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Journal Article
Household financial stability: who suffered the most from the crisis?
The financial crisis and ensuing recession took a toll on just about everybody?s household wealth. Not surprisingly, the pain wasn?t evenly distributed. Those groups that are usually the most vulnerable in our society?young and middle-aged minority households?suffered the most, percentage-wise.
Journal Article
Asset Diversification and Low Debt Are the Keys to Building and Maintaining Wealth
Greatly expanded access to home mortgages during the 1980s, 1990s, and 2000s appeared to make the American dream a reality for millions of families. Homeownership was attainable by many who, for the first time, were able to take out a mortgage with an extremely low or no down payment ? even if they had a blemished credit history or none at all. For those with access to their accumulated home equity through mortgage refinancing or other home-secured borrowing, as well as to other sources of credit, lack of available cash no longer meant that they had to delay making routine purchases, buying a ...
Discussion Paper
Who pays for credit cards?
We model side payments in a competitive credit-card market. If competitive retailers charge a single (higher) price to cover the cost of accepting cards, banks must subsidize convenience users to prevent them from defecting to merchants who do not accept cards. The side payments will be financed by card users who roll over balances at interest if their subjective discount rates are high enough. Despite the feasibility of cross subsidies among cardholders, price discrimination without side payments is Pareto preferred because of the costliness of the card network--unless banks have other ...
Journal Article
Price stability and the efficiency of the retail payments system
Journal Article
The current P/E ratio: higher than you think
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
Measuring Household Distress and Potential Policy Impacts
Government policies such as income support and debt relief may help explain low levels of household financial distress, but outcomes are uncertain once assistance ends.
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 ...
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 ...