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Joseph G. Haubrich |

Vice President and Economist

Joseph G. Haubrich, Vice President and Economist

Joseph Haubrich is a vice president and economist at the Federal Reserve Bank of Cleveland, where he is responsible for leading the Research Department's Banking and Financial Institutions Group. He specializes in research related to financial institutions and regulations.

Before joining the Bank in 1990, Dr. Haubrich was assistant professor of finance at the Wharton School of the University of Pennsylvania.

Born in Oak Park, Illinois, Dr. Haubrich earned his bachelor’s degree in economics from the University of Chicago and his master’s and doctoral degrees from the University of Rochester in New York. He has also been a referee for several professional journals. In his free time, he tends his wildflower garden and his four children.

  • Fed Publications
  • Other Publications
Title Date Publication Author(s) Type

 

 October, 2011 ; Economic Commentary
Abstract: According to consumer price measures like the CPI, inflation has recently jumped up a notch. What those measures don't tell us is whether the increase will persist. In this Commentary, we look at a measure that does. The measure incorporates data on past inflation rates, surveys of expected inflation, inflation swaps, and a variety of interest rates. It provides estimates of inflation, along with expected inflation and real interest rates. A look at the measure’s estimates suggests that the recent increases in inflation are likely to be temporary.
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 October, 2011 ; News Item
Abstract: Are recent increases in consumer prices a temporary aberration, or the start of a dangerous upward trend?
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 August, 2011 ; Margaret Jacobson; Data
Abstract: Over the past month, the yield curve barely moved. The three-month Treasury bill rate rose to 0.03 percent and the ten-year rate rose to 2.97. The slope stayed constant at 294 basis points, remaining at its lowest level since last November. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 0.8 percent rate over the next year, and based on calculations using the yield curve, we estimate that the chance of the economy being in a recession next June is 1.7 percent.
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 May, 2011 Vol. 2, No. 2 ; Forefront
Abstract: One way to gauge opinions on future inflation is to ask people directly, and several well-respected surveys do just that.
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 March, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-07 ; George Pennacchi; Peter Ritchken; Working Papers
Abstract: This paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short-term real interest rate, expected inflation, inflation's central tendency, and four volatility factors that follow GARCH processes. We derive analytical solutions for nominal bond yields, yields on inflation-indexed bonds that have an indexation lag, and the term structure of expected inflation. Unlike prior studies, the model's parameters are estimated using data on inflation swap rates, as well as nominal yields and survey forecasts of inflation. The volatility state variables fully determine bonds' time-varying risk premia and allow for stochastic volatility and correlation between bond yields, yet they have small effects on the cross section of nominal yields. Allowing for time-varying volatility is particularly important for real interest rate and expected inflation processes, but long-horizon real and inflation risk premia are relatively stable. Comparing our model prices of inflation-indexed bonds to those of Treasury Inflation Protected Securities (TIPS) suggests that TIPS were significantly underpriced prior to 2004 and again during the 2008-2009 financial crisis.
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 March, 2011 Vol. 2, No. 1 ; James B Thomson; Forefront
Abstract: To measure a bank's strength, one could look at factors like profitability or stock price, but few gauges are as revealing as a bank's capital level.
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 February, 2011 Vol. 2, No. 1 ; Forefront
Abstract: Charles Calomiris is the Henry Kaufman Professor of Financial Institutions at the Columbia University Graduate School of Business and a Professor at Columbia's School of International and Public Affairs. The Federal Reserve Bank of Cleveland's Joseph Haubrich interviewed Calomiris on October 14, 2010 at the Bank's Conference on Countercyclical Capital Requirements.
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 July, 2010 ; John B Carlson; John Lindner; Economic Commentary
Abstract: The Federal Reserve balance sheet's size and composition have changed dramatically since September 2008. Federal Reserve policymakers have expressed their support for eventually shrinking the Fed's balance sheet and returning the composition of its securities portfolio to include only U.S. Treasury issues. Through the careful study of public Federal Open Market Committee documents, this Economic Commentary concisely explains some of the FOMC's decisions concerning an appropriate sequence of policy actions.
