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Working Paper
The Evolution of Scale Economies in U.S. Banking
Continued consolidation of the U.S. banking industry and a general increase in the size of banks has prompted some policymakers to consider policies that discourage banks from getting larger, including explicit caps on bank size. However, limits on the size of banks could entail economic costs if they prevent banks from achieving economies of scale. This paper presents new estimates of returns to scale for U.S. banks based on nonparametric, local-linear estimation of bank cost, revenue and profit functions. We report estimates for both 2006 and 2015 to compare returns to scale some seven ...
Working Paper
An Empirical Test of Auction Efficiency: Evidence from MBS Auctions of the Federal Reserve
Auction theory has ambiguous implications regarding the relative efficiency of three formats of multiunit auctions: uniform-price, discriminatory-price, and Vickrey auctions. We empirically evaluate the performance of these three auction formats using the bid-level data of the Federal Reserve's purchase auctions of agency mortgage-backed securities (MBS) from June 1, 2014 through November 17, 2014. We estimate marginal cost curves for all dealers, at each auction, based on structural models of the multiunit discriminatory-price auction. Our preliminary results suggest that neither ...