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FEDS Paper: Declining Search Frictions, Unemployment, and Growth Revisited

10/31/2025 Federal Reserve Central banks

Juan Carlos Córdoba, Anni T. Isojärvi, and Haoran LiThis paper revisits the conditions under which search models generate balanced growth paths (BGPs)—equilibria where unemployment, vacancies, and job flows remain steady as search frictions decline. Martellini and Menzio (2020) claim that such paths exist only when matches are “inspection goods” and match quality follows a Pareto distribution. We show that these conditions are sufficient but not necessary.

FEDS Paper: Do the Rich Really Save More? Answering an Old Question Using the SCF with Direct Measures of Lifetime Earnings and an Expanded Wealth Concept

10/31/2025 Federal Reserve Central banks

Elizabeth Llanes, Jeffrey Thompson, and Alice Henriques VolzThe question of whether affluent households save at a higher rate than other parts of the distribution has been asked by economists on numerous occasions since the 1950s. It is standard in this research to define affluent, or “rich,” households as those with high lifetime earnings or income to better ground the empirical question in relevant theory.

FEDS Paper: Understanding Preferences for Payment Cards using Household Scanner Data

10/31/2025 Federal Reserve Central banks

Marc Rysman, Shuang Wang, and Krzysztof WozniakWe use consumer panel scanner data to examine households' payment choices, a new application of such data. In particular, we study the long-term shift towards payment cards, as well as the role of transaction size in determining choices. We find that idiosyncratic household preferences are a key driver of payment choice.

IFDP Paper: The case for supporting liquidity supply in (some corners of) non-bank intermediation

10/15/2025 Federal Reserve Central banks

Sirio AramonteAfter the Global Financial Crisis, the liquidity-supply ecosystem that underpins nonbank intermediation shifted away from traditional dealers. Instead, it started to rely more on intermediaries with fragile funding structures and opportunistic investment strategies. Over the years, stress episodes saw the sudden retrenchment of these intermediaries, which amplified liquidity imbalances and market malfunction.

IFDP Paper: Retail inventories and inflation dynamics: The price margin channel

10/15/2025 Federal Reserve Central banks

Neil Mehrotra, Hyunseung Oh, and Julio L. OrtizUsing industry-level panel data and plausibly exogenous variation in supply conditions, we estimate the elasticity of retail price margins with respect to inventories along the retailer's optimal pricing curve. We find that this elasticity is negative and statistically significant, implying that lower finished-good inventories lead to higher price margins.

FEDS Paper: Decomposing Recent Employment Gains Among Disabled Workers

10/15/2025 Federal Reserve Central banks

Hsinyu (Samuel) Tseng, Douglas A. WebberWe use the longitudinal component of the Current Population Survey to compare transition rates into and out of disability and employment prior to and after the onset of the pandemic. We find that one-third of the increased employment rate among disabled people is due to the excess incidence of disability seen following the pandemic, while the other two-thirds is attributable to higher participation among people whose disabilities were unrelated to the pandemic.

FEDS Paper: Illiquid Homeownership and the Bank of Mom and Dad

09/30/2025 Federal Reserve Central banks

Eirik Eylands BrandsaasHousing is the largest asset in U.S. household portfolios, and first-time homebuyers increasingly rely on parental transfers. This paper quantifies the contribution of parental transfers to the homeownership rate of young households. I build and estimate a life-cycle overlapping generations model with housing, where adult children and parents interact without commitment. I find that parental transfers account for 13 percentage points (27%) of young households' homeownership.

FEDS Paper: “Harvest Now Decrypt Later”: Examining Post-Quantum Cryptography and the Data Privacy Risks for Distributed Ledger Networks

09/30/2025 Federal Reserve Central banks

Jillian Mascelli and Megan RoddenThis paper analyzes the risks posed by future-state quantum computers, specifically the “harvest now decrypt later” (HNDL) risk. We review foundational concepts of quantum computing to address the present and ongoing threat of HNDL to currently protected data. We use the Bitcoin network as an illustrative example to study the implications of HNDL for distributed ledger cryptocurrency networks that rely upon traditional cryptography.

FEDS Paper: Can LLMs Improve Sanctions Screening in the Financial System? Evidence from a Fuzzy Matching Assessment

09/29/2025 Federal Reserve Central banks

Jeffrey S. Allen and Max S. S. HatfieldWe examined the performance of four families of large language models (LLMs) and a variety of common fuzzy matching algorithms in assessing the similarity of names and addresses in a sanctions screening context. On average, across a range of realistic matching thresholds, the LLMs in our study reduced sanctions screening false positives by 92 percent and increased detection rates by 11 percent relative to the best-performing fuzzy matching baseline.

FEDS Paper: Parallel Trends Forest: Data-Driven Control Sample Selection in Difference-in-Differences

09/29/2025 Federal Reserve Central banks

Yesol Huh and Matthew Vanderpool KlingThis paper introduces parallel trends forest, a novel approach to constructing optimal control samples when using difference-in-differences (DiD) in a relatively long panel data with little randomization in treatment assignment. Our method uses machine learning techniques to construct an optimal control sample that best meet the parallel trends assumption. We demonstrate that our approach outperforms existing methods, particularly with noisy, granular data.

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