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 June, 2010 ; Timothy Bianco; Economic Commentary
Abstract: The most frequently cited measures of inflation expectations, from TIPS-derived indicators to survey-based estimates like Blue Chip forecasts, have some inherent limitations when it comes to applying them to questions of monetary policy. Recently, researchers developed a model that takes information from a number of sources and produces estimates of inflation expectations that are superior to these popular measures in a number of respects. This Commentary explains how these estimates are better and what they imply for current monetary policy.
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 October, 2009 ; Economic Commentary
Abstract: This Economic Commentary explains a relatively new method of uncovering inflation expectations, real interest rates, and an inflation-risk premium. It provides estimates of expected inflation from one month to 30 years, an estimate of the inflation-risk premium, and a measure of real interest rates, particularly a short (one-month) rate, which is not readily available from the TIPS market. Calculations using the method suggest that longer-term inflation expectations remain near historic lows. Furthermore, the inflation-risk premium is also low, which in the model means that inflation is not expected to deviate far from expectations.
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 September, 2009 Federal Reserve Bank of Cleveland, working paper no. 09-08 ; Michael D Bordo; Working Papers
Abstract: The relatively infrequent nature of major credit distress events makes a historical approach particularly useful. Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress arises as part of the transmission of monetary policy, and document the subsequent effect on output. Using turning points defined by the Harding-Pagan algorithm, we identify and compare the timing, duration, amplitude, and comovement of cycles in money, credit, and output. Regressions show that financial distress events exacerbate business cycle downturns both in the nineteenth and twentieth centuries and that a confluence of such events makes recessions even worse.
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 May, 2009 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 26 ; Guillaume Rocheteau; Pierre-Olivier Weill; Randall Wright; Policy Discussion Papers
Abstract: This Policy Discussion Paper summarizes the papers that were presented at the Liquidity in Frictional Markets conference in November 2008. The papers, which looked at markets for assets as diverse as houses, bank loans, and electronic funds transfer, all explored that amorphous concept called “liquidity” and how its presence—or absence—affects the economy.
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 November, 2008 Federal Reserve Bank of Cleveland, Working Paper no. 0810 ; George Pennacchi; Peter Ritchken; Working Papers
Abstract: This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is expected to revert, as well as four volatility factors that follow GARCH processes. We derive analytical solutions for the prices of nominal bonds, inflation-indexed bonds that have an indexation lag, the term structure of expected inflation, and inflation swap rates. The model parameters are estimated using data on nominal Treasury yields, survey forecasts of inflation, and inflation swap rates. We find that allowing for GARCH effects is particularly important for real interest rate and expected inflation processes, but that long–horizon real and inflation risk premia are relatively stable. Comparing our model prices of inflation-indexed bonds to those of Treasury Inflation Proected Securities (TIPS) suggests that TIPS were underpriced prior to 2004 but subsequently were valued fairly. We find that unexpected increases in both short run and longer run inflation implied by our model have a negative impact on stock market returns.
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 August, 2008 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 24 ; James B Thomson; Policy Discussion Papers
Abstract: Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will seize up? Are there viable alternatives? Will the intervention make further crises more likely? The Federal Reserve Bank of Cleveland and the FDIC sponsored a conference in April 2008 to debate and exchange ideas on these issues. The following document summarizes and ties together the contributions presented.
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 June, 2008 2007 Annual Report ; Annual Report
Abstract: Fostering financial stability is a key role of a central bank. The Federal Reserve Bank of Cleveland's 2007 Annual Report reviews lessons from past financial crises that may help guide policymakers as they respond to future challenges.
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 August, 2007 Federal Reserve Bank of Cleveland, Economic Commentary ; Brent Meyer; Economic Commentary
Abstract: When will the world's production of oil peak, and what will the economic consequences be? Calculating when turns out not to be so straightforward as it seems, but predicting the likely economic consequences is-and they're not as bleak as many fear.
