FEDS Notes are articles in which Board economists offer their own views and present analysis on a range of topics in economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers

Monitoring the Liquidity Profile of Mutual Funds

Sirio Aramonte, Chiara Scotti, and Ilknur Zer

Policymakers and academics have been particularly attuned to the issues of liquidity transformation and first mover advantage at open-end mutual funds.Open-end mutual funds engage in liquidity transformation because they promise one-day redemptions on their assets, even when the invested assets have low or uncertain liquidity.

DOI: http://doi.org/10.17016/2380-7172.2558

The Geography of Small Business Dynamics

Business dynamism is a micro-foundation for economic growth. Productivity gains come from a reallocation of resources from less efficient to more efficient firms, often through entry of new firms and exit of existing firms.

DOI: http://doi.org/10.17016/2380-7172.2580

A Comparison of Living Standards Across the States of America

Elena Falcettoni and Vegard Nygaard (University of Houston)

While a large body of literature has examined how welfare, or living standards, vary across countries, very little is known about how welfare varies within a given country彩神8官方版. This note summarizes and discusses the analysis and results in Falcettoni and Nygaard (彩神8官方版), where we seek to fill this gap in the context of the United States.

DOI: http://doi.org/10.17016/2380-7172.2545

How do children spend their time? Time use and skill development in the PSID

Hannah Hall and Eric Nielsen

As income and wealth inequality have grown in the United States in recent decades, the large and growing differences in household expenditures on children from advantaged versus disadvantaged backgrounds have increasingly become a matter of public concern. High socioeconomic status (SES) households (those with high incomes and/or high levels of parental education) increasingly spend more money on physical goods (books, tuition, computers, etc.) and more time on "enrichment" activities such as 彩神网work, tutoring, reading, and extracurricular activities that are thought to directly foster cognitive (academic) skills.

DOI: http://doi.org/10.17016/2380-7172.2577

Analyzing the Community Bank Leverage Ratio

Bert Loudis, Daniel Nguyen, and Carlo Wix

This note analyzes the newly introduced Community Bank Leverage Ratio ("CBLR") framework. The analysis covers the framework's eligibility, its capital stringency, and its potential impact on system-wide capital levels under a hypothetical adverse scenario.

DOI: http://doi.org/10.17016/2380-7172.2516

Real Effects of Uncertainty: Evidence from Brexit

In the historic Brexit referendum on June 23, 2016, U.K. citizens voted in favor of leaving the European Union (EU), a result that created substantial uncertainty regarding the future economic relationship between the United Kingdom and the EU. As can be seen in Figure 1, uncertainty, measured by the Economic and Policy Uncertainty (EPU) index of Baker et al. (2016), spiked around the Brexit referendum date and has remained elevated relative to its pre-referendum levels since then.

DOI: http://doi.org/10.17016/2380-7172.2536

An Aggregate View of Bank Lending Standards and Demand

The Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) provides information about the supply of, and demand for, bank credit in the United States on a quarterly basis. SLOOS responses are used internally by Federal Reserve staff in monitoring bank lending conditions and as an input into research and analysis about broader economic and financial conditions.

DOI: http://doi.org/10.17016/2380-7172.2546

How Much Does 彩神网 Equity Extraction Matter for Spending?

Aditya Aladangady and Kelsey O'Flaherty

In this note, we investigate recent trends in 彩神网 equity extraction and how these trends may have impacted household spending and residential improvements. 彩神网 equity extractions—which rose and fell with house prices in the 1990s and 2000s—have remained sluggish in the recovery despite low interest rates and gains in 彩神网 equity. Compared to the mid-2000s, equity extractions have fallen especially among younger households and those with lower credit scores and higher leverage, suggesting that mortgage credit supply is likely tighter than before the recession, at least for portions of the population.

DOI: http://doi.org/10.17016/2380-7172.2535

Regulatory Arbitrage in the Use of Insurance in the New Standardized Approach for Operational Risk Capital

Basel's new standardized approach (SA) for operational risk capital may allow for regulatory arbitrage through the use of insurance. Under the SA, banks will have incentive to insure recurring losses, which can meaningfully reduce capital requirements even as it does not meaningfully decrease tail operational loss exposure. Several alternatives to deal with this regulatory arbitrage strategy are discussed.

DOI: http://doi.org/10.17016/2380-7172.2479

The Great Recession and a Missing Generation of Exporters

William F. Lincoln, Andrew H. McCallum, and Michael Siemer

While the large collapse in aggregate international trade volumes during the Great Recession has been widely studied in the literature, the recovery is much less well understood. Indeed, by 2014 U.S. foreign sales were still below their historical post-recession level. In this note, we summarize the results of Lincoln, McCallum, and Siemer (2019), which considers how much of a role a "missing generation of exporters" played in explaining the relatively slow growth of foreign sales after the financial crisis.

