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Author:Yoldas, Emre 

Working Paper
What does financial volatility tell us about macroeconomic fluctuations?

This paper provides an extensive analysis of the predictive ability of financial volatility measures for economic activity. We construct monthly measures of stock and bond market volatility from daily returns and model volatility as composed of a long-run component that is common across all series, and a set of idiosyncratic short-run components. Based on powerful in-sample predictive ability tests, we find that the stock volatility measures and the common factor significantly improve short-term forecasts of conventional financial indicators. A real-time out of sample assessment yields a ...
Finance and Economics Discussion Series , Paper 2013-61

Working Paper
Effects of Changing Monetary and Regulatory Policy on Overnight Money Markets

Money markets have been operating under a new monetary policy implementation framework since the Federal Reserve started paying interest on bank reserves in late 2008. The regulatory environment has also evolved substantially over this period. We develop and test hypotheses regarding the effects of changes in the monetary and regulatory policy on dynamics of key overnight funding markets. We find that the federal funds rate continued to provide an anchor, albeit weaker, for unsecured funding rates amid substantial decline in activity and changing composition of trades, while its transmission ...
Finance and Economics Discussion Series , Paper 2016-084

Working Paper
Non-linearity in the Inflation-Growth Relationship in Developing Economies: Evidence from a Semiparametric Panel Model

Using data on developing economies, we estimate a flexible semiparametric panel data model that incorporates potentially nonlinear effects of inflation on economic growth. We find that inflation is associated with significantly lower growth only after it reaches about 12 percent, which is notably lower than the comparable estimate obtained from a threshold model. Our results also suggest that models with restrictive functional form assumptions tend to underestimate marginal effects of inflation on economic growth. We also document significant variation in the effect of inflation on growth ...
Finance and Economics Discussion Series , Paper 2014-51

Working Paper
What does financial volatility tell us about macroeconomic fluctuations?

This paper provides an extensive analysis of the predictive ability of financial volatility measures for economic activity. We construct monthly measures of aggregated and industry-level stock volatility, and bond market volatility from daily returns. We model log financial volatility as composed of a long-run component that is common across all series, and a short-run component. If volatility has components, volatility proxies are characterized by large measurement error, which veils analysis of their fundamental information and relationship with the economy. We find that there are ...
Finance and Economics Discussion Series , Paper 2012-09

Working Paper
Financial Stress and Equilibrium Dynamics in Money Markets

Interest rate spreads are widely-used indicators of funding pressures and market functioning in money markets. Using weekly data from 2002 to 2015, we analyze money market dynamics in a long-run equilibrium framework where commonly-monitored spreads serve as error correction terms. We find strong evidence for nonlinearities with respect to levels of the spreads. We provide point and interval estimates for spread thresholds that quantify funding pressure points from a long-run perspective. Our results indicate significant asymmetry in the adjustment toward long-run equilibrium. We show that ...
Finance and Economics Discussion Series , Paper 2015-91

Working Paper
Government debt and macroeconomic activity: a predictive analysis for advanced economies

This paper explores the empirical relationship between government debt and future macroeconomic activity using data on twenty advanced economies throughout the post-war era. We use robust inference techniques to deal with the bias arising from the persistent nature of debt to GDP ratio as an endogenous predictor of GDP growth. Our results show that statistical significance of the coefficient on the debt ratio in predictive regressions changes considerably with the use of robust inference techniques. For countries with relatively low average debt ratios we find a negative threshold effect as ...
Finance and Economics Discussion Series , Paper 2013-05

Working Paper
When is Bad News Good News? U.S. Monetary Policy, Macroeconomic News, and Financial Conditions in Emerging Markets

Rises in U.S. interest rates are often thought to generate adverse spillovers to emerging market economies (EMEs). We show that what appears to be bad news for EMEs might actually be good news, or at least not-so-bad news, depending on the source of the rise in U.S. interest rates. We present evidence that higher U.S. interest rates stemming from stronger U.S. growth generate only modest spillovers, while those stemming from a more hawkish Fed policy stance or inflationary pressures can lead to significant tightening of EME financial conditions. Our identification of the sources of U.S. rate ...
International Finance Discussion Papers , Paper 1269

Discussion Paper
Drivers of Inflation Compensation: Evidence from Inflation Swaps in Advanced Economies

In this note, we provide a comparative analysis of inflation swaps for three advanced economies: the United States, the euro area, and the United Kingdom. We consider empirical proxies for energy prices, economic activity, exchange rates, and risky asset prices as potential drivers of inflation expectations and risk premiums in a regression framework.
IFDP Notes , Paper 2016-12-30-2

Discussion Paper
The Impact of COVID-19 on Emerging Market Economies' Financial Conditions

The emerging market economies (EMEs) – and the lower-income developing economies to an even greater extent – generally are extremely vulnerable to the COVID-19 pandemic. Many EMEs have weak public health systems, poor and financially vulnerable populations, inadequate social safety nets, limited monetary and especially fiscal policy space, and high exposure to global trade and commodity prices.
FEDS Notes , Paper 2020-10-07-1

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