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Working Paper
The time-varying price of financial intermediation in the mortgage market
Lo, Stephanie; Willen, Paul S.; Fuster, Andreas (2017-01-01)
The U.S. mortgage market links homeowners with savers all over the world. In this paper, we ask how much of the flow of money from savers to borrowers actually goes to the intermediaries that facilitate these transactions. Based on a new methodology and a new administrative dataset, we find that the price of intermediation, measured as a fraction of the loan amount at origination, is large?142 basis points on average over the 2008?2014 period. At daily frequencies, intermediaries pass on the price changes in the secondary market to borrowers in the primary market almost completely. At monthly ...
Working Papers , Paper 16-28

Working Paper
Understanding the Aggregate Effects of Credit Frictions and Uncertainty
Martinez-Garcia, Enrique; Balke, Nathan S.; Zeng, Zheng (2017-06-20)
We examine the interaction of uncertainty and credit frictions in a New Keynesian framework. To do so, uncertainty is modeled as time-varying stochastic volatitlity - the product of monetary policy uncertainty, financial risk (micro-uncertainty), and macrouncertainty. The model is solved using a pruned third-order approximation and estimated by the Simulated Method of Moments. We find that: 1) Micro-uncertainty aggravates the information asymmetry between lenders and borrowers, worsens credit conditions, and has first-order effects on real economic activity. 2) When credit conditions are ...
Globalization Institute Working Papers , Paper 317

Working Paper
House Price Responses to Monetary Policy Surprises: Evidence from the U.S. Listings Data
Gorea, Denis; Kryvtsov, Oleksiy; Kudlyak, Marianna (2022-08-05)
Existing literature documents that house prices respond to monetary policy surprises with a significant delay, taking years to reach their peak response. We present new evidence of a much faster response. We exploit information contained in listings for the residential properties for sale in the United States between 2001 and 2019 from the CoreLogic Multiple Listing Service Dataset. Using high-frequency measures of monetary policy shocks, we document that a one standard-deviation contractionary monetary policy surprise lowers housing list prices by 0.2–0.3 percent within two weeks—a ...
Working Paper Series , Paper 2022-16

Working Paper
The Transmission of Monetary Policy through Bank Lending : The Floating Rate Channel
Ippolito, Filippo; Ozdagli, Ali K.; Perez, Ander (2017-03)
We describe and test a mechanism through which outstanding bank loans affect the firm balance sheet channel of monetary policy transmission. Unlike other debt, most bank loans have floating rates mechanically tied to monetary policy rates. Hence, monetary policy-induced changes to floating rates affect the liquidity, balance sheet strength, and investment of financially constrained firms that use bank debt. We show that firms---especially financially constrained firms---with more unhedged bank debt display stronger sensitivity of their stock price, cash holdings, sales, inventory, and fixed ...
Finance and Economics Discussion Series , Paper 2017-026

Working Paper
Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
Gao, Haoyu; Zha, Tao; Waggoner, Daniel F.; Chen, Kaiji; Higgins, Patrick C. (2020-08-27)
We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same ...
FRB Atlanta Working Paper , Paper 2020-16

Working Paper
Inflation Disagreement Weakens the Power of Monetary Policy
Dong, Ding; Liu, Zheng; Wang, Pengfei; Wei, Min (2024-12-06)
We present empirical evidence that household inflation disagreement weakens the power of forward guidance and conventional monetary policy shocks. The attenuation effect is stronger when inflation forecasts are positively skewed and it is not driven by endogenous responses of inflation disagreement to contemporaneous shocks. These empirical observations can be rationalized by a model featuring heterogeneous beliefs about the central banks' inflation target. An agent who perceives higher future inflation also perceives a lower real interest rate and thus borrows more to finance consumption, ...
Finance and Economics Discussion Series , Paper 2024-094

Working Paper
Monetary Policy Shocks: Data or Methods?
Brennan, Connor M.; Jacobson, Margaret M.; Matthes, Christian; Walker, Todd B. (2024-11-01)
Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.3 and the same sign in only one half of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. After documenting differences in monetary shock series, we explore their consequence for inference in several specifications. We find that empirical estimates of monetary policy transmission have few qualitative differences. We caution that inference may not be entirely robust to all shock constructions because ...
Finance and Economics Discussion Series , Paper 2024-011r1

Working Paper
Monetary Policy Shocks: Data or Methods?
Brennan, Connor M.; Jacobson, Margaret M.; Matthes, Christian; Walker, Todd B. (2024-02-28)
Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.5 and the same sign in only two-thirds of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. Methods that exploit the differential responsiveness of short- and long-term asset prices can incorporate additional information. After documenting differences in monetary shocks, we explore their consequence for inference. We find that empirical estimates of monetary policy transmission from local projections and ...
Finance and Economics Discussion Series , Paper 2024-011

Working Paper
Monetary policy and global banking
Ivashina, Victoria; Bräuning, Falk (2016-12-23)
Global banks use their global balance sheets to respond to local monetary policy. However, sources and uses of funds are often denominated in different currencies. This leads to a foreign exchange (FX) exposure that banks need to hedge. If cross?currency flows are large, the hedging cost increases, diminishing the return on lending in foreign currency. We show that, in response to domestic monetary policy easing, global banks increase their foreign reserves in currency areas with the highest interest rate, while decreasing lending in these markets. We also find an increase in FX hedging ...
Working Papers , Paper 17-5

Report
The effect of monetary policy on bank wholesale funding
Choi, Dong Beom; Choi, Hyun-Soo (2016-01-01)
We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the retail deposit supply, banks try to substitute the deposit outflows with wholesale funding to smooth their lending. Banks have varying degrees of accessibility to wholesale funding owing to financial frictions, hence large banks, or those with a greater reliance on wholesale funding, increase their wholesale funding more. Consequently, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector. Our findings also ...
Staff Reports , Paper 759

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