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 ...
Working Paper
Bank Capital Regulations Around the World : What Explains the Differences?
Despite the extensive attention that the Basel capital adequacy standards have received internationally, significant variation exists in the implementation of these standards across countries. Furthermore, a significant number of countries increase or decrease the stringency of capital regulations over time. The paper investigates the empirical determinants of the variation in the data based on the theories of bank capital regulation. The results show that countries with high average returns to investment and a high ratio of government ownership of banks choose less stringent capital ...
Working Paper
Out of Sight No More? The Effect of Fee Disclosures on 401(k) Investment Allocations
We examine the effects of a 2012 regulatory reform that mandated fee and performance disclosures for the investment options in 401(k) plans. We show that participants became significantly more attentive to expense ratios and short-term performance after the reform. The disclosure effects are stronger among plans with large average contributions per participant and weaker for plans with many investment options. Additionally, these results are not driven by secular changes in investor behavior or sponsor-initiated changes to the investment menus. Our findings suggest that providing salient fee ...
Briefing
The Center for Advancing Women in Economics: A Conference Recap
Economists from the Richmond Fed, research universities and other institutions met in Richmond for the Center for Advancing Women in Economics (AWE) conference in November. Women researchers presented papers on a variety of topics, including unconventional monetary and fiscal policy, global inflation patterns, worker responses to labor shocks, capital flows and risk, changes in U.S. supply chains, and the dynamics of official lending.The conference concluded with a panel discussion on the challenges and opportunities for academic research to inform policy. AWE Director Marina Azzimonti served ...
Working Paper
The Differential Impact of Bank Size on Systemic Risk
We examine whether financial stress at larger banks has a different impact on the real economy than financial stress at smaller banks. Our empirical results show that stress experienced by banks in the top 1 percent of the size distribution leads to a statistically significant and negative impact on the real economy. This impact increases with the size of the bank. The negative impact on quarterly real GDP growth caused by stress at banks in the top 0.15 percent of the size distribution is more than twice as large as the impact caused by stress at banks in the top 0.75 percent, and more than ...
Working Paper
A New Look at the Effects of the Interest Rate Ceiling in Arkansas
Arkansas has been a popular place to study the effects of rate ceilings because of its exceptionally low interest rate ceiling. This paper examines the effects of the Arkansas rate ceiling on credit use by risky nonprime Arkansas consumers, which are especially vulnerable to credit rationing because of the low ceiling. We compare the level and composition of consumer debt of nonprime consumers in Arkansas with that of prime Arkansas consumers and also nonprime consumers in the neighboring states. We find that nonprime Arkansas consumers are less likely to have consumer debt and, conditional ...
Working Paper
Supervisory Stress Testing For CCPs : A Macro-Prudential, Two-Tier Approach
Stress testing has become an increasingly important mechanism to support a variety of financial stability objectives. Stress tests can be used to test the individual resilience of a single entity or to assess the system-wide vulnerabilities of a network. This article examines the role of supervisory stress testing of central counterparties (CCPs), which has emerged in recent years. A key message is that crucial differences in CCPs? role, risk profile and financial structure, when compared to banks, are likely to require significant adaptation in the design of supervisory stress tests (SSTs). ...
Journal Article
Policy Update: Will Chevron Keep its Stripes?
Following the will of Congress is often a complicated endeavor for regulators, especially when lawmakers leave aspects of a regulatory law unclear. That uncertainty often leads to litigation. But how should courts determine if an administrative agency has gone outside the bounds of the law when designing regulations? This is an important question for regulators, like the Fed, that have been charged with implementing laws passed by Congress.In the 1984 landmark case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. the Supreme Court established a process to determine ...
Working Paper
Federal Reserve Structure, Economic Ideas, and Banking Policy During the "Quiet Period" in Banking
We evaluate the decentralized structure of the Federal Reserve System as a mechanism for generating and processing new ideas on banking policy in the 1950s and 1960s. We document that demand for research and analysis was driven by banking industry developments and legal changes that required the Federal Reserve and other banking regulatory agencies to develop guidelines for bank mergers. In response to these developments, the Board and the Reserve Banks hired industrial organization economists and young economists out of graduate school who brought in the leading theory of industrial ...