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Author:Dilts Stedman, Karlye 

Journal Article
Unconventional Monetary Policy and International Interest Rate Spillovers

After the 2008 global financial crisis, advanced economies turned to unconventional monetary policies to provide additional monetary stimulus while short-term interest rates were constrained by their effective lower bound. However, the speed of economic recovery differed markedly among these economies, leading to differences in the timing and intensity of unconventional monetary policies across central banks. These differences may have generated “spillover effects” that undermined policy tightening in the United States after 2015.Karlye Dilts Stedman assesses whether monetary policies ...
Economic Review , Volume 105 , Issue no.2 , Pages 47-60

Journal Article
When Normalizing Monetary Policy, the Order of Operations Matters

As economic conditions in the United States continue to improve, the FOMC may consider normalizing monetary policy. Whether the FOMC reduces the balance sheet before raising the federal funds rate (or vice versa) may affect the shape of the yield curve, with consequences for financial institutions. Drawing lessons from the previous normalization in 2015–19, we conclude that normalizing the balance sheet before raising the funds rate might forestall yield curve inversion and, in turn, support economic stability.
Economic Bulletin , Issue October 14, 2021 , Pages 4

Journal Article
The G-Spread Suggests Federal Reserve Restored Calm to Treasury Markets

In March, the coronavirus pandemic led to a sell-off in Treasury markets and a subsequent period of financial stress. I use one measure of Treasury market pressure, the G-spread, to gauge how liquidity in Treasury markets changed in response to the pandemic and the Federal Reserve’s interventions. I find that timely Federal Reserve interventions restored calm to the Treasury market, and that these interventions stand out in speed and scale compared with interventions in the early days of the 2007–08 financial crisis.
Economic Bulletin

Working Paper
Capital Flows in Risky Times: Risk-On / Risk-Off and Emerging Market Tail Risk

This paper characterizes the implications of risk-on/risk-off shocks for emerging market capital flows and returns. We document that these shocks have important implications not only for the median of emerging markets flows and returns but also for the left tail. Further, while there are some differences in the effects across bond vs. equity markets and flows vs. asset returns, the effects associated with the worst realizations are generally larger than on the median realization. We apply our methodology to the COVID-19 shock to examine the pattern of flow and return realizations: the sizable ...
Research Working Paper , Paper RWP 20-08

Working Paper
Spillovers at the Extremes: The Macroprudential Stance and Vulnerability to the Global Financial Cycle

Evidence suggests that macroprudential policy has small and insignificant effects on the volume of portfolio flows. We show, however, that these minor effects mask very different relationships across the global financial cycle. A tighter ex-ante macroprudential stance amplifies the impact of global risk shocks on bond and equity flows—increasing outflows by significantly more during risk-off episodes and increasing inflows significantly more during risk on episodes. These amplification effects are more prominent at the “extremes,” especially for extreme risk-off periods, and are larger ...
Research Working Paper , Paper RWP 21-16

Working Paper
Unconventional Monetary Policy, (A)Synchronicity and the Yield Curve

This paper examines international spillovers from unconventional monetary policy between the United States, the euro area, the United Kingdom and Japan, and assesses the influence of asynchronous policy normalization on the slope of the yield curve. Using high frequency futures data to identify monetary policy surprises and controlling for contemporaneous news, I find that spillovers increase during periods of unconventional monetary policy and strengthen during asynchronous policy normalization. Local projections suggest persistent spillovers from the Federal Reserve, whereas other ...
Research Working Paper , Paper RWP 19-9

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