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Working Paper
The Fed Information Effect and Firm-Level Investment: Evidence and Theory
Hsu, Alex; Mitra, Indrajit; Xu, Yu; Zeng, Linghang (2023-06-20)
We present evidence that the Fed's private information about economic conditions revealed through Federal Open Market Committee announcements affect firm investment. We use firm-level investment data and analyst forecasts of firm fundamentals to document three facts. First, the investment rate sensitivity to Fed information is greater for more cyclical firms. Second, revisions in analyst forecasts of firm fundamentals are greater for more cyclical firms. Third, the investment response is consistent with changes in firm profitability following Fed announcements. We propose a HANK model to ...
FRB Atlanta Working Paper , Paper 2023-6a

Report
Manufacturing Gains from Green Energy and Semiconductor Spending since the CHIPS and Inflation Reduction Acts
Barbiero, Omar (2024-11-19)
Real investment—spending (net of inflation) on nonresidential construction, manufacturing equipment, and intellectual property products (IPP)—in the United States has grown substantially over the last few years despite the high-interest-rate environment that emerged in 2022 and is only now beginning to subside. The current strength of investment is important to policymakers because its sensitivity to interest rates makes it a key channel through which monetary policy is transmitted into the economy and because real private domestic investment constitutes 15 percent of US real GDP.
Current Policy Perspectives , Paper 2024-7

Working Paper
What Do Survey Data Tell Us about US Businesses?
Birinci, Serdar; See, Kurt; McGrattan, Ellen R.; Bhandari, Anmol (2020-01)
This paper examines the reliability of survey data on business incomes, valuations, and rates of return, which are key inputs for studies of wealth inequality and entrepreneurial choice. We compare survey responses of business owners with available data from administrative tax records, brokered private business sales, and publicly traded company filings and document problems due to nonrepresentative samples and measurement errors across several surveys, subsamples, and years. We find that the discrepancies are economically relevant for the statistics of interest. We investigate reasons for ...
Working Papers , Paper 2019-021

Working Paper
The Profitability Channel of Monetary Policy Transmission
Mitra, Indrajit; Hsu, Alex; Zeng, Linghang (2023-06-20)
We provide firm-level evidence that Federal Open Market Committee announcements have real effects by changing expectations of firm profitability. We use an existing decomposition of a monetary policy shock into a central bank information component (CBI) and a conventional monetary component (MP). We find (1) firms with a higher value of capital asset pricing model (CAPM) beta have a higher investment rate sensitivity to the CBI component; no similar heterogeneity in investment response is observed for the MP component. We also find (2) the heterogeneity in investment sensitivity is due to ...
FRB Atlanta Working Paper , Paper 2023-6

Working Paper
Misallocation Costs of Digging Deeper into the Central Bank Toolkit
Zeke, David; Kurtzman, Robert J. (2017-08-03)
Central bank large-scale asset purchases, particularly the purchase of corporate bonds of nonfinancial firms, can induce a misallocation of resources through their heterogeneous effect on firms cost of capital. First, we analytically demonstrate the mechanism in a static model. We then evaluate the misallocation of resources induced by corporate bond buys and the associated output losses in a calibrated heterogeneous firm New Keynesian DSGE model. The calibrated model suggests misallocation effects from corporate bond buys can be large enough to make them less effective than government bond ...
Finance and Economics Discussion Series , Paper 2017-076

Report
The Macroeconomic Dynamics of Labor Market Policies
Hurst, Erik; Kehoe, Patrick J.; Pastorino, Elena; Winberry, Thomas (2025-03-28)
We develop a dynamic macroeconomic framework with worker heterogeneity, putty-clay adjustment frictions, and firm monopsony power to study the distributional impact of labor market policies over time. Our framework reconciles the well-known tension between low short-run and high long-run elasticities of substitution across inputs of production, especially among workers with different skills within a same education group. We use this framework to evaluate the effects of redistributive policies such as the minimum wage and the Earned Income Tax Credit. We argue that since these policies ...
Staff Report , Paper 668

Journal Article
Payments fraud: a clear and present danger
Davies, Matt (2012)
Financial Insights , Volume 1 , Issue 2 , Pages 1-3

Working Paper
On Commercial Construction Activity's Long and Variable Lags
Glancy, David P.; Kurtzman, Robert J.; Loewenstein, Lara (2024-06-27)
We use microdata on the phases of commercial construction projects to document three facts regarding time-to-plan lags: (1) plan times are long—about 1.5 years—and highly variable, (2) roughly 40 percent of projects are abandoned in planning, and (3) property price appreciation reduces the likelihood of abandonment. We construct a model with endogenous planning starts and abandonment that matches these facts. The model has the testable implication that supply is more elastic when there are more "shovel ready" projects available to advance to construction. We use local projections to ...
Working Papers , Paper 24-14

Report
Firm Entry and Exit and Aggregate Growth
Kehoe, Timothy J.; Ruhl, Kim J.; Asturias, Jose; Hur, Sewon (2017-02-21)
Using data from Chile and Korea, we find that a larger fraction of aggregate productivity growth is due to firm entry and exit during fast-growth episodes compared to slow-growth episodes. Studies of other countries confirm this empirical relationship. We develop a model of endogenous firm entry and exit based on Hopenhayn (1992). Firms enter with efficiencies drawn from a distribution whose mean grows over time. After entering, a firm?s efficiency grows with age. In the calibrated model, reducing entry costs or barriers to technology adoption generates the pattern we document in the data. ...
Staff Report , Paper 544

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