Search Results
Journal Article
Stock market fundamentals
An explanation of the primary factors driving stock market fundamentals and an examination of how well those factors explain--or fail to explain--current market trends.
Working Paper
Estimating real and nominal term structures using Treasury yields, inflation, inflation forecasts, and inflation swap rates
This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is expected to revert, as well as four volatility factors that follow GARCH processes. We derive analytical solutions for the prices of nominal bonds, inflation-indexed bonds that have an indexation lag, the term structure of expected inflation, and inflation swap rates. The model parameters are estimated ...
Journal Article
The evolving loan sales market
An examination of the continuing strength of the loan sales market, documenting its growth during the latter half of the 1980s, its subsequent downturn in the early 1990s, the effect of merger and acquisition activity, and the impact of the 1990-91 recession, plus a discussion of how these issues relate to the rationales for federal deposit insurance and bank regulation.
Journal Article
The future of inflation
According to consumer price measures like the CPI, inflation has recently jumped up a notch. What those measures don?t tell us is whether the increase will persist. In this Commentary, we look at a measure that does. The measure incorporates data on past inflation rates, surveys of expected inflation, inflation swaps, and a variety of interest rates. It provides estimates of inflation, along with expected inflation and real interest rates. A look at the measure?s estimates suggests that the recent increases in inflation are likely to be temporary.
Working Paper
The sources and nature of long-term memory in the business cycle
This paper examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. We develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. We then derive the relation between properties of fractionally integrated macroeconomic time series and those of microeconomic data and discuss how fiscal policy may alter the stochastic behavior of the former. To implement these results empirically, we employ a ...
Working Paper
Sticky prices, money, and business fluctuations
Can nominal contracts create monetary nonneutrality if they arise endogenously in general equilibrium? Yes, if (1) agents have complete information about the money stock and (2) shocks to the system are purely redistributive and private information, precluding conventional insurance markets. Without contracts, money is neutral toward aggregate quantities. However, risk-sharing between suppliers and demanders creates an incentive for both parties to use nominal contracts. in particular, if an increase in the money growth rate signals a rise in the dispersion of shocks to demanders' wealth, ...
Journal Article
Combining bank supervision and monetary policy
In the United States, the Federal Reserve has responsibility for both monetary policy and bank supervision. Other countries separate these functions to varying degrees. What lies behind this global diversity? Should a central bank be charged with conducting monetary policy and regulating banks, or does it make more sense ? both economic and political ? to keep these activities separate? The answer is not a simple yes or no. Rather, it appears that the right choice depends on a country?s prevailing conditions, including its financial system, its political environment, and the preferences of ...
Working Paper
Pricing kernels, inflation, and the term structure of interest rates
We estimate a discrete-time multivariate pricing kernel for the term structure of interest rates, using both yields and inflation rates. This gives a separate estimate of the real kernel and the nominal kernel, taking into account a relatively sophisticated dynamical structure and mutual interaction between the real and nominal side of the economy. Along with obtaining an estimate of the real term structure, we use the estimates to obtain a new perspective on how real and nominal influences interact to produce the observed term structure.
Journal Article
Does the yield curve signal recession?
Experience has taught economic forecasters to expect a recession when the yield on short-term Treasury securities rises above the yield on longer-term securities - a situation known as a yield-curve inversion. But some economists suspect the yield curve might not be as reliable a predictor of output growth as it used to be.