Federal Reserve

FEDS Paper: The Evolution of Inflation Targeting from the 1990s to 2020s: Developments and New Challenges

Michael T. Kiley and Frederic S. MishkinSince the initial launch of inflation targeting in the early 1990s in New Zealand and a few other countries, inflation targeting has become the predominant monetary policy strategy in large advanced and emerging market economies. Inflation targeting has been remarkably successful in anchoring inflation, likely owing to core elements of the framework across central banks.

FEDS Paper: From Friedman to Taylor: The Revival of Monetary Policy Rules in the 1990s

Edward NelsonThis paper examines the revival in the analysis of monetary policy rules that took place during the 1990s. The focus is on the role that John Taylor played in this revival. It is argued that Taylor’s role—most notably through his advancing the Taylor rule, developed in 1992−1993 and increasingly permeating discussions in research and policy circles over the subsequent several years—is usefully viewed as one of building bridges.

FEDS Paper: How Markets Process Macro News: The Importance of Investor Attention

T. Niklas KronerI provide evidence that investors' attention allocation plays a critical role in how financial markets incorporate macroeconomic news. Using intraday data, I document a sharp increase in the market reaction to Consumer Price Index (CPI) releases during the 2021-2023 inflation surge. Bond yields, market-implied inflation expectations, and other asset prices exhibit significantly stronger responses to CPI surprises, while reactions to other macroeconomic announcements remain largely unchanged.

FEDS Paper: Do Households Substitute Intertemporally? 10 Structural Shocks That Suggest Not

Edmund CrawleyI combine microdata on the intertemporal marginal propensity to consume with 10 structural macro shocks to identify the role of intertemporal substitution in consumption behavior. Although some of the structural shocks that I examine lead to large and persistent changes in real interest rates—which in many models would induce a large intertemporal substitution effect—I find no evidence that households shift the timing of their consumption in response to these interest rate changes.

FEDS Paper: A Model of Charles Ponzi

Gadi Barlevy, Ines XavierWe develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived agents. The model identifies when a Ponzi fraud can occur and what interventions can prevent it.

FEDS Paper: Beyond the Streetlight: Economic Measurement in the Division of Research and Statistics at the Federal Reserve

Carol Corrado, Arthur Kennickell, and Tomaz CajnerThis paper was written for the academic conference held in celebration of the 100th anniversary of the Division of Research and Statistics (R&S) of the Federal Reserve Board. The work of the Federal Reserve turns strongly on empirical efforts to understand the structure and state of the economy, and R&S can be thought of as operating a large factory for discovering and developing data and analytical methods to provide evidence relevant to the mission of the Board.

FEDS Paper: Challenging Demographic Representativeness at State Borders: Implications for Policy Research

Benjamin S. Kay and Albina KhatiwodaThis study examines the demographic characteristics of U.S. state border counties, comparing them with those of nonborder counties. The demographic representativeness of border counties is essential for the interpretation of the results in state border-county difference-in-difference analyses, used in state policy evaluations. Our findings reveal that border counties generally have higher proportions of White, older, and disabled populations.

FEDS Paper: CardSim: A Bayesian Simulator for Payment Card Fraud Detection Research

Jeffrey S. AllenPayment fraud has been high in recent years, and as criminals gain access to capability-enhancing generative AI tools, there is a growing need for innovative fraud detection research. However, the pace, diversity, and reproducibility of such research are inhibited by the dearth of publicly available payment transaction data. A few payment simulation methodologies have been developed to help narrow the payment transaction data gap without compromising important data privacy and security expectations.

IFDP Paper: How do Firms in Different Sectors Organize their Supply Chains? Evidence from Transaction-Level Import Data

Sebastian Heise, Justin R. Pierce, Georg Schaur, and Peter K. SchottHeise et al. (2021) develop a model-based empirical measure—sellers per shipment (SPS)—to characterize how firms organize supply chains in response to a quality control problem. High SPS indicates spot-market purchasing with costly inspections, while low SPS suggests long-term relationships where buyers pay an incentive premium to prevent cheating.

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