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 June, 2007 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 20 ; Deborah Lucas; Policy Discussion Papers
Abstract: "Toxic waste" refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.
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 April, 2007 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 19 ; Policy Discussion Papers
Abstract: This Policy Discussion Paper reviews the restructuring and recapitalization of Long-Term Capital Management, looking at possible alternatives and paying particular attention to the Federal Reserve's role.
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 March, 2007 Federal Reserve Bank of Cleveland, Economic Commentary ; James B Thomson; Economic Commentary
Abstract: Stock and bond prices contain all sorts of information about investors' beliefs and expectations. For example, the interest rate on bank debt not insured by the FDIC has information about the health of the banks issuing the debt. Unfortunately, difficulties in extracting information from these subordinated debt prices reduces the information' usefulness to regulators and policymakers.
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 October, 2006 Federal Reserve Bank of Cleveland, Working Paper no. 0611 ; Michael D Bordo; Working Papers
Abstract: Using the yield curve helps forecast real growth over the period 1875 to 1997. Using both the level and slope of the curve improves forecasts more than using either variable alone. Forecast performance changes over time and depends somewhat on whether recursive or rolling out of sample regressions are used.
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 April, 2006 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Experience has taught economic forecasters to expect a recession when the yield on short-term Treasury securities rises above the yield on longer-term securities-a situation known as a yield-curve inversion. But some economists suspect the yield curve might not be as reliable a predictor of output growth as it used to be.
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 January, 2006 Federal Reserve Bank of Cleveland, Working Paper no. 0604 ; Ben R Craig; Working Papers
Abstract: Changes in net lending hide the much larger and more variable gross lending flows. We present a series of stylized facts about gross loan flows and how they vary over time, bank size, and the business cycle. We look at both the intensive (increases and decreases) and extensive (entry and exits) margins. We compare these results with the output from a simple stochastic search model.
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 December, 2005 Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 11 ; James B Thomson; Policy Discussion Papers
Abstract: Deregulation and financial consolidation have led to the development of financial holding companies-allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella-and the Federal Reserve has been named supervisor of the consolidated enterprise. This Policy Discussion Paper will show that there likely are economies of scope between the Fed's inherent central-banking responsibilities and those of an umbrella supervisor and that these duel roles benefit both the Fed and functional regulators.
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 September, 2005 Federal Reserve Bank of Cleveland, Economic Commentary ; James B Thomson; Economic Commentary
Abstract: Deregulation and financial consolidation have led to the development of financial holding companies-allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella-and the Federal Reserve has been named supervisor of the consolidated enterprise. This Commentary explains the increasing importance of an umbrella supervisor amid the sea of regulatory agencies, and why the Fed may be the best natural choice, both practically and conceptually, to assume the role.
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 March, 2005 Federal Reserve Bank of Cleveland, Economic Commentary ; Ben R Craig; Economic Commentary
Abstract: Are asset prices climbing too far too fast? Do they signal the approach of an unsustainable boom that the FOMC should step in and stop before it gathers speed? Bubbles are notoriously hard to spot beforehand, and even if we were better at it, no one is sure what the best monetary policy response would be.
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 December, 2004 Federal Reserve Bank of Cleveland, Economic Commentary ; Patrick C Higgins; Janet Miller; Economic Commentary
Abstract: A useful first guess about the future spot price of a commodity is usually found in its current futures price. But it doesn’t work that way when the commodity in question is oil. This Commentary explains why the characteristics of oil, particularly the value it can offer its owner by remaining in the ground, cloud the information that oil futures prices give about future oil prices.
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 June, 2004 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: The yield curve has a wealth of information about future interest rates and economic conditions. Users should exercise caution, though, as many of the relationships that hold between the behavior of the curve and what it fortells depend on the monetary regime in place at the time the curve is drawn.
