Search Results
Working Paper
'Captive markets': the impact of kidnappings on corporate investment in Colombia
This paper measures the impact of crime on firm investment by exploiting variation in kidnappings in Colombia from 1996 to 2002. Our central result is that firms invest less when kidnappings directly target firms. We also find that broader forms of crime--homicides, guerrilla attacks, and general kidnappings--have no significant effect on investment. This finding alleviates concerns that our main result may be driven by unobserved variables that explain both overall criminal activity and investment. Furthermore, kidnappings that target firms reduce not only the investment of firms that sell ...
Working Paper
Monetary policy and the corporate bond market: How important is the Fed information effect?
Does expansionary monetary policy drive up prices of risky assets? Or, do investors interpret monetary policy easing as a signal that economic fundamentals are weaker than they previously believed, prompting riskier asset prices to fall? We test these competing hypotheses within the U.S. corporate bond market and find evidence strongly in favor of the second explanation—known as the "Fed information effect". Following an unanticipated monetary policy tightening (easing), returns on corporate bonds with higher credit risk outperform (underperform). We conclude that monetary policy surprises ...
Working Paper
The insensitivity of investment to interest rates: Evidence from a survey of CFOs
A fundamental tenet of investment theory and the traditional theory of monetary policy transmission is that investment expenditures by businesses are negatively affected by interest rates. Yet, a large body of empirical research offer mixed evidence, at best, for a substantial interest-rate effect on investment. In this paper, we examine the sensitivity of investment plans to interest rates using a set of special questions asked of CFOs in the Global Business Outlook Survey conducted in the third quarter of 2012. Among the more than 500 responses to the special questions, we find that most ...
Discussion Paper
U.S. Corporations' Repatriation of Offshore Profits: Evidence from 2018
We investigate how companies with large holdings of cash abroad have used those funds following the Tax Cuts and Jobs Act (TCJA), which eliminated prior tax disincentives on the repatriation of foreign earnings.
Discussion Paper
U.S. Corporations' Repatriation of Offshore Profits
We investigate how companies with large holdings of cash abroad have used those funds following the Tax Cuts and Jobs Act, which eliminated prior tax disincentives on the repatriation of foreign earnings.
Discussion Paper
Do CFOs Think Investment is Sensitive to Interest Rules?
This piece presents results from ongoing research that takes a new look at the sensitivity of a business's capital expenditures to changes in interest rates.
Working Paper
Accounting for racial wealth disparities in the United States
Using data from the Survey of Consumer Finances, this paper updates and extends previous research on the racial wealth gap in the United States. We explore several hypotheses that help explain differential wealth accumulation by racial groups, including the importance of receiving inheritances and other financial support from relatives and the conditions in local real estate markets. By exploring the disparities among white, black, and Hispanic families, we make new contributions to the literature. We find that observable factors account for the entire wealth gap between white and Hispanic ...
Working Paper
How effective were the Federal Reserve emergency liquidity facilities?: evidence from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
Following the failure of Lehman Brothers in September 2008, short-term credit markets were severely disrupted. In response, the Federal Reserve implemented new and unconventional facilities to help restore liquidity. Many existing analyses of these interventions are confounded by identification problems because they rely on aggregate data. Two unique micro datasets allow us to exploit both time series and cross-sectional variation to evaluate one of the most unusual of these facilities - the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF). The AMLF extended ...
Working Paper
The evolution of a financial crisis: panic in the asset-backed commercial paper market
The $350 billion contraction in the asset-backed commercial paper (ABCP) market in the last five months of 2007 played a central role in transforming concerns about the credit quality of mortgage-related assets into a global financial crisis. This paper attempts to better understand why the substantial contraction in ABCP occurred by measuring and analyzing runs on ABCP programs over the period from August 2007 through December 2007. While it has been suggested that commercial paper programs, like commercial banks, may be prone to runs, we are the first to conduct a comprehensive empirical ...
Working Paper
Updating the Racial Wealth Gap
Using newly available data from the Survey of Consumer Finances, this paper updates and extends the literature exploring the racial wealth gap. We examine several hypotheses proposed by previous researchers, including the importance of inherited wealth and other family support and that of trends in local real estate markets, and also extend the literature by exploring the gap across the distribution of wealth and simultaneously considering white, African American and Hispanic households. The findings indicate that observable factors account for all of wealth gap between white and Hispanic ...