Federal Reserve

IFDP Paper: Estimating the Volume of Counterfeit U.S. Currency in Circulation

Ruth JudsonThe incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the Federal Reserve, the U.S. Treasury and the United States Secret Service (USSS), who are jointly responsible for U.S. banknote design, including security features, and production.

FEDS Paper: Heraclius: A Byzantine Fault Tolerant Database System with Potential for Modern Payments Systems

James Lovejoy, Tarakaram Gollamudi, Jeremy Kassis, Narayanan Pillai, Jeremy Brotherton, and Eric ThompsonModern payments systems are critical infrastructure for the US and global economy, and they all utilize computing systems to facilitate transactions. These computing systems can be vulnerable to failures and an outage of a payment system could cause a serious ripple effect throughout the economy it supports.

FEDS Paper: Research in Commotion: Measuring AI Research and Development through Conference Call Transcripts

Paul E. SotoThis paper introduces a novel measure of firm-level Artificial Intelligence (AI) Research & Development—the AIR Index—derived from the semantic similarity between earnings conference call transcripts and leading AI research papers. The AIR Index varies widely across industries, with sustained strength in computer and electronic manufacturing, and accelerating growth in computing infrastructure and educational services seen after the introduction of ChatGPT in November 2022.

IFDP Paper: Geopolitics Meets Monetary Policy: Decoding Their Impact on Cross-Border Bank Lending

Swapan-Kumar Pradhan, Viktors Stebunovs, Előd Takáts, and Judit TemesvaryWe use bilateral cross-border bank claims by nationality to assess the effects of geopolitics on cross-border bank flows. We show that a rise in geopolitical tensions between countries — disagreements in UN voting, broad sanctions, or sentiments captured by geopolitical risk indices — significantly dampens cross-border bank lending.

FEDS Paper: Shedding Light on Survey Accuracy—A Comparison between SHED and Census Bureau Survey Results

Kabir Dasgupta, Fatimah Shaalan, and Mike ZabekThe annual Survey of Household Economics and Decisionmaking (SHED) receives substantial research attention for topics related to household finances and economic well-being. To assess the reliability of data from the SHED, we compare aggregate statistics from the SHED with prominent, nationally representative surveys that use different survey designs, sample methodologies, and interview modes.

FEDS Paper: Regulating Bank Portfolio Choice Under Asymmetric Information

Chris AndersonRegulating bank risk-taking is challenging since banks know more than regulators about the risks of their portfolios and can make adjustments to game regulations. To address this problem, I build a tractable model that incorporates this information asymmetry. The model is flexible enough to encompass many regulatory tools, although I focus on taxes. These taxes could also be interpreted as reflecting the shadow costs of other regulations, such as capital requirements.

FEDS Paper: The effect of ending the pandemic-related mandate of continuous Medicaid coverage on health insurance coverage

Kabir Dasgupta, Keisha SolomonThe Medicaid continuous enrollment provision, which ensured uninterrupted coverage for beneficiaries during the COVID-19 pandemic, was ended in March 2023. This unwinding process has led to large-scale Medicaid disenrollments, as states resumed their standard renewal process to evaluate enrolled individuals' eligibility status.

FEDS Paper: Non-monetary news in Fed announcements: Evidence from the corporate bond market(Revised)

Michael Smolyansky and Gustavo SuarezWhen the Federal Reserve tightens monetary policy, do the prices of riskier assets fall relative to safer assets? Or, do investors interpret policy tightening as a signal that economic fundamentals are stronger than they previously believed, thus leading riskier assets to outperform? We present evidence that the latter of these two forces empirically dominates within the U.S. corporate bond market.

FEDS Paper: Beliefs, Aggregate Risk, and the U.S. Housing Boom(Revised)

Margaret M. JacobsonEndogenously optimistic beliefs about future house prices can account for the increase, time-path, and volatility of house prices in the U.S. housing boom of the 2000s without shocks to housing preferences. In a general equilibrium model with incomplete markets and aggregate risk, heterogeneous agents endogenously form beliefs about future house prices in response to shocks to fundamentals.

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