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Bank:Federal Reserve Bank of Richmond  Series:Annual Report 

Unsustainable fiscal policy: implications for monetary policy

Federal government debt held by the public reached 67.7 percent of gross domestic product in 2011, and trends point to large budget deficits for many years to come. In this essay, economics writer Renee Haltom and research director John Weinberg explore the implications for monetary policy if the United States ever approached its "fiscal limit." In that scenario, the Federal Reserve might face pressure to produce inflation revenue. The authors conclude that the United States must avoid this scenario by placing fiscal policy on a more sustainable path
Annual Report

Systemic risk and the pursuit of efficiency

In this essay, senior economist Kartik Athreya identifies systemic risk with the presence of linkages between market participants, where problems for one directly create problems for others. He argues that such situations can arise from the use of contractual arrangements, especially debt that requires frequent refinancing and liquidation in the event of an inability to repay. The presence of spillover effects can, in turn, lead to outcomes in the wake of shocks that can be improved via policy intervention. Nonetheless, he cautions against taking this as a license to intervene after the fact, ...
Annual Report

Living Wills: A Tool for Curbing 'Too Big to Fail'

Economist Arantxa Jarque and senior editor David A. Price explore an innovation of the Dodd-Frank Act of 2010, which requires the largest and most complex financial institutions to create resolution plans to follow if the institutions fall into severe financial distress. In these plans, or "living wills," the institutions must give regulators a roadmap for resolving them via the bankruptcy process ? without disrupting the financial system or resorting to public bailouts. Jarque and Price argue that living wills are a tool that regulators can use to curb the "too big to fail" problem ...
Annual Report

Understanding Urban Decline

Senior policy economist Santiago Pinto and economics writer Tim Sablik discuss the forces that drive urbanization and the factors that determine where firms and households locate within cities. Pinto and Sablik also evaluate a variety of place-based and people-based policy responses to urban decline. Because every city is different, the authors caution that revitalization efforts that worked for one city may not work for another.
Annual Report




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