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Working Paper
Inflation Factors
Leiva-León, Danilo; Sheremirov, Viacheslav; Tang, Jenny; Zakrajšek, Egon (2025-08-01)
This paper develops an econometric framework for identifying latent factors that provide real time estimates of supply and demand conditions shaping goods- and services-related price pressures in the U.S. economy. The factors are estimated using category-specific personal consumption expenditures (PCE) data on prices and quantities, using a sign-restricted dynamic factor model that imposes theoretical predictions of the effects of fluctuations in supply and demand on prices and associated quantities through factor loadings. The resulting estimates are used to decompose total PCE inflation ...
Working Papers , Paper 25-5

Working Paper
Purchasing power parity: three stakes through the heart of the unit root null
Higgins, Matthew; Zakrajšek, Egon (2000)
We provide a comprehensive analysis of the purchasing power parity hypothesis, relying on a linear panel data framework. First, we consider two panel unit root tests, based on transformations of country-specific statistics, which allow for parameter heterogeneity across countries. Using GLS techniques, we modify the two tests to eliminate the upward size distortion induced by cross-sectional dependence among contemporaneous real exchange rate innovations. Second, we consider two tests based on a fixed-effects specification: these tests allow for cross-sectional dependence but impose parameter ...
Finance and Economics Discussion Series , Paper 2000-22

Conference Paper
The importance of credit for macroeconomic activity: identification through heterogeneity
Gilchrist, Simon; Zakrajšek, Egon (1995)
Conference Series ; [Proceedings] , Volume 39 , Pages 129-173

Working Paper
Uncertainty, Financial Frictions, and Investment Dynamics
Gilchrist, Simon; Zakrajšek, Egon; Sim, Jae W. (2014-04-01)
Micro- and macro-level evidence indicates that fluctuations in idiosyncratic uncertainty have a large effect on investment; the impact of uncertainty on investment occurs primarily through changes in credit spreads; and innovations in credit spreads have a strong effect on investment, irrespective of the level of uncertainty. These findings raise a question regarding the economic significance of the traditional "wait-and-see" effect of uncertainty shocks and point to financial distortions as the main mechanism through which fluctuations in uncertainty affect macroeconomic outcomes. The ...
Finance and Economics Discussion Series , Paper 2014-69

Working Paper
The impact of the Federal Reserve's Large-Scale Asset Purchase programs on corporate credit risk
Gilchrist, Simon; Zakrajšek, Egon (2013)
Estimating the effect of Federal Reserve's announcements of Large-Scale Asset Purchase (LSAP) programs on corporate credit risk is complicated by the simultaneity of policy decisions and movements in prices of risky financial assets, as well as by the fact that both interest rates of assets targeted by the programs and indicators of credit risk reacted to other common shocks during the recent financial crisis. This paper employs a heteroskedasticity-based approach to estimate the structural coefficient measuring the sensitivity of market-based indicators of corporate credit risk to declines ...
Finance and Economics Discussion Series , Paper 2013-56

Working Paper
The Macroeconomic Impact of Financial and Uncertainty Shocks
Caldara, Dario; Zakrajšek, Egon; Gilchrist, Simon; Fuentes-Albero, Cristina (2016-05)
The extraordinary events surrounding the Great Recession have cast a considerable doubt on the traditional sources of macroeconomic instability. In their place, economists have singled out financial and uncertainty shocks as potentially important drivers of economic fluctuations. Empirically distinguishing between these two types of shocks, however, is difficult because increases in economic uncertainty are strongly associated with a widening of credit spreads, an indication of a tightening in financial conditions. This paper uses the penalty function approach within the SVAR framework to ...
International Finance Discussion Papers , Paper 1166

Working Paper
Stress-testing U.S. bank holding companies: a dynamic panel quantile regression approach
Zakrajšek, Egon; Rump, Ben; Covas, Francisco (2013)
We propose an econometric framework for estimating capital shortfalls of bank holding companies (BHCs) under pre-specified macroeconomic scenarios. To capture the nonlinear dynamics of bank losses and revenues during periods of financial stress, we use a fixed effects quantile autoregressive (FE-QAR) model with exogenous macroeconomic covariates, an approach that delivers a superior out-of-sample forecasting performance compared with the standard linear framework. According to the out-of-sample forecasts, the realized net charge-offs during the 2007-09 crisis are within the multi-step-ahead ...
Finance and Economics Discussion Series , Paper 2013-55

Working Paper
The Fed Takes On Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF
Wei, Bin; Zakrajšek, Egon; Gilchrist, Simon; Yue, Vivian Z. (2020-09-15)
We evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the corporate bond market in the wake of the COVID-19 shock. The Fed announced the SMCCF on March 23 and expanded the program on April 9. Regression discontinuity estimates imply that these announcements reduced credit spreads on bonds eligible for purchase 70 basis points (bp). We refine this analysis by constructing a sample of bonds—issued by the same set of companies—that differ in their SMCCF eligibility. A diff-in-diff analysis shows that both announcements had large ...
FRB Atlanta Working Paper , Paper 2020-18

Working Paper
Monetary Policy and the Distribution of Income: Evidence from U.S. Metropolitan Areas
Favara, Giovanni; Loria, Francesca; Zakrajšek, Egon (2025-01-01)
We use Zip code–level Statistics of Income data from the Internal Revenue Service to measure the distribution of income within U.S. metropolitan areas from 1998 through 2019. Exploiting geographic variation in income distribution over time, we study how unanticipated changes in the monetary policy stance shape the subsequent dynamics of income inequality. The results show that monetary policy persistently affects labor income inequality and that these distributional effects are amplified significantly in weak local labor markets.
Working Papers , Paper 25-1

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