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Author:Bi, Huixin 

Journal Article
Understanding the Recent Rise in Municipal Bond Yields

In late March, investors sold off municipal bonds at a rapid pace, depressing municipal bond prices and driving up their yields relative to U.S. Treasuries. We find that this initial investor run on the municipal bond market was likely due to increased liquidity demand rather than credit concerns, making the Federal Reserve’s early actions to relieve liquidity stress effective. Going forward, however, municipal bond prices will likely reflect increased credit concerns.
Economic Bulletin , Issue May 27, 2020 , Pages 4

Journal Article
Implementation Delays in Pension Retrenchment Reforms

As the global population ages, public spending on pensions has increased dramatically. As a result, policymakers have increasingly focused on pension retrenchment reforms to keep their systems solvent. These reforms usually involve long implementation delays to provide retirees time to adjust their retirement plans. However, long implementation delays also slow the rollback of governments? pension spending, potentially raising long-run fiscal risks. {{p}} {{p}} Huixin Bi, Kevin Hunt, and Sarah Zubairy collect a new data set that tracks implementation delays during pension retrenchment reforms ...
Economic Review , Issue Q II , Pages 53-70

Working Paper
Debt-dependent effects of fiscal expansions

Economists often postulate that fiscal expansions are less stimulative when government debt is high than when it is low. Empirical evidence, however, is ambiguous. Using a nonlinear neoclassical growth model, we show that the difference in government spending effects between high- and low-debt environments depends on the wealth effect on labor supply and on whether the government uses taxes or spending to retire debt. Because of interrelated state variables, structural VAR estimations conditioning on debt alone can fail to isolate debt-dependent effects. Also, uncertainty on when the ...
Research Working Paper , Paper RWP 16-4

Working Paper
Sovereign Default and Monetary Policy Tradeoffs

The paper is organized around the following question: when the economy moves from a debt-GDP level where the probability of default is nil to a higher level?the ?fiscal limit?? where the default probability is non-negligible, how do the effects of routine monetary operations designed to achieve macroeconomic stabilization change? We find that the specification of the monetary policy rule plays a critical role. Consider a central bank that targets the risky rate. When the economy is near its fiscal limit, a transitory monetary policy contraction leads to a sustained rise in inflation, even ...
Research Working Paper , Paper RWP 18-2

Journal Article
Fiscal Sustainability: A Cross-Country Analysis

Since the global financial crisis, public debt has risen rapidly in many advanced and emerging market economies. Every country faces a fiscal limit at which taxes and spending can no longer adjust to stabilize debt. But quantifying fiscal limits can be challenging. Different countries have different capacities to service their debt. Moreover, two countries with similar debt levels may face drastically different default risks. {{p}} Huixin Bi introduces a new, country-specific framework of fiscal limits to quantify the maximum level of debt a government can sustain given its economic and ...
Economic Review , Issue Q IV , Pages 5-35

Working Paper
Sovereign Risk and Fiscal Information: A Look at the U.S. State Default of the 1840s

This paper examines how newspaper reporting affects government bond prices during the U.S. state default of the 1840s. Using unsupervised machine learning algorithms, the paper first constructs novel ``fiscal information indices'' for state governments based on U.S. newspapers at the time. The impact of the indices on government bond prices varied over time. Before the crisis, the entry of new western states into the bond market spurred competition: more state-specific fiscal news imposed downward pressure on bond prices for established states in the market. During the crisis, more ...
Research Working Paper , Paper RWP 19-4

Journal Article
The Fiscal Stance of U.S. States

We study the fiscal stance of U.S. states through the lens of state reserve funds. We find that the overall rainy day and unemployment insurance funds have largely recovered since the start of the Great Recession but at an uneven pace across states. More importantly, we find that states are better prepared to meet their own budgetary shortfalls in the event of a downturn than the shortfalls of households.
Macro Bulletin

Journal Article
Examining the Recent Shift in State and Local Pension Plans to Alternative Investments

State and local pension plans have increasingly turned to alternative investments in recent years. The authors found that this shift appears to be across the board; underfunding only partially explains this shift. In addition, they found that switching to alternative investments does not necessarily increase the volatility of returns.
Macro Bulletin

Journal Article
Rainy Day Funds Have Grown as State Tax Revenue Strengthens

Many state governments have seen solid growth in their tax revenues over the past couple of years. We show that recent changes in the federal tax code contributed to the uptick in state revenues. In addition, we show that states have used the recent revenue windfall to build up rainy day funds at a much faster pace than they did before the Great Recession.
Economic Bulletin

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