions. We revisit two applications using our methodology and find substantially different results relative to those obtained using prior informal binscatter methods. ...
Staff Reports
, Paper 881
Report
Beta-Sorted Portfolios
Cattaneo, Matias D.; Wang, Weining; Crump, Richard K.
(2023-07-01)
Beta-sorted portfolios—portfolios comprised of assets with similar covariation to selected risk factors— are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little is known of their econometric properties in contrast to comparable procedures such as two-pass regressions. We formally investigate the properties of beta-sorted portfolio returns by casting the procedure as a two-step nonparametric estimator with a nonparametric first step and a beta-adaptive portfolios construction. Our framework rationalizes the ...
Staff Reports
, Paper 1068
Report
Changing Risk-Return Profiles
Hundtofte , Sean; Giannone, Domenico; Crump, Richard K.; Everaert, Miro
(2018-06-01)
We show that realized volatility in market returns and financial sector stock returns have strong predictive content for the future distribution of market returns. This is a robust feature of the last century of U.S. data and, most importantly, can be exploited in real time. Current realized volatility has the most information content on the uncertainty of future returns, whereas it has only limited content about the location of the future return distribution. When volatility is low, the predicted distribution of returns is less dispersed and probabilistic forecasts are sharper.
Staff Reports
, Paper 850
Discussion Paper
Preparing for Takeoff? Professional Forecasters and the June 2013 FOMC Meeting
Moench, Emanuel; Eusepi, Stefano; Crump, Richard K.
(2013-09-09)
Following the June 18-19 Federal Open Market Committee (FOMC) meeting different measures of short-term interest rates increased notably. In the chart below, we plot two such measures: the two-year Treasury yield and the one-year overnight indexed swap (OIS) forward rate, one year in the future. The vertical line indicates the final day of the June FOMC meeting. To what extent did this rise in rates following the June FOMC meeting reflect a shift in the expected future path of the federal funds rate (FFR)? Market participants and policy makers often directly read the expected path from ...
Liberty Street Economics
, Paper 20130909
Discussion Paper
What Is Corporate Bond Market Distress?
Boyarchenko, Nina; Crump, Richard K.; Kovner, Anna; Shachar, Or
(2022-06-29)
Corporate bonds are a key source of funding for U.S. non-financial corporations and a key investment security for insurance companies, pension funds, and mutual funds. Distress in the corporate bond market can thus both impair access to credit for corporate borrowers and reduce investment opportunities for key financial sub-sectors. In a February 2021 Liberty Street Economics post, we introduced a unified measure of corporate bond market distress, the Corporate Bond Market Distress Index (CMDI), then followed up in early June 2022 with a look at how corporate bond market functioning evolved ...
Liberty Street Economics
, Paper 20220629
Report
A New Jackknife Variance Estimator for Time-Series and Panel Regressions
Lopez Gaffney, Ignacio; Crump, Richard K.; Gospodinov, Nikolay
(2024-10-01)
We introduce a new jackknife variance estimator for time-series and panel-data regressions. The novelty in our approach is that we first rotate the data using a particular choice of trigonometric basis functions. This rotation removes serial correlation in a broad class of time-series processes, including random walks, and enables the use of the conventional leave-one-out jackknife on the transformed space of the regressors and residuals. The procedure is tuning-parameter free and naturally adapts to the degree of persistence of the data. We prove the asymptotic validity of our variance ...
Staff Reports
, Paper 1133
Discussion Paper
How Large Are Inflation Revisions? The Difficulty of Monitoring Prices in Real Time
Xing, Roshie; Audoly, Richard; Melcangi, Davide; Crump, Richard K.; Almuzara, Martín
(2023-09-07)
With prices quickly going up after the COVID-19 pandemic, inflation releases have rarely been as present in the public debate as in recent years. However, since inflation estimates are frequently revised, how precise are the real-time data releases? In this Liberty Street Economics post, we investigate the size and nature of revisions to inflation. We find that inflation estimates for a given month can change substantially as subsequent data vintages are released. As an example, consider March 2009. With the economy contracting amid the Global Financial Crisis, the twelve-month inflation rate ...
Liberty Street Economics
, Paper 20230907
Discussion Paper
Skills Mismatch, Construction Workers and the Labor Market
Crump, Richard K.; Sahin, Aysegul
(2012-03-29)
Recessions and recoveries typically have been times of substantial reallocation in the economy and the labor market, and the current cycle does not appear to be an exception. The speed and smoothness of reallocation depend in part on the structure of the labor market, particularly the degree of mismatch between the characteristics of available workers and newly available jobs. Such mismatches could occur because of differences in skills between workers and jobs (skills mismatch) or because of differences in the location of the available jobs and available workers (geographic mismatch). In ...
Liberty Street Economics
, Paper 20120329
Report
Sparse Trend Estimation
Gospodinov, Nikolay; Crump, Richard K.; Wieman, Hunter
(2023-02-01)
The low-frequency movements of economic variables play a prominent role in policy analysis and decision-making. We develop a robust estimation approach for these slow-moving trend processes that is guided by a judicious choice of priors and characterized by sparsity. We present novel stylized facts from longer-run survey expectations that inform the structure of the estimation procedure. The general version of the proposed Bayesian estimator with a spike-and-slab prior accounts explicitly for cyclical dynamics. We show that it performs well in simulations against relevant benchmarks and ...
Staff Reports
, Paper 1049
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