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 April, 2004 Federal Reserve Bank of Cleveland, Working Paper no. 0402 ; Michael D Bordo; Working Papers
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.
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 November, 2003 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Many market commentators argue that companies should expense the stock options they give their employees. Will expensing give investors better information about what companies earn and spend?
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 October, 2003 Federal Reserve Bank of Cleveland, Working Paper no. 0308 ; Ben R Craig; Working Papers
Abstract: The authors estimate a discrete-time, multivariate pricing kernel for the term structure of interest rates, using both yields and inflation rates. This gives a separate estimate of the real kernel and the nominal kernel, taking into account a relatively sophisticated dynamical structure and mutual interaction between the real and nominal side of the economy. Along with obtaining an estimate of the real term structure, they use the estimates to obtain a new perspective on how real and nominal influences interact to produce the observed term structure.
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 May, 2003 Federal Reserve Bank of Cleveland, Economic Commentary ; Ozgur Emre Ergungor; Economic Commentary
Abstract: Information problems pervade the economy. This Commentary describes the challenges they create and the clever solutions markets find to overcome them.
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 January, 2002 Federal Reserve Bank of Cleveland, Working Paper no. 0214 ; Rong Fan; Peter Ritchken; James B Thomson; Working Papers
Abstract: Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide relatively clean signals of bank risk and are not unduly influenced by non-risk factors. Fixed-rate debt with a put is unacceptable, but making the putable debt floating resolves most problems. The authors' approach also helps to clarify several different notions of "bank risk."
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 December, 2001 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Interest rate swaps have become a popular financial derivative, and market watchers and economists are paying closer attention to them and their associated yield curves. This Commentary gives a brief introduction to swaps and their relation to other interest rates.
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 June, 2001 Federal Reserve Bank of Cleveland, Economic Review, vol. 37, no. 2, pp. 15-30 ; Andrew W Lo; Economic Review
Abstract: This article examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. The authors develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. To implement these results empirically, they employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test is robust to short-range dependence and is applied to quarterly and annual real GDP to determine the sources and nature of long-range dependence in the business cycle.
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 March, 2001 Federal Reserve Bank of Cleveland, Economic Review, vol. 37, no. 1, pp. 2-8 ; Economic Review
Abstract: In the standard solution to the principal-agent problem, a risk-neutral agent bears all the risk. The author shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. As risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution, wherein the agent bears the least amount of risk. Even a small degree of risk aversion can result in agents bearing significantly less risk than the standard solution suggests.
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 February, 2001 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Some financial failures occur when people don’t understand the risks they take. Others are simply bad luck. But the most important cases happen when private risks have an extra social aspect.
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 January, 2001 Federal Reserve Bank of Cleveland, Working Paper no. 0103 ; Owen F Humpage; Working Papers
Abstract: We apply a notion of power defined for coalitions derived from the Shapley value. We calculate the power of coalitions within a twelve-person committee, meant to correspond to the FOMC.
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 December, 2000 Federal Reserve Bank of Cleveland, Economic Review, vol. 36, no. 4, pp. 2-9 ; Economic Review
Abstract: The recent record-setting economic expansion and the accompanying record-setting bull market in stocks are often attributed to Federal Reserve interest rate policy and increased productivity. But if interest rates behave differently when productivity changes, interest rate policy may need to change as well. This article examines how productivity changes affect the entire term structure-from short-term interest rates like the federal funds rate, to long-term rates like mortgages, car loans, and corporate bonds.
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 January, 2000 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Should central bankers be free to decide what policy actions they will take and when they will take them, or should they agree to an explicit policy rule and stick to it? The discretion versus rules debate is an old one; unfortunately, it has rarely addressed the fact that the benefits of moving from one regime to the other depend on the timing of the move. This Economic Commentary explores the value of waiting to adopt rules and the way it is affected by uncertainty.
