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Discussion Paper
Inequality and financial sector vulnerabilities
In recent decades, income and wealth inequality have risen notably in the United States and other countries around the world. Importantly, such rises in inequality have been shown to predict financial crises.
Working Paper
Sowing the Seeds of Financial Imbalances: The Role of Macroeconomic Performance
The seeds of financial imbalances are sown in times of buoyant economic growth. We study the link between macroeconomic performance and financial imbalances, focusing on the experience of the United States since the 1960s. We first follow a narrative approach to review historical episodes of significant financial imbalances and find that the onset of financial disturbances typically occurs when the economy is running hot. We then look for evidence of a statistical link between measures of macroeconomic conditions and financial imbalances. In our in-sample analysis, we find that strong ...
Discussion Paper
Evaluating Empirical Regularities in Variable Comovement in Stress Test Scenarios
Each year, the Federal Reserve Board conducts a stress test of large banks to assess their ability to withstand economic downturns while continuing to lend and meet their obligations. These stress tests include severely adverse scenarios which feature 13-quarter paths of key macroeconomic and financial variables that factor into the calculation of projected capital losses of the stress-tested institutions.
Working Paper
Cyber Vulnerabilities at Large US Financial Institutions and Their Third-Party Service Providers
This paper examines cyber vulnerabilities across the 100 largest US banks, non-bank financial institutions (NBFIs), and their third-party service providers. Our analysis, based on a proprietary cyber risk analytics model, shows NBFIs exhibit greater cyber vulnerabilities than banks, though banks face larger relative losses from routine incidents. We identify third-party service providers as a hidden cyber fault line in the financial system, often having greater vulnerabilities than the institutions they serve and creating systemic risks. Scenario analyses of catastrophic cyber events ...