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Tag Archives: Federal Reserve

The Money Market Mutual Fund Liquidity Facility

Marco Cipriani, Gabriele La Spada, Reed Orchinik, and Aaron Plesset 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. Over the first three weeks of March, as uncertainty surrounding the COVID-19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation,...

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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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How the Fed Managed the Treasury Yield Curve in the 1940s

Kenneth D. Garbade The coronavirus pandemic has prompted the Federal Reserve to pledge to purchase Treasury securities and agency mortgage-backed securities in the amount needed to support the smooth market functioning and effective transmission of monetary policy to the economy. But some market participants have questioned whether something more might not be required, including possibly some form of direct yield curve control. In the first half of the 1940s the Federal Open...

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Alphabet soup

It's that time of the economic cycle. Financial writers are flocking to the phrase alphabet soup again. This was a phrase we all adopted in 2008 to describe the hodge podge of credit facilities created by the Federal Reserve to deal with the credit crisis. Twelve years later, alphabet soup applies just as well to the Fed's response to the coronavirus crisis.As in 2008 the Fed is currently trying to get funding into as many nooks & crannies of the credit system as it can. The easiest...

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Monetary and Financial Stability During the Coronavirus Outbreak

By Tobias Adrian This blog is part of a special series on the response to the coronavirus. The global spread of the coronavirus is a human tragedy unfolding across the world. Quantifying the economic impact is complex, giving rise to significant uncertainty about the economic outlook and the associated downside risks. Such an abrupt rise in uncertainty can put both economic growth and financial stability at risk. In addition to targeted economic policies and fiscal measures, the right...

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Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK

Sushant Acharya and Keshav Dogra In recent years there has been a lot of interest in the effect of income inequality (heterogeneity) on the economy, from both academics and policymakers. Researchers have developed Heterogeneous Agent New Keynesian (HANK) models that incorporate heterogeneity and uninsurable idiosyncratic risk into the New Keynesian models that have become a cornerstone of monetary policy analysis. This research has argued that heterogeneity and idiosyncratic risk change...

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The Watergate banknotes

Cash isn't quite anonymous, it's anonymous-ish. To illustrate this, a few years ago I wrote about the 1932 Lindbergh kidnapping case. The ransom was paid in gold certificates, not Federal Reserve notes. By coincidence, the U.S. went off the gold standard the next year, and all gold certificates were called in. So when the kidnapper spent some of his gold certificates in 1934 to buy gas, his purchase was odd enough to out him to the authorities. I recently stumbled on a more recent example...

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2019 in Review: The Global Economy Explained in 5 Charts

By Gita Gopinath, Gian Maria Milesi-Ferretti, and Malhar Nabar عربي, Español, 中文, Français Global growth this year recorded its weakest pace since the global financial crisis a decade ago, reflecting common influences across countries and country-specific factors. Rising trade barriers and associated uncertainty weighed on business sentiment and activity globally. In some cases (advanced economies and China), these developments magnified cyclical and structural slowdowns already under way....

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Mooning over daylight overdrafts

Every few days for the last month or so I've been refreshing a Federal Reserve page that shows data about daylight overdrafts. For some reason the Fed only updates it every few months. I had been getting quite curious to see what happened during the great September interest rate spike. Well, finally the Fed has uploaded the data. If you don't know about the September rate spike, I'd suggest reading Nathan Tankus's tweet, listening to David Beckworth's podcast with Bill Nelson, or picking...

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