Federal Reserve

Olesya V. Grishchenko and Laura WilcoxWe study probabilities of extreme inflation events in the United States and the euro area. Using a state-space model that incorporates information from a large set of professional forecasters, we generate the term structure of inflation forecasts as well as probabilities of future inflation for any range of inflation outcomes in closed form at any horizon.

Christopher Gust and Arsenios SkaperdasWe study the relationship between government debt and interest rates in an environment where financial market participants have limited foresight about the future path of government debt. We show that limited foresight substantially attenuates estimates of the effect of government debt on longer-term yields relative to the benchmark of rational expectations often used in empirical analysis.

Buhui QIu, Teng WangThis paper examines corporate mergers and acquisitions (M&A) outcomes under lender scrutiny. Using the unique shocks of U.S. supervisory stress testing, we find that firms under increased lender scrutiny after their relationship banks fail stress tests engage in fewer but higher-quality M&A deals. Evidence from comprehensive supervisory data reveals improved credit quality for newly originated M&A-related loans under enhanced lender scrutiny.

Andrew C. Chang, Joanne W. Hsu, Eva Ma, Kate Bachtell, and Micah SjoblomTo encourage survey participation and improve sample representativeness, the Survey of Consumer Finances (SCF) offers an unconditional pre-paid monetary incentive and separate post-paid incentive upon survey completion.