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Journal Article
The Global Pandemic and Run on Shadow Banks
In March, the global coronavirus pandemic led to a period of financial stress in which credit conditions tightened at an unprecedented pace. Elements of this stress period can be explained as a classic run on “shadow banks”—nonbank financial institutions that fund long-term assets with short-term debt. Although timely Federal Reserve interventions restored some calm to markets, shadow banks remain vulnerable to future runs because they lack the safeguards available to regulated depository institutions.
Journal Article
How Low- and Moderate-Income Households Are Coping with Inflation
Most people across income groups report financial stress from recent high inflation. To cope, individuals with lower incomes have cut back on necessities.
Speech
Financial Stress and the Current Macroeconomic Outlook
St. Louis Fed President Jim Bullard presented “Financial Stress and the Current Macroeconomic Outlook” at a meeting of Greater St. Louis Inc.He noted that financial stress has been on the rise in recent days and that the macroprudential policy response has been swift and appropriate. He added that regulators stand ready to take additional action if necessary.Meanwhile, incoming data on the U.S. macroeconomy have been stronger than expected, and inflation remains too high, Bullard said. He also noted that FOMC policy has kept market-based measures of inflation expectations relatively low, ...
Journal Article
Safe-Haven Performance in the Age of Bitcoin
In past periods of financial stress, investors seeking “safe havens” have shifted toward government bonds and gold. In recent years, some have questioned whether Bitcoin could also serve as a safe haven. We compare the behavior of government bonds, gold, and Bitcoin from January 1995 through February 2020 and find that the 10-year Treasury note behaved like a safe haven consistently, gold occasionally, and Bitcoin never. During March 2020, however, none of the assets can be classified with confidence as a safe haven.
Speech
Bullard Discusses Financial Stress, Rate Increases and Inflation on Bloomberg TV
During an appearance on Bloomberg TV, St. Louis Fed President Jim Bullard discussed financial stress, the federal funds rate and inflation.On banking sector problems, Bullard said the reaction was swift and appropriate. He said he projected an 80% probability that the financial stress within the sector will decline.“You’ve got the macroprudential tools for financial stress, and you’ve got monetary policy to fight inflation. We can do both as long as financial stress doesn’t morph into something much larger,” he said.To bring down inflation, Bullard said the median Federal Open ...
Speech
Financial Conditions, the Economic Outlook and Monetary Policy
St. Louis Fed President Alberto Musalem gave a speech, “Financial Conditions, the Economic Outlook and Monetary Policy,” at a Money Marketeers of New York University Inc. event in New York.
Journal Article
Financial Stress May Do Relatively Little to Reduce Inflation
Financial stress has risen in the wake of recent bank failures. At the same time, the Federal Reserve has been tightening the stance of monetary policy to reduce elevated inflation. While both banking stress and tighter monetary policy can slow economic activity, historical evidence suggests that financial stress may be less effective in reducing inflation.
Working Paper
International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs), covering the so-called taper-tantrum episode of 2013 and seven other episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in relatively early and persisted through this episode. (3) During ...
Working Paper
International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs). Our analysis covers the so-called taper-tantrum episode of 2013 and six earlier episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in quite early and persisted throughout this episode. ...