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With few firms advising life insurers, is financial stability at risk?
Despite asset managers playing an increasingly pivotal role in investment decisions—leading to more similar portfolios—analysis of life insurance firms and their advisers reveals a relatively small threat to financial stability.
Supplier networks transmit Fed rate moves through economy
An important way monetary policy affects the economy is through household spending. When the Federal Reserve increases or lowers interest rates, the effects do not end with just the businesses most exposed to the resulting changes in household spending.
Supplier networks transmit Fed rate moves through economy
An important way monetary policy affects the economy is through household spending. When the Federal Reserve increases or lowers interest rates, the effects do not end with just the businesses most exposed to the resulting changes in household spending.
Using Inflation Expectations to Boost Consumer Spending Poses Policy Risks
Communication that raises inflation expectations has been suggested as a policy tool for central banks. Our research suggests that this policy tool has some limitations that central banks must manage when implementing it.
Life Insurers’ Preference for Familiar Bond Issuers Limits COVID-19 Shock Transmission
Despite regulations that encourage diversification and informational symmetry among buyers, insurance companies tend to lend to their current borrowers. This bondholder–issuer relationship moderates the effect of transitory economic shocks such as those associated with the onset of COVID-19.
Firm Debt Structure Can Mitigate Impact of Uncertainty Shock
We found evidence that the way a firm structures its debt can mitigate a significant amount of the negative effects from uncertainty shocks, especially for zombie firms.
Policy impact of unexpected Fed rate movements blurred by key information cues
Unexpected Federal Reserve monetary policy moves can profoundly affect market participants, investors and the economy. The impact of policy stems not only from its direct effects—the traditional focus for economists—but also from the new information revealed about the Fed’s economic outlook.
Trade liberalization reduces entrepreneurship rate
Our research suggests that if the world becomes increasingly interconnected through international trade, entrepreneurship rates will decrease over time.
Evolving leveraged loan covenants may pose novel transmission risk
An evolving change affecting the expanding, highly leveraged corporate loan sector may impact how the economy responds to adverse shocks.
Report
SNAP: should we be worried about a sudden, sharp rise from low, long-term rates?
Despite the expectations of FOMC and market participants at the beginning of 2014 to the contrary, the yield on 10-year U.S. Treasury debt declined by about 50 basis points from 2.72 percent at the beginning of 2014 to 2.17 percent as of December 22, 2014. This raises the worrisome possibility that we might observe a sudden change in longer-term yields once the Federal Reserve announces an increase in short-term rates. In other words, longer-term rates could snap, very much as they did in the summer of 2013 after the tapering announcement, once the Fed announces its first short-term rate hike ...