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Journal Article
Improving the measurement of cross-border securities holdings: the Treasury International Capital SLT
In the wake of the financial crisis, growing interest in improving the measurement of cross-border securities positions and flows spurred the introduction of a new Treasury International Capital (TIC) reporting form, the TIC Security Long Term (SLT). This article reviews the existing structure of TIC cross-border position and flow data, the benefits that the new SLT can provide, and the incoming information from the first two reporting months of SLT data, September and December 2011. While some patterns and characteristics of the SLT data will become clear only after more data have ...
Working Paper
Whither the liquidity effect: the impact of Federal Reserve Open Market Operations in recent years
Previous research indicated that the daily liquidity effect, or the change in the federal funds rate associated with an exogenous change in Fed balances, varies with several factors including the day of the maintenance period. In this paper, we examine the data over the recent period of increased Federal Reserve transparency and find that the liquidity effect stabilized across days of the maintenance period. Rather, the liquidity effect may be a function of the uncertainty about banks' end-of-day balances. Moreover, we find that increased transparency led to a larger liquidity effect on the ...
Working Paper
Demand for M2 at the Zero Lower Bound: The Recent U.S. Experience
In this paper, we re-examine the relationship between money and interest rates with a focus on the past few years, when the opportunity cost of M2 has dropped below zero. Until the late 1980s, a stable relationship between monetary aggregates and the opportunity cost of holding money--measured as the spread between the three-month Treasury bill yield and the deposit-weighted average return on M2 assets--existed, and played an integral role in the conduct of monetary policy (e.g., Moore et al.(1990)). This relationship broke down in the early 1990s, when M2 velocity increased beyond the range ...
Working Paper
International Dollar Flows
Using confidential Federal Reserve data, we study the factors driving U.S. banknote flows between the United States and other countries. These flows are a significant component of capital flows in emerging market economies, where physical U.S. currency functions as a safe asset and precautionary demand for U.S. banknotes is a form of flight to quality. Prior to the global financial crisis, country-specific factors, including local economic uncertainty, largely explain the volume and heterogeneity of the flows. Since the crisis, global factors, particularly, global economic uncertainty, ...
Working Paper
Estimating dynamic panel data models: a practical guide for macroeconomists
We use a Monte Carlo approach to investigate the performance of several different methods designed to reduce the bias of the estimated coefficients for dynamic panel data models estimated with the longer, narrower panels typical of macro data. We find that the bias of the least squares dummy variable approach can be significant, even when the time dimension of the panel is as large as 30. For panels with small time dimensions, we find a corrected least squares dummy variable estimator to be the best choice. However, as the time dimension of the panel increases, the computationally simpler ...
Discussion Paper
Estimating the volume of counterfeit U.S. currency in circulation worldwide: data and extrapolation
The incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the U.S. Treasury and the U.S. Secret Service. This paper assembles data from Federal Reserve and U.S. Secret Service sources and presents a range of estimates for the number of counterfeits in circulation. In addition, the paper presents figures on counterfeit passing activity by denomination, location, and method of production. The paper has two main conclusions: first, the stock of ...
Working Paper
Do low human capital coefficients make sense? A puzzle and some answers
I develop a new measure of human capital stock that has two advantages over previous measures. First, it allows for varying costs of education across time, countries, and level of education. Second, the unit of measurement is dollars, which allows comparison of human capital stocks with other macro- economic variables, including national income (GDP) and physical capital stocks. Using cross-country panel regression analysis, I find that human capital accumulation accounts for a relatively small (about ten percent) of per-capita GDP growth. I further find that, unlike physical capital, the ...
Working Paper
Sticky deposit rates
We examine the dynamics of eleven different deposit rates for a panel of over 2,500 branches of about 900 depository institutions observed weekly over ten years. We replicate previous work showing that rates are downwards-flexible and upwards-sticky, and show that a simple menu cost model can generate this behavior. The degree of asymmetric rigidity varies substantially by deposit type, bank size, and across branches of the same bank. In the absence of such stickiness, depositors would have received as much as $100 billion more in interest per year during periods when market rates were ...
Journal Article
Improving Measurement of Cross-Border Securities Holdings: The TIC SLT
In the wake of the financial crisis, growing interest in improving the measurement of cross-border securities positions and flows spurred the introduction of a new Treasury International Capital (TIC) reporting form, the TIC Security Long Term (SLT). This article reviews the existing structure of TIC cross-border position and flow data, the benefits that the new SLT can provide, and the incoming information from the first two reporting months of SLT data, September and December 2011. While some patterns and characteristics of the SLT data will become clear only after more data have ...
Working Paper
Estimating U.S. Cross-Border Securities Positions: New Data and New Methods
The role of capital flows in the buildup to the global financial crisis and the potential vulnerabilities posed by capital flows to emerging market economies highlight the importance of reliable and timely measures of cross-border investment activity to better monitor developments as they unfold. We present new monthly estimates of U.S. cross-border securities investment, combining information from detailed annual Treasury International Capital (TIC) surveys with new information from the TIC form SLT. We also show how changes in the new monthly data can be decomposed into flows, estimated ...