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Report
A model of the federal funds market: yesterday, today, and tomorrow
Lester, Benjamin; Afonso, Gara; Armenter, Roc (2018-02-01)
The landscape of the federal funds market changed drastically in the wake of the Great Recession as large-scale asset purchase programs left depository institutions awash with reserves and new regulations made it more costly for these institutions to lend. As traditional levers for implementing monetary policy became less effective, the Federal Reserve introduced new tools to implement the target range for the federal funds rate, changing this landscape even more. In this paper, we develop a model that is capable of reproducing the main features of the federal funds market, as observed before ...
Staff Reports , Paper 840

Working Paper
The Credit Card Spending Channel of Monetary Policy: Micro Evidence from Account-level Data
Bräuning, Falk; Stavins, Joanna (2025-09-01)
Monetary policy impacts consumer spending via the effect of interest rate changes on credit card borrowing. Using supervisory account-level spending and balance data, we estimate that a 1 percentage point increase in the interest rate reduces credit card spending by nearly 9 percent and revolving balances by close to 4 percent. Aggregate results are primarily driven by revolving accounts, while we estimate small and statistically insignificant interest-rate elasticity for transaction accounts. Consistent with financial constraints, low-credit-score accounts tend to adjust spending, while ...
Working Papers , Paper 25-10

Working Paper
Supply of Sovereign Safe Assets and Global Interest Rates
Ferreira, Thiago Revil T.; Shousha, Samer (2021-04-30)
We estimate that the supply of sovereign safe assets is a major driver of neutral interest rates--real rates consistent with both economic activity and inflation at their trends. We find this result using an empirical cross-country model with many economic drivers for the neutral rates of 11 advanced economies during the 1960-2019 period. The increasing availability of safe assets after 2008 has pushed up neutral rates, preventing them from continuing their previous decline because of other drivers. We also evaluate the "global savings glut" hypothesis. We estimate that since 1994 the global ...
International Finance Discussion Papers , Paper 1315

Working Paper
Saving Constraints, Debt, and the Credit Market Response to Fiscal Stimulus
Young, Eric R.; Walsh, Kieran; Miranda-Pinto, Jorge; Murphy, Daniel P. (2020-02-27)
We document that the interest rate response to fiscal stimulus (IRRF) is lower in countries with high inequality or high household debt. To interpret this evidence we develop a model in which households take on debt to maintain a consumption threshold (saving constraint). Now debt-burdened, these households use additional income to deleverage. In economies with more debt-burdened households, increases in government spending tighten credit conditions less (relax credit conditions more), leading to smaller increases (larger declines) in the interest rate. Our theoretical framework predicts that ...
Working Papers , Paper 20-07

Working Paper
The Causal Effect of Debt on Interest Rates
Bhatt, Abhik; Diercks, Anthony M.; Eyal, Benjamin; Skaperdas, Arsenios (2026-05-26)
This paper uses a natural experiment to measure the causal effect of an expected debt-financed fiscal stimulus on interest rates. We find that a 1 percentage point increase in the expected US debt-to-GDP ratio leads to an increase of about 1-2 basis points in the longer-run neutral rate (r∗) and of about 2–3 basis points in the 10-year Treasury term premium. Our results validate estimates from a common time-series approach that regresses long-term forward interest rates on long-term projections of government debt, where the exclusion restriction does not apply.
Finance and Economics Discussion Series , Paper 2026-031

Journal Article
The Global Pandemic and Run on Shadow Banks
Sengupta, Rajdeep (2020-05-11)
In March, the global coronavirus pandemic led to a period of financial stress in which credit conditions tightened at an unprecedented pace. Elements of this stress period can be explained as a classic run on “shadow banks”—nonbank financial institutions that fund long-term assets with short-term debt. Although timely Federal Reserve interventions restored some calm to markets, shadow banks remain vulnerable to future runs because they lack the safeguards available to regulated depository institutions.
Economic Bulletin , Issue May 11, 2020 , Pages 5

Working Paper
Monetary Policy and Home Buying Inequality
Ringo, Daniel R. (2023-01-20)
Does monetary policy influence who becomes a home owner? Home purchases by low- and moderate-income households may be particularly sensitive to mortgage interest rates, as these households’ budgets are tighter and they more frequently come up against binding payment-to-income ratio constraints in credit decisions. Exploiting the timing of high-frequency observations of mortgage applicants locking in their interest rates around monetary policy shocks, I find that a 1 percentage point policy-induced increase in mortgage rates lowers the presence of low-income households in the population of ...
Finance and Economics Discussion Series , Paper 2023-006

Report
Intraday Price Pressure and Order Flow Around U.S. Treasury Auctions
Liu, Weiling; Fleming, Michael J.; Nguyen, Giang (2026-03-01)
Using thirty-three years of intraday Treasury data, we provide the first high-frequency evidence on auction-day price pressure: yields rise in the hours before auction and reverse afterward. This pressure strengthens when dealers face tighter risk-bearing constraints and weakens when investor demand is stronger or more elastic. More importantly, net order flow dominates in explaining the pressure, providing the first direct evidence that trading transmits dealer constraints into prices. Despite concerns about dealer capacity amid rapid federal debt growth, price pressure has not increased in ...
Staff Reports , Paper 1188

Working Paper
Affine term structure pricing with bond supply as factors
Hayashi, Fumio (2016-04-01)
This paper presents a theoretical model for analyzing the effect of the maturity structure of government debt on the yield curve. It is an ATSM (affine term structure model) in which the factors for the yield curve include, in addition to the short rate, the government bond supply for each maturity. The supply shock is not restricted to be perfectly correlated across maturities. The effect on the yield curve of a bond supply shock that is local to a maturity is largest at the maturity. This hump-shaped response of the yield curve persists in spite of the absence of preferred-habitat investors.
FRB Atlanta CQER Working Paper , Paper 2016-1

Newsletter
The Rise of Intangible Investment and the Transmission of Monetary Policy
David, Joel M.; Gourio, François (2023-08)
Monetary policy acts on the economy primarily through its effects on investment spending. But the nature of investment has evolved over time: “Intangible assets”—such as intellectual property or software—play an increasingly important role in the modern economy. In this Chicago Fed Letter, we study the implications of this change for the transmission of monetary policy. We show that investment in intangible assets is less sensitive to interest rates than investment in tangible assets. This suggests that the secular shift toward intangibles has reduced the responsiveness of aggregate ...
Chicago Fed Letter , Volume no 482 , Pages 8

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