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 January, 2000 Federal Reserve Bank of Cleveland, Working Paper no. 0014 ; Ben R Craig; Working Papers
Abstract: We present a series of stylized facts about gross loan flows and how they vary over time, bank size, and region. We define loan creation as the sum of the change in bank loans at all banks that increased loans since last quarter. Loan destruction is similarly defined as the absolute value of the change in loans at all banks that decreased loans. The gross flow (akin to what the labor literature calls reallocation) is the sum of creation and destruction.
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 September, 1999 Federal Reserve Bank of Cleveland, Economic Review, vol. 35, no. 3, pp. 2-9 ; Economic Review
Abstract: The interest rates for bonds of different maturities are related, but the interplay of factors that influence these rates is not easy to tease apart. The author leads the reader through the development of a model of the term structure of interest rates, then works with the model to provide some insights into the interplay of factors, especially the effect of uncertainty on interest rates. His analysis shows how a common simplification known as the expectations hypothesis obscures the significant contribution that uncertainty can make to the determination of interest rates.
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 January, 1999 Federal Reserve Bank of Cleveland, Working Paper no. 9907 ; Joao Cabral dos Santos; Working Papers
Abstract: This paper looks at the advantages and disadvantages of mixing banking and commerce, using the \liquidity" approach to nancial intermediation. Adding a commercial rm makes it easier for a bank to dispose of assets seized in a loan default. This `internal market' increases the liquidity of such assets and improves the bank's ability to perform nancial intermediation. More generally, owning a commercial rm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a non-bank bank in an unregulated environment.
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 December, 1998 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Several recent proposals aim to restore market discipline to the banking sector by forcing banks to issue debt that is not guaranteed by the government, termed subordinated debt. This Commentary examines the reasoning behind such proposals and assesses the likelihood of their success.
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 April, 1998 Federal Reserve Bank of Cleveland, Economic Review, vol. 34, no. 2 ; Economic Review
Abstract: Conventional wisdom on bank diversification confuses risk with failure. This article clarifies the distinction and shows how increasing bank size may increase bank risk, even though it lessens the probability of failure and lowers the expected loss. The key result is an application of Samuelson's "fallacy of large numbers."
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 March, 1998 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: The price of gold commands attention because it serves as an indicator of general price stability or inflation. But gold is also a commodity, used in jewelry and by industry, so demand and supply affect its pricing and need to be considered when gold is a factor in monetary policy decisions.
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 January, 1998 Federal Reserve Bank of Cleveland, Working Paper no. 9803 ; James B Thomson; Working Papers
Abstract: An analysis of the 1987 change in control at Mellon, which was one of only a few banks with a large shareholder. It finds that the large shareholder did not monitor the firm extensively before it experienced performance difficulties, but was able to enforce a management change when problems arose-without having to acquire a majority stake.
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 September, 1997 Federal Reserve Bank of Cleveland, Economic Commentary ; Joao Cabral dos Santos; Economic Commentary
Abstract: A look at the disadvantages of a firm’s having too much liquidity, explaining that when a company has a great deal of its worth tied up in liquid assets, it has a harder time attracting investors, who must be convinced that the firm’s managers will not “take the money and run.”
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 January, 1997 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An explanation of the primary factors driving stock market fundamentals and an examination of how well those factors explain—or fail to explain—current market trends.
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 November, 1996 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: In the United States, the Federal Reserve has responsibility for both monetary policy and bank supervision. Other countries separate these functions to varying degrees. What lies behind this global diversity? Should a central bank be charged with conducting monetary policy and regulating banks, or does it make more sense - both economic and political - to keep these activities separate? The answer is not a simple yes or no. Rather, it appears that the right choice depends on a country&rquo;s prevailing conditions, including its financial system, its political environment, and the preferences of the public.
