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Tag Archives: Crisis

Did State Reopenings Increase Social Interactions?

Rajashri Chakrabarti and Maxim Pinkovskiy Social distancing—avoiding nonessential movement and largely staying at home—is seen as key to limiting the spread of COVID-19. To promote social distancing, over forty states imposed shelter-in-place or stay-at-home orders, closing nonessential businesses, banning large gatherings, and encouraging citizens to stay home. Over the course of the last month, virtually all of these states have reopened. However, these reopenings were preceded...

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Outflows from Bank-Loan Funds during COVID-19

Nicola Cetorelli, Gabriele La Spada, and João Santos The COVID-19 pandemic has put significant pressure on debt markets, especially those populated by riskier borrowers. The leveraged loan market, in particular, came under remarkable stress during the month of March. Bank-loan mutual funds, among the main holders of leveraged loans, suffered massive outflows that were reminiscent of the outflows they experienced during the 2008 crisis. In this post, we show that the flow sensitivity of...

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The Great Lockdown through a Global Lens

By Gita Gopinath عربي, 中文, Español, Français, 日本語, Русский  The Great Lockdown is expected to play out in three phases, first as countries enter the lockdown, then as they exit, and finally as they escape the lockdown when there is a medical solution to the pandemic. Many countries are now in the second phase, as they reopen, with early signs of recovery, but with risks of second waves of infections and re-imposition of lockdowns. Surveying the economic landscape, the sheer scale and severity...

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How Fed Swap Lines Supported the U.S. Corporate Credit Market amid COVID-19 Strains

Nicola Cetorelli, Linda S. Goldberg, and Fabiola Ravazzolo The onset of the COVID-19 shock in March 2020 brought large changes to the balance sheets of the U.S. branches of foreign banking organizations (FBOs). Most of these branches saw sizable usage of committed credit lines by U.S.-based clients, resulting in increased funding needs. In this post, we show that branches of FBOs from countries whose central banks used standing swap lines with the Federal Reserve (“standing swap central...

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Have the Fed Swap Lines Reduced Dollar Funding Strains during the COVID-19 Outbreak?

Nicola Cetorelli, Linda S. Goldberg, and Fabiola Ravazzolo In March 2020, the Federal Open Market Committee (FOMC) made changes to its swap line facilities with foreign central banks to enhance the provision of dollars to global funding markets. Because the dollar has important roles in international trade and financial markets, reducing these strains helps facilitate the supply of credit to households and businesses, both domestically and abroad. This post summarizes the...

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The Paycheck Protection Program Liquidity Facility (PPPLF)

Haoyang Liu and Desi Volker This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak. On April 9, 2020, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the COVID-19 crisis. Among the measures taken was the establishment of a new facility intended to...

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Modeling the Global Effects of the COVID-19 Sudden Stop in Capital Flows

Ozge Akinci, Gianluca Benigno, and Albert Queralto The COVID-19 outbreak has triggered unusually fast outflows of dollar funding from emerging market economies (EMEs). These outflows are known as “sudden stop” episodes, and they are typically followed by economic contractions. In this post, we assess the macroeconomic effects of the COVID-induced sudden stop of capital flows to EMEs, using our open-economy DSGE model. Unlike existing frameworks, such as the Federal Reserve...

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Does the BCG Vaccine Protect Against Coronavirus? Applying an Economist’s Toolkit to a Medical Question

Richard Bluhm and Maxim Pinkovskiy Editor’s note: A sentence in this post has been corrected to state that Heinsberg, Germany, borders the Netherlands (rather than France, as originally stated). (May 11, 2020, 12:30 p.m.) As COVID-19 has spread across the globe, there is an intense search for treatments and vaccines, with numerous trials running in multiple countries. Several observers and prominent news outlets have noticed that countries still administering an old vaccine...

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The COVID-19 Pandemic and the Fed’s Response

Michael Fleming, Asani Sarkar, and Peter Van Tassel The Federal Reserve has taken unprecedented actions to mitigate the effects of the COVID-19 pandemic on U.S. households and businesses. These measures include cutting the Fed’s policy rate to the zero lower bound, purchasing Treasury and mortgage-backed securities (MBS) to promote market functioning, and establishing several liquidity and credit facilities. In this post, we briefly review the developments motivating these...

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How Does Supervision Affect Bank Performance during Downturns?

Uyanga Byambaa, Beverly Hirtle, Anna Kovner, and Matthew Plosser Supervision and regulation are critical tools for the promotion of stability and soundness in the financial sector. In a prior post, we discussed findings from our recent research paper which examines the impact of supervision on bank performance (see earlier post How Does Supervision Affect Banks?). As described in that post, we exploit new supervisory data and develop a novel strategy to estimate the impact of...

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