Reports

“In a recent research paper we argue that interest rates have very different consequences for current versus future financial stability. In the short run, lower real rates mean higher asset prices and hence higher net worth for financial institutions. In the long run, lower real rates lead intermediaries to shift their portfolios toward risky assets, making…

“The inflation expectations of individuals who lead firms can influence the prices that their firms charge customers and hence can influence overall inflation. This Economic Commentary summarizes results from the Survey of Firms’ Inflation Expectations (SoFIE), which asks top business executives for their inflation expectations once per quarter alongside a second question from a rotating…

“Previous literature has established that the role of family income has grown substantially at predicting college entry decisions when comparing the 1979 and 1997 National Longitudinal Surveys of Youth (e.g., Belley and Lochner (2007)). In this article, I further examine the changing role of family income as a determinant of college quality choice, degree attainment,…

” This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms…

“In conclusion, our findings highlight how economic mis-measurement in widely used data can bias our understanding of economic activity. With recent debates regarding the rise of market power and markup in the U.S., it is more important than ever to pay close attention to the measurement of economic variables used in policy decisions and academic…

“U.S. congressional roll-call voting records show that as polarization of the two parties alongthe economic dimension changes, polarization along the social/cultural dimension tends tochange in the opposite direction. A model of party competition within a two-dimensionalideology space is developed in which party platforms are determined by voters who composethe party. It is shown that if…

“Results from the 2022 Survey of Household Economics and Decision making (SHED) indicate a decline in peoples’ financial well-being over the previous year.1 The survey, which was fielded in October 2022, found that self-reported financial well-being fell sharply and was among the lowest observed since 2016. Similarly, the share of adults who said that they…

“What is the effect of a hike in interest rates on the economy? Building on recent research, we argue in this post that the answer to this question very much depends on how vulnerable the financial system is. We measure financial vulnerability using a novel concept—the financial stability interest rate r** (or “r-double-star”)—and show that, empirically,…

“Extended periods of ultra-easy monetary policy in advanced economies have rekindled debates about the zombification of weak companies and its impact on resource allocation, economic growth, inflation, and financial stability. Using both firm-level and macroeconomic data, we find that recessions are a critical factor in the rapid increase in the number of zombie firms. Expansionary…

“To conclude, global central banks have responded to the large and persistent inflation surge over the last two years by engaging in a rapid tightening cycle. This “coordinated” global monetary policy reaction is potentially magnifying financial tightness whose time-series and cross-country cumulative effects are difficult to assess in real time because of potential nonlinearities in…