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Predicting real growth using the yield curve

 

 March, 1996 Federal Reserve Bank of Cleveland, Economic Review, vol. 32, no. 1, pp. 26-35 ; Ann M Dombrosky; Economic Review
Abstract: In the United States, the Federal Reserve has responsibility for both monetary policy and bank supervision. Other countries separate these functions to varying degrees. What lies behind this global diversity? Should a central bank be charged with conducting monetary policy and regulating banks, or does it make more sense - both economic and political - to keep these activities separate? The answer is not a simple yes or no. Rather, it appears that the right choice depends on a country&rquo;s prevailing conditions, including its financial system, its political environment, and the preferences of the public.
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 January, 1996 Federal Reserve Bank of Cleveland, Working Paper no. 9606 ; Joseph A Ritter; Working Papers
Abstract: An explanation of how irreversible investment and the techniques associated with pricing real options can apply to a broad range of problems in finance, macroeconomics, and trade policy.
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 January, 1996 Federal Reserve Bank of Cleveland, Working Paper no. 9601 ; Joseph A Ritter; Working Papers
Abstract: An examination of the dynamics of commitment, showing that because the decision regarding rules versus discretion occurs in real time, opting for discretion is often the better choice, since it leaves open the possibility of adopting rules later on.
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 September, 1995 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of the dynamics of commitment, showing that because the decision regarding rules versus discretion occurs in real time, opting for discretion is often the better choice, since it leaves open the possibility of adopting rules later on.
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 March, 1995 Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no. 1, pp. 13-19 ; Economic Review
Abstract: An examination of the dynamics of commitment, showing that because the decision regarding rules versus discretion occurs in real time, opting for discretion is often the better choice, since it leaves open the possibility of adopting rules later on.
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 January, 1995 Federal Reserve Bank of Cleveland, Working Paper no. 9506 ; Working Papers
Abstract: Standard work on costly state verification, monitoring, and auditing generally assumes perfect signals about the underlying state, especially in questions about financial contracting. Relaxing that assumption has several intriguing consequences. Most imperfect audits turn out to be useless, and those that are useful cannot be ranked by conventional criteria such as Blackwell's information measure. Thus, the notion of "more" or "less" information becomes problematic.
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 November, 1994 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Standard work on costly state verification, monitoring, and auditing generally assumes perfect signals about the underlying state, especially in questions about financial contracting. Relaxing that assumption has several intriguing consequences. Most imperfect audits turn out to be useless, and those that are useful cannot be ranked by conventional criteria such as Blackwell's information measure. Thus, the notion of "more" or "less" information becomes problematic.
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 July, 1994 Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 3 ; James B Thomson; Economic Review
Abstract: In October 1993, the Federal Reserve Bank of Cleveland and the Journal of Money, Credit, and Banking sponsored a conference that examined the costs, causes, and consequences of credit allocation by the federal government. The eight presenters looked at the broad rationale for government intervention in U.S. credit markets, analyzed some issues related to pensions and federal pension guarantees, and discussed a number of specific programs and regulations, including credit imperfections in housing markets, risk-based capital requirements for banks, and community reinvestment rules. This article is an overview of those proceedings.
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 January, 1994 Federal Reserve Bank of Cleveland, Working Paper no. 9417 ; Working Papers
Abstract: The conventional wisdom on bank diversification confuses risk with failure. This paper clarifies that distinction and shows how increasing bank size may increase bank risk even though it lessens the probability of failure and lowers the expected loss. The key result is an application of Samuelson's "fallacy of large numbers."
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 January, 1994 Federal Reserve Bank of Cleveland, Working Paper no. 9416 ; Ivilina Popova; Working Papers
Abstract: We use a version of the Grossman and Hart (1983) principal-agent model with 10 actions and 10 states to produce quantitative predictions for executive compensation. Performance incentives derived from the model are compared with the performance incentives of 350 firms from a survey by Michael Jensen and Kevin Murphy. The results suggest both that the model does a reasonable job of explaining the data and that actual incentives are close to the optimal incentives predicted by theory.
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 January, 1994 Federal Reserve Bank of Cleveland, Working Paper no. 9414 ; James B Thomson; Working Papers
Abstract: Foreign banks play a large role in the loan sales market. We examine this role using individual bank data on foreign-owned banks in the United States. We find that the motives for loan sales and purchases differ between U.S. and foreign-owned banks and between foreign banks of different regions. The evidence is consistent with foreign banks' using the market for diversification.
