Jaemin Jeong, Eunseong Ma, Choongryul YangWhen do households listen to the Fed? We show the answer lies in a simple but powerful force: household attention to macroeconomic conditions. We develop a model where attention acts as a crucial gatekeeper for the pass-through of policy news to beliefs, and confirm its predictions using household survey data.
Daniel A. Dias; Sophia C. ScottThis paper shows that U.S. commercial banks' funding betas rise predictably with the length, magnitude, and direction of each monetary policy cycle: longer cycles and those with larger changes in the policy rate yield stronger pass-through in both tightening and loosening cycles, with modest asymmetry favoring slightly greater transmission during loosening cycles. Nondeposit liabilities consistently adjust more than deposits.
David M. Arseneau and Gazi I. KaraThis paper uses a large-scale redrawing of flood zone maps for the City of New Orleans in 2016 to identify how banks respond to changes in perceived flood risk in residential mortgage origination. Using geo-coding, we separate loan-level data on mortgage originations into treatment versus control groups based on how individual properties were affected by the map changes.
Charles Taragin, Benjamin Wallace, Eddie WatkinsWe study how corporate debt influences the competitive outcomes of horizontal and conglomerate mergers. In contrast to standard models where debt does not affect pricing, our framework shows that mergers can spread fixed debt obligations across a broader product portfolio, creating an "insurance effect" against adverse demand shocks. This effect interacts with the traditional recapture effect from reduced competition.
Matthew P. Seay and Shawn M. KimbleDid bank equity prices reflect growing sector imbalances before the 2023 failure of Silicon Valley Bank? We find that banks with higher reliance on uninsured deposits, or with higher marked-to-market leverage, had lower equity returns prior to SVB's collapse. Although markets priced uninsured deposits and high leverage individually, their interaction was not reflected in market prices prior to SVB’s failure.
Brent Bundick, Isabel Cairó, Nicolas Petrosky-NadeauAsymmetries play an important role in many macroeconomic models. We show that assumptions on household and firm expectations play a key role in determining the effects of these asymmetries on macroeconomic outcomes.
Colin WeissI examine how governments have managed their holdings of gold and dollar reserves in recent decades, a period when gold’s share of aggregate international reserves rose and the dollar’s share fell. Using data on central banks’ reserve currency composition and official sector purchases of U.S. assets, I argue that gold reserve accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases.
Rochelle M. Edge and Dan LiThis paper proposes an approach to enhance the Federal Reserve's readiness to undertake market-functioning asset purchases during Treasury market disruptions.
Friederike Niepmann and Leslie Sheng ShenHow do banks respond to geopolitical risk, and is this response distinct from other macroeconomic risks? Using U.S. supervisory data and new geopolitical risk indices, we show that banks reduce cross-border lending to countries with elevated geopolitical risk but continue lending to those markets through foreign affiliates—unlike their response to other macro risks.
Todd PronoIn heavy-tailed cases, variance targeting the Student's-t estimator proposed in Bollerslev (1987) for the linear GARCH model is shown to be robust to density misspecification, just like the popular Quasi-Maximum Likelihood Estimator (QMLE). The resulting Variance-Targeted, Non-Gaussian, Quasi-Maximum Likelihood Estimator (VTNGQMLE) is shown to possess a stable limit, albeit one that is highly non-Gaussian, with an ill-defined variance.
