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129 Results

The Macroeconomic Implications of Coholding

Staff Working Paper 2024-16 Michael Boutros, Andrej Mijakovic
Coholder households simultaneously carry high-cost credit card debt and low-yield cash. We study the implications of this behavior for fiscal and monetary policy, finding that coholder households have smaller consumption responses in the short run but larger responses in the long run.

The Neutral Interest Rate: Past, Present and Future

Staff Discussion Paper 2024-3 Matteo Cacciatore, Bruno Feunou, Galip Kemal Ozhan
The decline in safe real interest rates over the past three decades has reignited discussions on the neutral real interest rate, known as R*. We address the determinants and estimation methods of R*, as well as the factors influencing its decline and its future trajectory.

Supporting the Transition to Net-Zero Emissions: The Evolving Role of Central Banks

Staff Discussion Paper 2023-31 Karen McGuinness
While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the trade-offs and considerations central banks face.

International Portfolio Rebalancing and Fiscal Policy Spillovers

Staff Working Paper 2023-56 Sami Alpanda, Uluc Aysun, Serdar Kabaca
We evaluate, both empirically and theoretically, the spillover effects that debt-financed fiscal policy interventions of the United States have on other economies. We consider a two-country model with international portfolio rebalancing effects. We show that US fiscal expansions would increase global long-term rates and hinder economic activity in the rest of the world.

The Macroeconomic Effects of Debt Relief Policies During Recessions

Staff Working Paper 2023-48 Soyoung Lee
A large-scale reduction in mortgage principal can strengthen a recovery, support house prices and lower foreclosures. The nature of the intervention shapes its impact, which rests on how resources are redistributed across households. The availability of bankruptcy on unsecured debt changes the response to large-scale mortgage relief by reducing precautionary savings.

What People Believe About Monetary Finance and What We Can(’t) Do About It: Evidence from a Large-Scale, Multi-Country Survey Experiment

Staff Working Paper 2023-36 Cars Hommes, Julien Pinter, Isabelle Salle
We conduct a large-scale survey to shed light on what people believe about public finance. An experiment demonstrates that central bank communication can persistently shift views on monetary financing. It further suggests that views on monetary financing impact support for fiscal discipline.
Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Fiscal policy, Monetary policy JEL Code(s): C, C8, C83, E, E5, E58, E6, E60, E62, E7, E70, G, G5, G53, H, H3, H31

SME Failures Under Large Liquidity Shocks: An Application to the COVID-19 Crisis

We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms’ borrowing capacity to smooth temporary shocks to liquidity.

Understanding Inflation Dynamics: The Role of Government Expenditures

Staff Working Paper 2023-30 Chang Liu, Yinxi Xie
We study the impact government expenditure has on inflation. We find that changes in government expenditure account for a substantial portion of inflation variations. We also find that inflation and inflation expectations respond negatively to fiscal spending shocks, reaffirming the supply-side channel through which inflation responds to fiscal expansions.

The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles

Staff Working Paper 2023-22 Michael Irwin
This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations.
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