Search Results
Working Paper
Demand Shock, Liquidity Management, and Firm Growth during the Financial Crisis
We examine the transmission of liquidity across the supply chain during the 2007-09 financial crisis, a period of financial market illiquidity, for a sample of unrated public firms with differential demand shocks. We measure differential demand by comparing firms that primarily supply to government customers with those that primarily supply to corporate customers. A difference-in-difference analysis shows little evidence that relatively high demand firms provide more or less liquidity to their own suppliers. The main determinant of the usage of short-term financing is a product market shock. ...
Discussion Paper
Supply and Demand Drivers of Global Inflation Trends
Our previous post identified strong global components in the slow-moving and persistent dynamics of headline consumer price index (CPI) inflation in the U.S. and abroad. We labeled these global components as the Global Inflation Trend (GIT), the Core Goods Global Inflation Trend (CG-GIT) and the Food & Energy Global Inflation Trend (FE-GIT). In this post we offer a narrative of the drivers of these global inflation trends in terms of shocks that induce a trade-off for monetary policy, versus those that do not. We show that most of the surge in the persistent component of inflation across ...
Working Paper
The Impact of the COVID-19 Pandemic on Business Expectations
We document and evaluate how businesses are reacting to the COVID-19 crisis through August 2020. First, on net, firms see the shock (thus far) largely as a demand rather than supply shock. A greater share of firms reports significant or severe disruption to sales activity than to supply chains. We compare these measures of disruption to their expected changes in selling prices and find that, even for firms that report supply chain disruption, they expect to lower near-term selling prices on average. We also show that firms are engaging in wage cuts and expect to trim wages further before the ...
Working Paper
The Impact of the COVID-19 Pandemic on Business Expectations
We document and evaluate how businesses are reacting to the COVID-19 crisis through August 2020. First, on net, firms see the shock (thus far) largely as a demand rather than supply shock. A greater share of firms reports significant or severe disruption to sales activity than to supply chains. We compare these measures of disruption to their expected changes in selling prices and find that, even for firms that report supply chain disruption, they expect to lower near-term selling prices on average. We also show that firms are engaging in wage cuts and expect to trim wages further before the ...
Discussion Paper
Global Trends in U.S. Inflation Dynamics
A key feature of the post-pandemic inflation surge was the strong correlation among inflation rates across sectors in the United States. This phenomenon, however, was not confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies. As generalized as the inflation surge was, so was its decline from the mid-2022 peak. This post explores the common features of inflation patterns in the U.S. and abroad using an extension of the Multivariate Core Trend (MCT) Inflation model, our underlying inflation tracker for the U.S. The Global MCT model purges ...
Discussion Paper
What Drives International Bank Credit?
A major question facing policymakers is how to deal with slumps in bank credit. The policy prescriptions are very different depending on whether the decline is a result of global forces, domestic demand, or supply problems in a particular banking system. We present findings from new research that exactly decompose the growth in banks? aggregate foreign credit into these three factors. Using global banking data for the period 2000-16, we uncover some striking patterns in bilateral credit relationships between consolidated banking systems and borrowers in more than 200 countries. The most ...
Working Paper
Real Rigidities, Firm Dynamics, and Monetary Nonneutrality: The Role of Demand Shocks
We propose a parsimonious framework for real rigidities, in the form of strategic complementarities, that can generate real and nominal dynamics and match key features of the data across several literatures. Existing menu-cost models featuring strategic complementarities require unrealistically volatile shocks to idiosyncratic productivity to be consistent with pricing moments. We develop a simple menu-cost model with strategic complementarities along with idiosyncratic productivity and demand shocks that are disciplined by the data. This approach allows us to overcome previous criticism from ...
Report
Estimating Demand Shocks from Foot Traffic: A Big-Data Approach
This study leverages high-frequency foot-traffic data from SafeGraph to estimate demand shocks in customer-facing establishments across New York City’s retail, service, and health sectors. Recognizing that variations in foot traffic can arise from both unpredictable demand shocks and firm-driven strategies to attract customers, we present a theoretical framework that isolates establishment-level demand fluctuations from firm-level strategic choices. Implementing this empirically, we employ an unsupervised machine learning approach to classify establishments into distinct categories that are ...
Journal Article
Drivers of Wage and Employment Growth in Recent Years: A Supply and Demand Decomposition
Understanding whether labor market developments stem from supply or demand forces has fundamental implications for the conduct of monetary policy. This article develops a structural vector autoregression (VAR) methodology to decompose U.S. employment and wage growth into supply and demand components using sign restrictions. Extending Shapiro 2026, we separately identify trend growth, current shocks, and past shocks across different industries. Results reveal that goods-producing sectors experienced strong demand-driven growth in 2022, which subsequently weakened as Federal Reserve tightening ...