Search Results
Briefing
Essentiality of Money: A Historical Perspective
In this article, I explore the historical development of the concept of essentiality of money, as well as monetary theory more broadly. I begin by introducing the concept of money and its role in facilitating economic activity. I delve into the evolution of monetary theory, starting with the classical theory and the marginal revolution and moving to the division between microeconomics and macroeconomics. Then I discuss the microfoundation revolution in macroeconomics and the debate over the essentiality of money. Finally, I examine the New Keynesian School (which uses reduced-form tools to ...
Journal Article
Tools (Lessons and Strategies) Toward Market Restoration: A Conference Summary
Community development post-recession takes place in an environment that is greatly changed in terms of both demand for and capacity to deliver services. While no community was immune, the places that were most deeply affected by the Great Recession ? and continue to feel its effects ? are often those places that had suffered from disinvestment for decades leading up to it. The tools and strategies that have been developed and relied on by investors, practitioners and advocates ? in some cases for decades ? need to be adapted to the changes, while continuing to meet ever growing demand.
Journal Article
Nonparametric Estimation of the Diamond-Dybvig Banking Model
I propose a nonparametric structural estimator for the distribution of liquidity needs in a version of the Diamond and Dybvig (1983) model when only the aggregate level of withdrawals is observed. The model is an extension of Peck and Shell (2003) with a continuum of depositors. I show how the characterization of the optimal contract proposed in Sultanum (2014) can be used to estimate the distribution of aggregate liquidity needs. The method builds on the literature of estimation of auctions. More precisely, it uses the indirect approach proposed by Guerre et al. (2000). Guerre et al. (2000) ...
Speech
Keynote Remarks
Remarks at the Union of Arab Banks' Conference on Anti-Bribery Corruption, the Sixth European Union Anti-Money Laundering Directive, and the Anti-Money Laundering Act of 2020 (delivered via videoconference).
Report
The effect of state pension cut legislation on bank values
This study provides an empirical analysis of the impact of Wisconsin and Ohio pension cut legislation on values of banks operating in Wisconsin and Ohio, banks operating in other states in which pension cut legislation was being considered as Wisconsin and Ohio went through its legislative process, and all publicly traded U.S. banks. We find that banks doing business in Wisconsin and Ohio experience positive (negative) stock price reactions to announcements that indicate an increased (a decreased) probability of pension cut legislation. The stock price reactions are positively related to the ...
Working Paper
Did life insurers benefit from TARP or regulatory forbearance during the financial crisis of 2008–2009?
Life insurers? odds of being placed under regulatory control (for example, conservatorship or receivership) during the financial crisis years of 2008 and 2009 increased with deteriorating fundamentals at a much higher rate than during normal times or during the previous recession. However, no life insurer in the sample belonging to a life insurance holding company system (LIHCS) in receipt of TARP funds experienced such insolvency issues, and life insurers with poor and deteriorating performance that belonged to a LIHCS in receipt of TARP funds received increased capital inflows during the ...
Journal Article
IFF: A Leading Community Development Financial Institution Expanding Its Market Reach across the Midwest
Community Development departments at Federal Reserve Banks have been mandated by the Fed?s Board of Governors since 1981. As part of its mandate, the Chicago Fed?s Community Development and Policy Studies (CDPS) division works to understand and document the roles and capacities of community development organizations (CDO). With a combination of public, private, and philanthropic funding, these organizations provide an array of services for our country?s vulnerable populations, and may offer investment or lending opportunities for financial institutions subject to the Community Reinvestment ...
Discussion Paper
Behind the ATM: Exploring the Structure of Bank Holding Companies
Many modern banking organizations are highly complex. A “bank” is often a larger structure made up of distinct entities, each subject to different regulatory, supervisory, and reporting requirements. For researchers and policymakers, understanding how these institutions are structured and how they have evolved over time is essential. In this post, we illustrate what a modern financial holding company looks like in practice, document how banks’ organizational structures have changed over time, and explain why these details matter for conducting accurate analyses of the financial system.
Report
CDS and equity market reactions to stock issuances in the U.S. financial industry: evidence from the 2002-13 period
We study seasoned equity issuances by financial and nonfinancial companies between 2002 and 2013. To assess the risk and valuation implications of these issuances, we conduct an event-study analysis using daily credit default swap (CDS) and stock market pricing data. The major findings of the paper are that equity prices do not react to new issues in the pre-crisis period, but react negatively in the crisis. CDS prices respond to new, default-relevant information. Over the full sample period, cumulative abnormal CDS spreads drop in response to equity issuance announcements. The reactions are ...
Journal Article
The Distributional Effects of Bailouts
This article examines the distributional effects of government bailouts using a heterogeneous agent New Keynesian model with financial intermediation frictions. We analyze government equity injections to financial institutions financed by debt issuance, capturing essential features of bailout policies during financial crises. When calibrated to match key features of the U.S. economy, bailout policies are expansionary and reduce inequality through general equilibrium effects operating primarily via aggregate demand stimulation and increased labor income rather than direct wealth effects. ...