DOI: http://doi.org/10.17016/2380-7172.2531

Common and idiosyncratic inflation

In this note, we disentangle changes in prices due to economy-wide (common) shocks from changes in prices due to idiosyncratic shocks.

DOI: http://doi.org/10.17016/2380-7172.2508

What Happened in Money Markets in September 2019?

In mid-September 2019, overnight money market rates spiked and exhibited significant volatility, amid a large drop in reserves due to the corporate tax date and increases in net Treasury issuance.

DOI: http://doi.org/10.17016/2380-7172.2527

The Liquidity Coverage Ratio and Corporate Liquidity Management

This note examines the changes in the liquidity management at banks and nonbank financial firms in the United States that occurred following the proposal of the liquidity coverage ratio (LCR) requirement in 2010 and its finalization in 2014.

DOI: http://doi.org/10.17016/2380-7172.2509

Wealth concentration levels and growth: 1989-2016

Wealth concentration in the U.S. has increased over the past 25 years across multiple methodologies for measuring wealth. But the reasons for the increase—and the timing of the increase—are quite different. In this note, we show that most available estimates are fairly consistent in level and trend prior to the Financial Crisis. However, the timing and reasons for the sharp increase in wealth concentration during and after the crisis differ remarkably across methods. We describe some of the factors that underlie this divergence.

DOI: http://doi.org/10.17016/2380-7172.2438

What Happened to U.S. Business Dynamism?

Ufuk Akcigit and Sina T. Ates

The U.S. economy has witnessed a number of striking trends that indicate a rising market concentration and a slowdown in business dynamism in recent decades. We attempt to understand potential common forces behind these empirical regularities through the lens of a micro-founded general equilibrium model of endogenous firm dynamics.

DOI: http://doi.org/10.17016/2380-7172.2497

What Happened to Foreign Direct Investment in the United States?

This note demonstrates that the slowdown in FDIUS can be explained by two special factors: 1) a handful of corporate restructurings that are purely tax- and regulation-driven and affect the equity portion of direct investment flows, and 2) a reversal in intercompany debt flows that are often the result of corporate tax planning.

DOI: http://doi.org/10.17016/2380-7172.2499

How Global Value Chains Change the Trade-Currency Relationship

François de Soyres, Erik Frohm, Vanessa Gunnella

This note summarizes the main results of the de Soyres et al. (2018) paper, drawing out the most policy-relevant implications.

DOI: http://doi.org/10.17016/2380-7172.2504

How Do U.S. Global Systemically Important Banks Lower Their Capital Surcharges?

Jared Berry, Akber Khan, and Marcelo Rezende

In this note, we examine whether and how U.S. G-SIBs adjust their systemic importance indicators to lower their surcharges.

DOI: http://doi.org/10.17016/2380-7172.2480

Goods-Market Frictions and International Trade

Pawel M. Krolikowski and Andrew H. McCallum

The difficulty of locating and building connections with overseas buyers is a prevalent firm-level barrier to exporting. Producers and retailers must spend time and resources to find one another before they can transact.

DOI: http://doi.org/10.17016/2380-7172.2501

Why Has Wage Growth Been Subdued in the Advanced Foreign Economies?

Stephen Lin, Kaede Johnson, and Tyler Powell1

This note argues that certain factors, especially slower productivity growth and lower natural rates of unemployment, can explain much of the weakness of wage growth and the apparent breakdown of the simple wage Phillips curve.

DOI: http://doi.org/10.17016/2380-7172.2410

Monetary Policy Space in a Recession: Some Simple Interest Rate Arithmetic

As an alternative, two recession scenarios are presented in which interest rates change from October 2019 levels by the same amount as seen, on average, around the 1990 and 2001 recessions.

DOI: http://doi.org/10.17016/2380-7172.2484

Raising the Inflation Target: Lessons from Japan

In January 2013, the Bank of Japan increased its inflation target from 1 percent to 2 percent in an effort to end chronic deflation that had lasted for more than a decade. In this note, the author reviews this Japanese experience and highlights possible lessons for other central banks that may be interested in examining the possibility of raising their inflation target at some point in the future.

DOI: http://doi.org/10.17016/2380-7172.2493

Disclaimer: FEDS Notes are articles in which Board economists offer their own views and present analysis on a range of topics in economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers.

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Last Update: January 04, 2019