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Working Paper
Monetary Policy Spillovers Under Covid-19: Evidence from U.S. Foreign Bank Subsidiaries
This paper uses Call Report data to examine the impact of home country monetary policy on foreign bank subsidiary lending in the United States during the COVID-19 pandemic. Examining a large sample of foreign bank subsidiaries and domestic U.S. banks, we find that foreign bank lending growth was positively associated with both lower home country policy rates and negative home country rates. Our point estimates indicate that a one standard deviation decrease in home country policy rates was associated with a 3.5 percentage point increase in lending growth while negative home country policy ...
Speech
Observations on Monetary Policy and the Zero Lower Bound: Remarks for a Panel Discussion at the 2020 Spring Meeting of the Shadow Open Market Committee: “Current Monetary Policy: The Influence of Marvin Goodfriend”
I would like to thank the organizers of this conference for inviting me to participate on this panel – and more broadly for organizing a conference examining many of the challenges policymakers have faced over the past 20 years. As many of you know, these were challenges that Marvin Goodfriend anticipated, well before the Great Recession forced policymakers to confront them. Specifically, our panel topic – monetary policy and the zero lower bound – is one that Marvin devoted a good deal of thought to. And as I’ll touch on today, his emphasis on this topic proved prescient.
Report
Liquidity, Collateral Quality, and Negative Interest Rate
We analyze how banks manage liquidity between cash and marketable securities and its impact on the refinancing of projects subject to a liquidity shock. Securities can be pledged as collateral to acquire additional cash but are an imperfect hedge because their quality is uncertain. We show that banks may hold too much or too little cash in equilibrium compared to the first-best level, depending on the dispersion of securities value. Furthermore, the equilibrium relationship between the dispersion and banks cash holding is non-monotonous. We use this framework to assess the impact of liquidity ...
Speech
Research, Policy, and the Zero Lower Bound
Remarks at Shadow Open Market Committee Spring Meeting, New York City.
Working Paper
Passive Quantitative Easing: Bond Supply Effects through a Halt to Debt Issuance
This article presents empirical evidence of a supply-induced transmission channel to longterm interest rates caused by a halt to government debt issuance. This is conceptually equivalent to a central bank operated asset purchase program, commonly known as quantitative easing (QE). However, as it involves neither asset purchases nor associated creation of central bank reserves, we refer to it as passive QE. For evidence, we analyze the response of Danish government bond risk premia to a temporary halt in government debt issuance announced by the Danish National Bank. The data suggest that ...
Speech
Negative nominal central bank policy rates: where is the lower bound?
Remarks at the University of Wisconsin.
Working Paper
The Safety Premium of Safe Assets
Safe assets usually trade at a premium due to their high credit quality and deep liquidity. To understand the role of credit quality for such premia, we focus on Swiss Confederation bonds, which are extremely safe but not particularly liquid. We therefore refer to their premia as safety premia and quantify them using an arbitrage-free term structure model that accounts for time-varying premia in individual bond prices. The estimation results show that Swiss safety premia are large and exhibit long-lasting trends. Furthermore, our regression analysis suggests that they shifted upwards ...