“The failures of several U.S. regional banks have stimulated discussions about the macroeconomic effects of a likely credit contraction triggered by the recent banking turmoil. Drawing on historical evidence from advanced economies, this study documents a sizable and persistent decline in output and rise in unemployment following non-systemic financial distress. The effects of a systemic…

“Our results suggest that any significant tightening in credit conditions that has occurred in the wake of recent bank failures may take some time to impact the broad swath of Main Street businesses, as just 25 percent of firms in the SBU anticipate seeking credit financing during the next 12 months. And the majority of…

“If you follow speeches by members of the Federal Open Market Committee (FOMC), you will hear references to both “headline” and “core” household inflation. The former refers to a measure of inflation that is based on a weighted basket of goods and services from all household spending categories. The latter typically refers to a measure…

“Real gross domestic product (GDP) increased at an annual rate of 1.3 percent in the first quarter of 2023 (table 1), according to the “second” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.” “The GDP estimate released today is based on more complete source data than…

“Even though both financial stress and monetary policy tightening slow economic activity, they do not necessarily have the same implications for inflation. Our analysis shows that financial stress generates more modest disinflationary effects than monetary policy tightening for the same increase in the unemployment rate. Therefore, to the extent financial stresses reduce inflation, they do…

“Participants agreed that it would be important to closely monitor incoming information and assess the implications for monetary policy. In deter-mining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, various participants noted specific factors that should bear on future decisions on policy actions. One such…

“Given the term’s appearance in recent communications from central bankers about monetary policy, this article will examine some key questions about what long and variable lags are, what causes them, where the concept originated, and what they may look like today …”

“The impact of price on firm value can be understood through two main channels: level of profit per customer and customer base dynamics. In other words, the price influences the mass of customers buying from the firm in the current period, as well as the future customer base. Therefore, setting the optimal price requires balancing…

“In this post we have illustrated our approach to measuring a financial (in)stability real interest rate. We stress that our r** should be interpreted as a current indicator of financial stress as opposed to a predictor of future vulnerabilities, and that our relatively simple framework constitutes a first step in developing more refined and accurate…

“M2 is a broad measure of the money supply, including currency and various sorts of bank and money market mutual fund deposits that are relatively liquid. Figure 1 shows that the year-over-year growth rate of M2 has behaved very unusually since February 2020: M2 grew at record rates during the COVID-19 pandemic from February 2020…

“In sum, the platinum coin is an interesting thought experiment for students of fiscal and monetary economics and policy. Its practical implementation in the real world would — even if “workable” and a short-term fix — perhaps fundamentally alter the relationship between the monetary and the fiscal authority. The historical experience suggests serious risks to…

“We build a new measure of credit and financial market sentiment using Natural Language Processing on Twitter data. We find that the Twitter Financial Sentiment Index (TFSI) correlates highly with corporate bond spreads and other price- and survey-based measures of financial conditions. We document that overnight Twitter financial sentiment helps predict next day stock market…

“We present an indicator of job loss derived from Twitter data, based on a fine-tuned neural network with transfer learning to classify if a tweet is job-loss related or not. We show that our Twitter-based measure of job loss is well-correlated with and predictive of other measures of unemployment available in the official statistics and…

“Three main results arise from our analysis. First, we find that financial intermediation can improve the allocation at zero interest rates because it relaxes the liquidity constraints of impatient borrowers. Second, changes in credit conditions are not necessarily neutral at zero interest rates in a monetary equilibrium. When the debt limit is low, money and…

“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…