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Speech
The International Financial Crisis: Asset Price Exuberance and Macroprudential Regulation
Evans, Charles L. (2009-09-24)
Remarks by Charles L. Evans, President and Chief Executive Officer, Federal Reserve Bank of Chicago 2009 International Banking Conference Chicago, IL
Speech , Paper 34

Working Paper
Consumer risk appetite, the credit cycle, and the housing bubble
Breeden, Joseph L.; Canals-Cerda, Jose J. (2016-02-18)
We explore the role of consumer risk appetite in the initiation of credit cycles and as an early trigger of the U.S. mortgage crisis. We analyze a panel data set of mortgages originated between the years 2000 and 2009 and follow their performance up to 2014. After controlling for all the usual observable effects, we show that a strong residual vintage effect remains. This vintage effect correlates well with consumer mortgage demand, as measured by the Federal Reserve Board?s Senior Loan Officer Opinion Survey, and correlates well to changes in mortgage pricing at the time the loan was ...
Working Papers , Paper 16-5

Working Paper
FHA, Fannie Mae, Freddie Mac, and the Great Recession
Sherlund, Shane M.; Passmore, Wayne (2016-04-12)
Did government mortgage programs mitigate the adverse economic effects of the financial crisis? We find that counties with greater participation in traditional government mortgage programs experienced less severe economic downturns during the Great Recession. In particular, counties with higher levels of participation in FHA, Fannie Mae, and Freddie Mac lending had relatively smaller increases in mortgage delinquency rates; smaller declines in purchase originations, home sales, home prices, and new automobile purchases; and smaller increases in unemployment rates. These results hold both in ...
Finance and Economics Discussion Series , Paper 2016-031

Report
The Cost of Financial Frictions for Life Insurers
Koijen, Ralph S. J.; Yogo, Motohiro (2014-06-11)
During the financial crisis, life insurers sold long-term policies at deep discounts relative to actuarial value. The average markup was as low as ?19 percent for annuities and ?57 percent for life insurance. This extraordinary pricing behavior was due to financial and product market frictions, interacting with statutory reserve regulation that allowed life insurers to record far less than a dollar of reserve per dollar of future insurance liability. We identify the shadow cost of capital through exogenous variation in required reserves across different types of policies. The shadow cost was ...
Staff Report , Paper 500

Working Paper
Can Forecast Errors Predict Financial Crises? Exploring the Properties of a New Multivariate Credit Gap
Afanasyeva, Elena (2020-06-12)
Yes, they can. I propose a new method to detect credit booms and busts from multivariate systems -- monetary Bayesian vector autoregressions. When observed credit is systematically higher than credit forecasts justified by real economic activity variables, a positive credit gap emerges. The methodology is tested for 31 advanced and emerging market economies. The resulting credit gaps fit historical evidence well and detect turning points earlier, outperforming the credit-to-GDP gaps in signaling financial crises, especially at longer horizons. The results survive in real time and can shed ...
Finance and Economics Discussion Series , Paper 2020-045

Working Paper
Liquidity Crises in the Mortgage Market
Stanton, Richard; Laufer, Steven; Pence, Karen M.; Kim, You Suk; Wallace, Nancy (2018-03-08)
Non-banks originated about half of all mortgages in 2016, and 75% of mortgages insured by the FHA or VA. Both shares are much higher than those observed at any point in the 2000s. We describe in this paper how non-bank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario. We show how the same liquidity issues unfolded during the financial crisis, leading to the failure of many non-bank companies, requests for ...
Finance and Economics Discussion Series , Paper 2018-016

Working Paper
Housing Bust, Bank Lending & Employment : Evidence from Multimarket Banks
Glancy, David P. (2017-12-01)
I use geographic variation in bank lending to study how bank real estate losses impacted the supply of credit and employment during the Great Recession. Banks exposed to distressed housing markets cut mortgage and small business lending relative to other banks in the same county. This lending contraction had real e?ects, as counties whose banks were exposed to adverse shocks in other markets su?ered employment declines, especially in young ?rms. This ?nding is robust to instrumenting for bank exposure to housing shocks using shocks in distant markets, exposure based on historical lending, or ...
Finance and Economics Discussion Series , Paper 2017-118

Working Paper
A model of monetary policy shocks for financial crises and normal conditions
Smith, Andrew Lee; Valcarcel, Victor J.; Keating, John W.; Kelly, Logan J. (2014-10-01)
In late 2008, deteriorating economic conditions led the Federal Reserve to lower the federal funds rate to near zero and inject massive liquidity into the financial system through novel facilities. The combination of conventional and unconventional measures complicates the challenging task of characterizing the effects of monetary policy. We develop a novel method of identifying these effects that maintains the classic assumptions that a central bank reacts to output and the price level contemporaneously and may only affect these variables with a lag. A New-Keynesian DSGE model augmented with ...
Research Working Paper , Paper RWP 14-11

Speech
Bullard Discusses Economy and Fed’s Response to COVID-19 in Central Banking Journal Interview
Jeffery, Christopher; Bullard, James B. (2020-08-11)
St. Louis Fed President James Bullard shared his views on various aspects of the U.S. economy and the Fed’s response to the COVID-19 pandemic in an interview with Central Banking Journal.
Speech

Working Paper
Backtesting Systemic Risk Measures During Historical Bank Runs
Brownlees, Christian; Chabot, Benjamin; Ghysels, Eric; Kurz, Christopher J. (2015-07-02)
The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these questions is to take backtesting seriously and evaluate how useful the recently proposed measures are when applied to historical crises. Ideally, one would like to look at the pre-FDIC era for a broad enough sample of financial panics to confidently assess the robustness of systemic risk measures but ...
Working Paper Series , Paper WP-2015-9

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