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Working Paper
Limited Household Risk Sharing: General Equilibrium Implications for the Term Structure of Interest Rates
Mitra, Indrajit; Xu, Yu (2020-11-09)
We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining the dynamics of interest rates. Our production-based model relates the cross-sectional distribution of labor income risk to observable aggregate labor market variables. Our model makes two key predictions. First, it predicts positive risk premia for long-term bonds while simultaneously matching key macroeconomic moments. Second, it predicts a negative correlation between current labor market conditions (as measured by labor market tightness or the job-finding rate) and future ...
FRB Atlanta Working Paper , Paper 2020-20

Report
The execution of monetary policy: a tale of two central banks
Bartolini, Leonardo; Prati, Alessandro (2003)
The Eurosystem and the U.S. Federal Reserve System follow quite different approaches to the execution of monetary policy. The former institution adopts a "hands-off" approach that largely delegates to depository institutions the task of stabilizing their own liquidity at high frequency. The latter institution follows a much more "hands-on" approach involving daily intervention to fine-tune the liquidity of the banking system. We review the implications of these contrasting approaches, focusing on their impact on the high-frequency behavior of very short-term interest rates. We also examine ...
Staff Reports , Paper 165

Speech
Interview with St. Louis Fed President James Bullard
Bullard, James B. (2023-04-18)
Speech

Working Paper
Oil Prices, Exchange Rates and Interest Rates
Kilian, Lutz; Zhou, Xiaoqing (2019-11-27)
There has been much interest in the relationship between the price of crude oil, the value of the U.S. dollar, and the U.S. interest rate since the 1980s. For example, the sustained surge in the real price of oil in the 2000s is often attributed to the declining real value of the U.S. dollar as well as low U.S. real interest rates, along with a surge in global real economic activity. Quantifying these effects one at a time is difficult not only because of the close relationship between the interest rate and the exchange rate, but also because demand and supply shocks in the oil market in turn ...
Working Papers , Paper 1914

Working Paper
Deposit Convexity, Monetary Policy and Financial Stability
Greenwald, Emily; Schulhofer-Wohl, Sam; Younger, Josh (2023-10-10)
In principle, bank deposits can be withdrawn on demand. In practice, depositors tend to maintain stable balances for long periods, allowing banks to fund long-dated assets. Nevertheless, the cost of deposit funding influences banks’ capacity for maturity transformation. Banks and researchers conventionally model the response of deposit interest rates to market interest rates as constant, implying that deposits have nearly constant duration. Contrary to this standard assumption, we show empirically that the “beta” of deposit rates to market rates increases as market rates rise, causing ...
Working Papers , Paper 2315

Speech
Some unpleasant stabilization arithmetic: remarks at the Federal Reserve Bank of Boston's 62nd Economic Conference, \\"What are the Consequences of Long Spells of Low Interest Rates?\\", Boston, Massachusetts, September 8, 2018
Tootell, Geoffrey M. B.; Rosengren, Eric S.; Peek, Joe (2018-09-08)
These slides represent the combined thoughts of President Rosengren and his co-presenters, Joe Peek and Geoffrey M. B. Tootell.
Speech

Journal Article
Why Haven’t Recent Rate Increases Slowed the Economy More? Look to Unusually Low Private-Lending Spreads
Glover, Andrew; Oliyede, Johnson (2024-08-14)
Despite a large and rapid increase in the policy rate since March 2022, economic activity has remained resilient. We argue that private-lending spreads—the difference between the policy rate and rates private-sector borrowers pay—are surprisingly low and a major factor for why rate hikes have not slowed the economy more. If spreads are as insensitive to rate cuts as they are to rate hikes, then they may dampen the effect of expansionary monetary policy.
Economic Bulletin

Speech
Interview with St. Louis Fed President James Bullard
Bullard, James B. (2022-08-18)
Federal Reserve Bank of St. Louis President James Bullard said Thursday he is considering support for another large rate rise at the central bank’s policy meeting next month and added he isn’t ready to say the economy has seen the worst of the inflation surge.
Speech

Discussion Paper
The Housing Boom and the Decline in Mortgage Rates
Liu, Haoyang; Lucca, David O.; Parker, Dean; Rays-Wahba, Gabriela (2021-09-07)
During the pandemic, national home values and housing activity soared as mortgage rates declined to historic lows. Under the canonical “user cost” house price model, home values are held to be very sensitive to interest rates, especially at low interest rate levels. A calibration of this model can account for the house price boom with the observed decline in interest rates. But empirically, we find that home values are nowhere near as sensitive to interest rates as the user cost model predicts. This lower sensitivity is also found in prior economic research. Thus, the historical ...
Liberty Street Economics , Paper 20210907

Speech
Interview with St. Louis Fed President James Bullard
Bullard, James B. (2022-07-11)
Speech

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