Search Results
Journal Article
The Asian crisis and the exposure of large U.S. firms
A deep financial and economic crisis ravaged many Asian nations during 1997 and 1998. In this article, William Emmons and Frank Schmid examine the impact of the crisis on corporate risk for a subset of large U.S. firms that are included in the S&P 100 stock-market index. They find that the Asian crisis changed many of these firms' exposure to stock-market movements-that is, their "betas" or sensitivity to stock-market risk. In particular, the extent of a firm's sales exposure to Asia appears to be an important link through which the crisis affected beta. This effect is amplified by ...
Journal Article
Quality spreads in the bond market
Journal Article
Credit unions and the common bond
A distinguishing feature of credit unions is the legal requirement that members share a common bond. This organizing principle recently became the focus of national attention when the Supreme Court and the U.S. Congress took opposite sides in a controversy regarding the number of common bonds (fields of membership) that could coexist within a single credit union. In this article, Emmons and Schmid develop and simulate a model of credit-union formation and consolidation to examine the effects of common-bond restrictions on the performance of credit unions. The performance measures are ...
Journal Article
Gamblers fallacy?
Journal Article
Membership structure, competition, and occupational credit union deposit rates
How do occupational credit unions set deposit rates? This article shows that the answer to this question will depend on (i) who actually makes business decisions in credit unions (who is in control), and (ii) whether local deposit market competition is important. It is not obvious who controls occupational credit unions. If the sponsor (the employer) is in control, then loans and deposits are priced to maximize the surplus received by all of the credit union?s current and potential members (those eligible to join). If members are in control, then a group of members with a majority can ...
Journal Article
Is the current account deficit weighing on the dollar?
Working Paper
Conjectural guarantees loom large: evidence from the stock returns of Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs) with publicly traded equity. Although these companies hold government issued charters, their securities are not legally backed by the full faith and credit of the United States government. Yet, investors and rating agencies seem to believe that the U.S. Government would "bail out" Fannie or Freddie if they became distressed. We provide evidence of a conjectural guarantee in GSE stock returns. Stock that contains an option on returning the shares at a given price to the issuer -- the government, in this case -- show ...
Working Paper
When for-profits and not-for-profits compete: theory and empirical evidence from retail banking
We model competition in local deposit markets between for-profit and not-for-profit financial institutions. For-profit retail banks may offer a superior bundle of financial services, but not-for-profit (occupational) credit unions enjoy sponsor subsidies that allow them to capture a share of the local market. The model predicts that greater participation in credit unions in a given county will be associated with higher levels of retail-bank concentration. We find empirical evidence of this association. The ability of credit unions to affect local banking market structure supports the ...
Working Paper
Monetary policy actions and the incentive to invest
The ability of monetary policy actions to affect the private sector's incentive to invest in fixed capital is hotly debated. Whereas a downward shift in the yield curve increases the present value of expected cash flows and should spur investment, lower short term interest rates make delay more desirable. These influences work against each other so the net effect of stimulative monetary policy actions could go either way. This article outlines a simple investment decision rule that captures both effects of changing interest rates. It also clarifies why monetary policy actions that shift the ...
Working Paper
Do productivity growth, budget deficits, and monetary policy actions affect real interest rates? evidence from macroeconomic announcement data
Real-business-cycle models suggest that an increase in the rate of productivity growth increases the real rate of interest. But economic theory is ambiguous when it comes to the effect of government budget deficits on the real rate of interest. Similarly, little is known about the effect of monetary policy actions on real long-term interest rates. We investigate these questions empirically, using macroeconomic announcement data. We find that the real long-term rate of interest responds positively to surprises in labor productivity growth. However, we do not reject the hypothesis that the real ...