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 July, 1993 Federal Reserve Bank of Cleveland, Economic Commentary ; James B Thomson; Economic Commentary
Abstract: Foreign banks play a large role in the loan sales market. We examine this role using individual bank data on foreign-owned banks in the United States. We find that the motives for loan sales and purchases differ between U.S. and foreign-owned banks and between foreign banks of different regions. The evidence is consistent with foreign banks' using the market for diversification.
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 July, 1993 Federal Reserve Bank of Cleveland, Economic Review, vol. 29, no. 3 ; Paul Wachtel; Economic Review
Abstract: Since 1989, U.S. commercial banks have shifted their portfolios away from commercial loans toward government securities. Using data for individual banks, the authors document this shift and test for whether it can be attributed to the imposition of risk-based capital requirements. Their results indicate that these requirements may indeed account for part of the portfolio shift.
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 January, 1993 Federal Reserve Bank of Cleveland, Working Paper no. 9307 ; James B Thomson; Working Papers
Abstract: We document some recent changes in the market for loan sales. We use a Tobit model to characterize the determinants of loan sales and purchases by banks, relating quantities bought and sold to bank size, capital, risk, and funding mode. The results, though not definitive, broadly confirm the Pennacchi model of sales. Other data cast doubt on the importance of mergers and acquisitions for this market and on the comparability of different data sources.
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 January, 1993 Federal Reserve Bank of Cleveland, Working Paper no. 9301 ; Working Papers
Abstract: In the standard solution to the principal-agent problem, a risk-neutral agent bears all the risk. This paper shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. Furthermore, as risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution wherein the agent bears the least amount of risk. Even a small degree of risk aversion can lead to agents' bearing significantly less risk than the simple solution suggests.
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 October, 1992 Federal Reserve Bank of Cleveland, Economic Commentary ; Jeffrey J Hallman; Economic Commentary
Abstract: In the standard solution to the principal-agent problem, a risk-neutral agent bears all the risk. This paper shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. Furthermore, as risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution wherein the agent bears the least amount of risk. Even a small degree of risk aversion can lead to agents' bearing significantly less risk than the simple solution suggests.
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 June, 1992 Federal Reserve Bank of Cleveland, Economic Review, vol. 28, no. 2, pp. 23-35 ; Economic Review
Abstract: In the standard solution to the principal-agent problem, a risk-neutral agent bears all the risk. This paper shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. Furthermore, as risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution wherein the agent bears the least amount of risk. Even a small degree of risk aversion can lead to agents' bearing significantly less risk than the simple solution suggests.
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 June, 1992 Federal Reserve Bank of Cleveland, Economic Commentary ; Ann M Dombrosky; Economic Commentary
Abstract: In the standard solution to the principal-agent problem, a risk-neutral agent bears all the risk. This paper shows that, in fact, multiple solutions exist, and often the risk-neutral agent is not the sole bearer of risk. Furthermore, as risk aversion approaches zero, the unique risk-averse solution converges to the risk-neutral solution wherein the agent bears the least amount of risk. Even a small degree of risk aversion can lead to agents' bearing significantly less risk than the simple solution suggests.
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 January, 1992 Federal Reserve Bank of Cleveland, Working Paper no. 9217 ; Joseph A Ritter; Working Papers
Abstract: Considering time inconsistency as a problem of irreversible investment brings some neglected points to the fore. Making a policy choice in real time and under current conditions emphasizes the importance of the timing of commitment, the regret over past decisions, and the option value of not committing. This paper applies these concepts to monetary policy, banking regulation, and capital taxation.
