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Discussion Paper
The Final Crisis Chronicle: The Panic of 1907 and the Birth of the Fed
Narron, James; Morgan, Donald P. (2016-11-18)
The panic of 1907 was among the most severe we’ve covered in our series and also the most transformative, as it led to the creation of the Federal Reserve System. Also known as the “Knickerbocker Crisis,” the panic of 1907 shares features with the 2007-08 crisis, including “shadow banks” in the form high-flying, less-regulated trusts operating beyond the safety net of the time, and a pivotal “Lehman moment” when Knickerbocker Trust, the second-largest trust in the country, was allowed to fail after J.P. Morgan refused to save it.
Liberty Street Economics , Paper 20161118

Working Paper
The Fed's Response to Economic News Explains the “Fed Information Effect”
Swanson, Eric T.; Bauer, Michael D. (2020-02-27)
High-frequency changes in interest rates around FOMC announcements are a standard method of measuring monetary policy shocks. However, some recent studies have documented puzzling effects of these shocks on private-sector forecasts of GDP, unemployment, or inflation that are opposite in sign to what standard macroeconomic models would predict. This evidence has been viewed as supportive of a “Fed information effect” channel of monetary policy, whereby an FOMC tightening (easing) communicates that the economy is stronger (weaker) than the public had expected. We show that these empirical ...
Working Paper Series , Paper 2020-06

Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
Neely, Christopher J. (2022-04-15)
The weight of the evidence indicates that unconventional monetary policy (UMP) shocks had persistent effects on yields. To make this point, this paper illustrates that the most influential SVAR model of UMP effects, which implies transient effects, exhibits structural instability, sensitivity to specification and single observations that render the conclusions unreliable. Restricted SVAR models that limit asset return predictability are more stable and imply that UMP shocks were persistent. This conclusion is consistent with evidence from micro studies, surveys of professional forecasters, ...
Working Papers , Paper 2014-004

Journal Article
How Did the Fed Funds Market Change When Excess Reserves Were Abundant?
Nosal, Ed; McGowan, John (2020-03-01)
Prior to the 2007-2008 financial crisis, excess reserves in the U.S. banking system were scarce. After the financial crisis and up until early 2018, excess reserves were abundant. In this article, the authors document, analyze, and explain the differences in the performance of the federal funds market under the two different excess reserves frameworks.
Economic Policy Review , Volume 26 , Issue 1 , Pages 15

Working Paper
An agency problem in the MBS market and the solicited refinancing channel of large-scale asset purchases
Kandrac, John; Schlusche, Bernd (2015-03-31)
In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and thus determine the MBS that are delivered to the Federal Reserve. After ruling out several potential explanations for this result, we provide evidence that points to an agency problem in the secondary market for MBS, which has not previously been documented, as the most likely explanation for the ...
Finance and Economics Discussion Series , Paper 2015-27

Journal Article
Make-up Strategies for Monetary Policy
Drautzburg, Thorsten (2021-12-02)
How the Federal Reserve is addressing the challenge of the long-term decline in interest rates.
Economic Insights , Volume 6 , Issue 4 , Pages 9-15

Working Paper
Monetary Policy Implementation and Private Repo Displacement : Evidence from the Overnight Reverse Repurchase Facility
Kandrac, John; Anderson, Alyssa G. (2016-10-31)
In recent years, the scale and scope of major central banks' intervention in financial markets has expanded in unprecedented ways. In this paper, we demonstrate how monetary policy implementation that relies on such intervention in financial markets can displace private transactions. Specifically, we examine the experience with the Federal Reserve's newest policy tool, known as the overnight reverse repurchase (ONRRP) facility, to understand its effects on the repo market. Using exogenous variation in the parameters of the ONRRP facility, we show that participation in the ONRRP comes from ...
Finance and Economics Discussion Series , Paper 2016-096

Report
COVID Response: The Commercial Paper Funding Facility
Boyarchenko, Nina; Crump, Richard K.; Kovner, Anna; Leonard, Deborah (2021-09-01)
The Federal Reserve reestablished the Commercial Paper Funding Facility (CPFF 2020) in response to the disruptions in the commercial paper market triggered by the COVID-19 pandemic and subsequent economic shutdowns. The CPFF 2020 was designed to support market functioning and provide a liquidity backstop for the commercial paper market. This paper provides an overview of the CPFF 2020, including detailing the facility’s design, documenting its usage, and describing its impact on commercial paper markets. In addition, we compare the market conditions and facility design in CPFF 2020 to that ...
Staff Reports , Paper 982

Working Paper
Even Keel and the Great Inflation
Mukherjee, Sanchita; Humpage, Owen F.; Consolvo, Victoria (2020-10-23)
During the early part of the Great Inflation (1965-1975), the Federal Reserve undertook even-keel operations to assist the US Treasury’s coupon security sales. Accordingly, the central bank delayed any tightening of monetary policy and permanently injected reserves into the banking system. Using real-time Taylor-type and McCallum-like reaction functions, we show that the Fed routinely undertook these operations only when it was otherwise tightening monetary policy. Using a quantity-equation framework, we show that the Federal Reserve’s even-keel actions added approximately one percentage ...
Working Papers , Paper 20-33

Speech
Desk Operations: The New Normal
Logan, Lorie (2021-04-08)
Remarks at the Annual Primary Dealer Meeting (delivered via videoconference).
Speech

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