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Keywords:investment 

Working Paper
Government Connections and Financial Constraints: Evidence from a Large Representative Sample of Chinese Firms

We examine the role of firms' government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak ...
International Finance Discussion Papers , Paper 1129

Working Paper
Dale W. Jorgenson: An Intellectual Biography

Dale W. Jorgenson has been a central contributor to a wide range of economic and policy issues over a long and productive career. His research is characterized by a tight integration of economic theory, appropriate data that matches the theory, and sound econometrics. His groundbreaking work on the theory and empirics of investment established the research path for the economics profession. He is a founder of modern growth accounting: Official statistics in many countries, including the United States, implement Jorgenson’s methods. Relatedly, without Jorgenson’s unflagging efforts, ...
Working Paper Series , Paper 2022-08

Discussion Paper
Is the United States Relying on Foreign Investors to Finance Its Bigger Budget Deficit?

The fiscal packages passed in 2020 and 2021 to help the economy cope with the pandemic caused a dramatic increase in federal government borrowing. One might have expected that foreign investors were important buyers of this new debt, but that was not the case. They were instead net sellers of Treasury securities. Still, the amount of money flowing into the United States increased last year, which helped fund the government’s borrowing, if only indirectly. The upturn in inflows, though, was quite modest as a surge in domestic personal saving largely covered the government’s heightened ...
Liberty Street Economics , Paper 20210521

Report
How much do bank shocks affect investment? Evidence from matched bank-firm loan data

We show that supply-side financial shocks have a large impact on firms' investment. We do this by developing a new methodology to separate firm-borrowing shocks from bank supply shocks using a vast sample of matched bank-firm lending data. We decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of financial institution concentration means that individual banks are large relative to the size of the economy, which creates a role for granular shocks as in Gabaix (2011). As a result, bank supply shocks?that is, movements in ...
Staff Reports , Paper 604

Working Paper
Macroeconomic Effects of China's Financial Policies

The Chinese economy has undergone three major phases: the 1978?97 period marked as the SOE-led economy, the 1998?2015 phase as the investment-driven economy, and the new normal economy since 2016. All three economies have been shaped by the government financial policies, defined as a set of credit policy, monetary policy, and regulatory policy. We analyze the macroeconomic effects of these financial policies throughout the three phases and provide the stylized facts to substantiate our analysis. The stylized facts differ qualitatively across different phases or economies. We argue that the ...
FRB Atlanta Working Paper , Paper 2018-12

Working Paper
Accounting for Macro-Finance Trends: Market Power, Intangibles, and Risk Premia

Real risk-free interest rates have trended down over the past 30 years. Puzzlingly in light of this decline, (1) the return on private capital has remained stable or even increased, creating an increasing wedge with safe interest rates; (2) stock market valuation ratios have increased only moderately; (3) investment has been lackluster. We use a simple extension of the neoclassical growth model to diagnose the nexus of forces that jointly accounts for these developments. We find that rising market power, rising unmeasured intangibles, and rising risk premia, play a crucial role, over and ...
Working Paper Series , Paper WP-2018-19

Working Paper
Credit Default Swaps in General Equilibrium: Spillovers, Credit Spreads, and Endogenous Default

This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even those that are not CDS reference entities. Second, when firms internalize the credit spread changes, the incentive to issue safe rather than risky bonds is fundamentally altered. Issuing safe debt requires a transfer of profits from good states to bad states to ensure full repayment. Alternatively, issuing risky bonds maximizes profits in good states at the ...
Finance and Economics Discussion Series , Paper 2016-042

Discussion Paper
Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?

The federal tax cut and the increase in federal spending at the beginning of 2018 substantially increased the government deficit, requiring a jump in the amount of Treasury securities needed to fund the gap. One question is whether the government will have to rely on foreign investors to buy these securities. Data for the first half of 2018 are available and, so far, the country has not had to increase the pace of borrowing from abroad. The current account balance, which measures how much the United States borrows from the rest of the world, has been essentially unchanged. Instead, the tax ...
Liberty Street Economics , Paper 20181128

Journal Article
Econ Focus: Why Don't More Young People Buy Stocks?

Standard life-cycle models of portfolio choice suggest that individuals should participate in the stock market throughout their lives. Yet the data show that this is not typically the case early in life. Rather, there is a pattern of high human capital investment (that is, acquiring skills that the labor market values) and low stock market participation in youth, a pattern that reverses as individuals age.
Econ Focus , Issue 2Q , Pages 29

Journal Article
Global Banks, Local Branches, and Faraway Crises

In an article recently published in the Journal of International Economics, Horacio Sapriza of the Richmond Fed and Ricardo Correa and Andrei Zlate of the Fed Board of Governors suggested an alternative pathway for the spread of financial shocks. In particular, they used the case of the 2011 European debt crisis to show that local branches of global banks can also amplify shocks through pathways distinct from any effects stemming from their parent banks' capitalization levels.
Econ Focus , Issue 1Q , Pages 13

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