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Working Paper
Quantifying "Quantitative Tightening" (QT): How Many Rate Hikes Is QT Equivalent To?
Wei, Bin (2022-07-15)
How many interest rate hikes is quantitative tightening (QT) equivalent to? In this paper, I examine this question based on the preferred-habitat model in Vayanos and Vila (2021). I define the equivalence between rate hikes and QT such that they both have the same impact on the 10-year yield. Based on the model calibrated to fit the nominal Treasury data between 1999 and 2022, I show that a passive roll-off of $2.2 trillion over three years is equivalent to an increase of 29 basis points in the current federal funds rate at normal times. However, during a crisis period with risk aversion ...
FRB Atlanta Working Paper , Paper 2022-8

Speech
Bank of Korea International Conference Panel Comments
Evans, Charles L. (2010-06-14)
Remarks for the Bank of Korea International Conference 2010, June 1, 2010 Seoul, Korea
Speech , Paper 41

Speech
Financial Stability and Monetary Policy in a Low-Interest-Rate Environment
Mester, Loretta J. (2021-06-22)
I thank Kasper Roszbach and the Norges Bank for inviting me to present at this workshop on low-interest-rate and unconventional monetary policy. I applaud the Norges Bank for spurring research on this topic. In a period of less than two decades, the world has experienced two historically deep negative shocks to the global economy and financial system. While their causes were different, the global financial crisis of 2008 and the COVID-19 pandemic crisis each necessitated the intervention of central banks in ways not contemplated in earlier decades. Lessons from the actions taken during the ...
Speech

Speech
Transcript of Lorie Logan on the Macro Musings Podcast
Logan, Lorie (2022-01-10)
A closer look at monetary policy operations, the Fed’s new Standing Repo Facility, and the future of the Fed’s balance sheet.
Speech

Emerging-market countries insulate themselves from Fed rate hikes
Davis, J. Scott; Sagnanert, Pon (2023-08-08)
Earlier episodes of sizable Fed tightening preceded destabilizing currency devaluations in emerging markets, precipitating sovereign debt and banking crises in many of those economies
Dallas Fed Economics

Working Paper
Policy Rules and Large Crises in Emerging Markets
Espino, Emilio; Sanchez, Juan M.; Martin, Fernando M.; Kozlowski, Julian (2023-02-21)
Emerging countries have increasingly adopted rules to discipline government policy. The COVID-19 shock lead to widespread suspension and modification of these rules. We study rules and flexibility in a sovereign default model with domestic fiscal and monetary policies and long-term external debt. We find welfare gains from adopting monetary targets and debt limits during normal times. Though government policy cannot itself counteract fundamental shocks hitting the economy, the adoption of rules has a significant impact on policy, macroeconomic outcomes and welfare during large, unexpected ...
Working Papers , Paper 2022-018

Working Paper
A Probability-Based Stress Test of Federal Reserve Assets and Income
Christensen, Jens H. E.; Lopez, Jose A.; Rudebusch, Glenn D. (2013-12-16)
To support the economy, the Federal Reserve amassed a large portfolio of long-term bonds. We assess the Fed?s associated interest rate risk ? including potential losses to its Treasury securities holdings and declines in remittances to the Treasury. Unlike past examinations of this interest rate risk, we attach probabilities to alternative interest rate scenarios. These probabilities are obtained from a dynamic term structure model that respects the zero lower bound on yields. The resulting probability-based stress test finds that the Fed?s losses are unlikely to be large and remittances are ...
Working Paper Series , Paper 2013-38

Revisiting the odd behavior of the Beveridge curve as unemployment stays low
Cheremukhin, Anton A. (2024-03-05)
At first glance, it seems unlikely that the unemployment rate would remain stable if the number of job vacancies decreased. However, such a scenario played out recently as the number of firms seeking to fill positions by poaching employees from other firms increased, while the ranks of the unemployed remained relatively stable.
Dallas Fed Economics

Working Paper
Monetary Policy Effectiveness in China: Evidence from a FAVAR Model
Fernald, John G.; Spiegel, Mark M.; Swanson, Eric T. (2014-02-24)
We use a broad set of Chinese economic indicators and a dynamic factor model framework to estimate Chinese economic activity and inflation as latent variables. We incorporate these latent variables into a factor-augmented vector autoregression (FAVAR) to estimate the effects of Chinese monetary policy on the Chinese economy. A FAVAR approach is particularly well-suited to this analysis due to concerns about Chinese data quality, a lack of a long history for many series, and the rapid institutional and structural changes that China has undergone. We find that increases in bank reserve ...
Working Paper Series , Paper 2014-7

Journal Article
How Many Rate Hikes Does Quantitative Tightening Equal?
Wei, Bin (2022-07-14)
In this article, I examine the question of how to quantify the equivalence between interest rate hikes and quantitative tightening (QT). Using a simple "preferred habit" model I estimate that a $2.2 trillion passive roll-off of nominal Treasury securities from the Federal Reserve's balance sheet over three years is equivalent to an increase of 29 basis points in the current federal funds rate at normal times, but 74 basis points during turbulent periods.
Policy Hub , Volume 2022 , Issue 11

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