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Report
Spillovers of Conventional and Unconventional Monetary Policy: The Role of Real and Financial Linkages
Central banks around the world launched extraordinary monetary policy responses to the global financial crisis of 2007?09 and the European debt crises that began in 2010. Some were coordinated; all were directed at fulfilling domestic mandates for price and financial stability and supporting real economic activity.
Working Paper
The Double-Edged Sword of Global Integration: Robustness, Fragility & Contagion in the International Firm Network
We estimate global inter-firm networks across all major industries from 1981 through 2016 and provide the first empirical tests for both robust (beneficial) and fragile (harmful) network behavior, relating firms' health with global integration. More connected firms are less likely to be in distress and have higher profit growth and equity returns, but are also more exposed to direct contagion from distressed neighboring firms and network level crises. Our analysis reveals the centrality of finance in the international firm network and increased globalization, with greater potential for crises ...
Three Macroeconomic Factors to Watch in Equity Markets
Machine learning has helped make music playlist recommendations, facilitated self-driving cars and even interpreted patients’ medical test results.
Journal Article
Impact of Macroeconomic Surprises Changed After Zero Lower Bound
Macroeconomic surprises involving employment and inflation?reflecting the Fed?s attempts to achieve its dual mandate to promote full employment and price stability?increased in importance during the zero-lower-bound period. Also, market participants were more attentive to housing market indicators and final GDP revisions.
Journal Article
Global Interfirm Network Reveals Centrality of U.S. and Financial Sector
The global interfirm network indicates the level of integration among firms across industries and regions, which intensified with globalization in recent decades. While there is evidence of direct contagion passing between firms in the network, there are also indications that connectedness plays a role in a reduced likelihood of firm distress and improved performance.
Working Paper
Upstream, Downstream & Common Firm Shocks
We develop a multi-sector DSGE model to calculate upstream and downstream industry exposure networks from U.S. input-output tables and test the relative importance of shocks from each direction by comparing these with estimated networks of firms? equity return responses to one another. The correlations between the upstream exposure and equity return networks are large and statistically significant, while the downstream exposure networks have lower ? but still positive ? correlations that are not statistically significant. These results suggest a low short-term elasticity of substitution ...
Journal Article
Stock market provides imperfect view of real U.S. economy
Monitoring global economic and financial developments is important for assessing labor markets and inflation as well as risks to the economic outlook. The stock market?through measures such as the Standard & Poor?s 500?is often thought to be an economic bellwether. However, market volatility compromises the reliability of such indexes.
Working Paper
Can interest rate factors explain exchange rate fluctuations?
This paper explores whether interest rate factors, derived from the yield curve, can explain exchange rate fluctuations at different horizons. Using a dynamic term structure model under no-arbitrage, exchange rates are modeled as the ratio of two countries? stochastic discount factors. Key to this framework is that factors are observable, which allows the model to be estimated by Maximum Likelihood. Results show that interest rate factors can explain half of the variation in one-year exchange rates and up to ninety percent of five-year movements, for free-floating currencies from 1999 to ...
Working Paper
Macroeconomic news and asset prices before and after the zero lower bound
With short-term policy interest rates constrained by their effective zero lower bound (ZLB), monetary policy relied on communicating the future path of policy conditional on incoming macroeconomic data. Motivated by this, we exploit intra-day prices to investigate how updates on the state of the U.S. economy affect interest rates and exchange rates before and after the ZLB. We find that releases reflecting the dual mandate of the Fed rose in importance and ? as an ex-post acknowledgement of the sources of the Great Recession ? additional housing market indicators and GDP revisions, that ...