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Showing results 1 to 10 of approximately 34.
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Report
How "unconventional" are large-scale asset purchases? The impact of monetary policy on asset prices
This paper examines the impact of large-scale asset purchases (LSAP) on U.S. asset prices (nominal and inflation-indexed bonds, stocks, and U.S. dollar spot exchange rates) using an event study with intraday data. The surprise component of LSAP announcements is identified from Financial Times articles. Estimation results show that the LSAP news has economically large and highly significant effects on asset prices, even after controlling for the surprise component of the Fed's conventional target rate decision and communication about its future path of policy. This study documents that the ...
Report
Why are Switzerland's foreign assets so low? The growing financial exposure of a small open economy
Switzerland's international investment position shows a puzzling feature since 1999: Large and persistent current account surpluses have failed to boost the value of Swiss foreign assets. In this paper, we link this pattern to the substantial increase in the leveraging of Switzerland's international assets and liabilities over the last twenty years, which we document in detail. We estimate the impact of exchange rate and asset prices movements on Swiss net foreign assets, and show that they led to substantial valuations losses since 1999, accounting for between one-quarter and one-half of the ...
Journal Article
Asset building and the wealth gap
Building and maintaining financial security is increasingly difficult for a growing portion of American households. Wealth is less prevalent in middle-class households and increasing among the already well-to-do. At the same time, poverty is growing and concentrating disproportionately among the nonwhite population. As the cost of living outpaces income and wealth accumulation, a majority of U.S. households are ill-prepared for financial emergencies or retirement.
Speech
Remarks on the role of central bank interactions with financial markets
Remarks at New York University's Stern School of Business, New York City.
Report
Financial amplification mechanisms and the Federal Reserve's supply of liquidity during the crisis
The small decline in the value of mortgage-related assets relative to the large total losses associated with the financial crisis suggests the presence of financial amplification mechanisms, which allow relatively small shocks to propagate through the financial system. We review the literature on financial amplification mechanisms and discuss the Federal Reserve's interventions during different stages of the crisis in light of this literature. We interpret the Fed's early-stage liquidity programs as working to dampen balance sheet amplifications arising from the positive feedback between ...
Speech
Lessons learned from the financial crisis
Remarks at the Eighth Annual BIS Conference, Basel, Switzerland.
Working Paper
Predictable dynamics in the S&P 500 index options implied volatility surface
One key stylized fact in the empirical option pricing literature is the existence of an implied volatility surface (IVS). The usual approach consists of fitting a linear model linking the implied volatility to the time to maturity and the moneyness, for each cross section of options data. However, recent empirical evidence suggests that the parameters characterizing the IVS change over time. In this paper we study whether the resulting predictability patterns in the IVS coefficients may be exploited in practice. We propose a two-stage approach to modeling and forecasting the S&P 500 index ...
Speech
The implementation of current asset purchases
Remarks at the Forecasters Club of New York, New York City.
Report
Financial amplification of foreign exchange risk premia
Theories of systemic risk suggest that financial intermediaries? balance-sheet constraints amplify fundamental shocks. We provide supporting evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals and a component associated with financial intermediaries? balance sheets. Relative to the benchmark model with only macroeconomic state variables, balance sheets amplify the U.S. dollar risk premium. We discuss applications to systemic risk monitoring.
Report
Funding liquidity risk and the cross-section of stock returns
We derive equilibrium pricing implications from an intertemporal capital asset pricing model where the tightness of financial intermediaries? funding constraints enters the pricing kernel. We test the resulting factor model in the cross-section of stock returns. Our empirical results show that stocks that hedge against adverse shocks to funding liquidity earn lower average returns. The pricing performance of our three-factor model is surprisingly strong across specifications and test assets, including portfolios sorted by industry, size, book-to-market, momentum, and long-term reversal. ...