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Financial crises

 

  • Rising unemployment does not mean recession is inevitable

    The sort of increase seen in the U.S. unemployment rate over the past year is an oft-noted predictor of recession. Yet, forecasters currently expect only a modest increase in unemployment with no recession. Is this a reasonable expectation, and if so, how is this unemployment episode different from others?

  • Anticipatory discount window stigma

    Observers often assert that stigma—a perception that depositors, investors or others will penalize an institution for borrowing from the discount window—keeps banks from borrowing when they should, making the facilities less effective. Dallas Fed Senior Vice President Sam Schulhofer-Wohl argues that some harms of discount window stigma can be mitigated regardless of whether stigma itself persists.

  • Globalization Institute Working Paper

    Just Do IT? An Assessment of Inflation Targeting in a Global Comparative Case Study

    This paper introduces novel measures to assess the effectiveness of inflation targeting (IT) and examines its performance across a broad sample of advanced economies (AEs) and emerging market and developing economies (EMDEs).

  • Swap lines curbed global dollar shortages, appreciation during COVID-19 crisis

    During the initial weeks of the COVID-19 crisis, imbalances in the offshore dollar funding market led to safe-haven appreciation of the dollar. Fed swap lines between the U.S. central bank and counterparts abroad addressed these imbalances, subsequently helping reduce the cost of offshore dollar borrowing, reversing dollar appreciation and providing liquidity.

  • Globalization Institute Working Paper

    Living Up to Expectations: Central Bank Credibility, the Effectiveness of Forward Guidance and Inflation Dynamics Post-Global Financial Crisis

    This paper studies the effectiveness of forward guidance when central banks have imperfect credibility.

  • Emerging-market countries insulate themselves from Fed rate hikes

    Earlier episodes of sizable Fed tightening preceded destabilizing currency devaluations in emerging markets, precipitating sovereign debt and banking crises in many of those economies.

  • Research Department Working Papers

    Financial Shocks in an Uncertain Economy

    This paper focuses on some of the lessons we have learned over the years: (i) uncertainty and tail risk have cyclical variation; (ii) financial shocks can have a significant effect on macroeconomic outcomes; (iii) the impact of shocks is stronger in periods of high volatility.

  • Treasuries’ allure as safe haven noted in short maturities, not in long bonds

    The United States has a large negative net-foreign-asset position, especially in safe assets. In times of crisis, U.S. government debt, especially short-term Treasuries, are viewed as a safe haven. As a result, the U.S. is a net debtor. It is more leveraged and tends to hold more risky assets (mostly equities) and finance those positions by selling safe-asset debt to the rest of the world.

  • The connection between banking and sovereign debt crises

    Dallas Fed economist Sewon Hur examines how sovereign debt crises can amplify banking problems.

  • Research Department Working Papers

    Money Matters: Broad Divisia Money and the Recovery of Nominal GDP from the COVID-19 Recession

    The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. This paper finds that the demand for more theoretically-based Divisia aggregates can be modeled and that their growth rates provide useful information for future nominal GDP growth.