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 October, 1991 Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 4 ; Economic Review
Abstract: Changes in the efficiency of the financial system can greatly affect the overall economy. A simple real business cycle framework shows how banks can be a source, rather than just a filter, for output shocks. This paper develops and tests predictions about cointegration between several bank and output series, as well as explores the comovement of output and combined banking variables. Use of the vector error-correcting model provides additional information on the role of banks as both transmission mechanisms and originators of cyclical disturbances.
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 July, 1991 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: Changes in the efficiency of the financial system can greatly affect the overall economy. A simple real business cycle framework shows how banks can be a source, rather than just a filter, for output shocks. This paper develops and tests predictions about cointegration between several bank and output series, as well as explores the comovement of output and combined banking variables. Use of the vector error-correcting model provides additional information on the role of banks as both transmission mechanisms and originators of cyclical disturbances.
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 January, 1991 Federal Reserve Bank of Cleveland, Working Paper no. 9118 ; Working Papers
Abstract: This paper calculates numerical solutions to the principal-agent problem and compares the results to the stylized facts of CEO compensation. The numerical predictions come from parameterizing the models of Grossman and Hart and of Holmstrom and Milgrom. While the correct incentives for a CEO can greatly enhance a firm's performance, providing such incentives need not be expensive. For many parameter values, CEO compensation need only increase by about $10 for every $1,000 of additional shareholder value; for some values, the amount is 0.003 cents. The paper thus answers two challenges posed by Jensen: that principal-agent theory does not yield quantitative predictions, and that CEO compensation is insufficiently sensitive to firm performance.
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 January, 1991 Federal Reserve Bank of Cleveland, Working Paper no. 9116 ; Andrew W Lo; Working Papers
Abstract: This paper examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. We develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. We then derive the relation between properties of fractionally integrated macroeconomic time series and those of microeconomic data and discuss how fiscal policy may alter the stochastic behavior of the former. To implement these results empirically, we employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test, which is robust to short-term dependence, is applied to quarterly and annual real GNP to determine the sources and nature of long-term dependence in the business cycle.
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 January, 1990 Federal Reserve Bank of Cleveland, Working Paper no. 9010 ; Working Papers
Abstract: A calculation of the stochastic properties of consumption when income follows a fractional stochastic process, showing how this may explain excess-smoothness results noted in previous studies
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 January, 1990 Federal Reserve Bank of Cleveland, Working Paper no. 9008 ; Robert G King; Working Papers
Abstract: Can nominal contracts create monetary nonneutrality if they arise endogenously in general equilibrium? Yes, if (1) agents have complete information about the money stock and (2) shocks to the system are purely redistributive and private information, precluding conventional insurance markets. Without contracts, money is neutral toward aggregate quantities. However, risk-sharing between suppliers and demanders creates an incentive for both parties to use nominal contracts. in particular, if an increase in the money growth rate signals a rise in the dispersion of shocks to demanders' wealth, then prices adjust only partially to monetary shocks and money is positively associated with output.
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Title Date Publication Author(s) Type
Credit Crises, Money, and Contractions: An Historical View

 

 January, 2010 Journal of Monetary Economics, vol. 57, no. 1, pp. 1-18 ; Journal Article
Abstract: Can nominal contracts create monetary nonneutrality if they arise endogenously in general equilibrium? Yes, if (1) agents have complete information about the money stock and (2) shocks to the system are purely redistributive and private information, precluding conventional insurance markets. Without contracts, money is neutral toward aggregate quantities. However, risk-sharing between suppliers and demanders creates an incentive for both parties to use nominal contracts. in particular, if an increase in the money growth rate signals a rise in the dispersion of shocks to demanders' wealth, then prices adjust only partially to monetary shocks and money is positively associated with output.
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 November, 2008 Journal of Banking Regulation, vol. 10, no. 1, pp. 17-27 ; James B Thomson; Journal Article
Abstract: Deregulation and financial consolidation have led to the development of financial holding companies—allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella—and the Federal Reserve has been named supervisor of the consolidated enterprise. This paper will suggest economies of scope between the Fed's inherent central banking responsibilities and those of an umbrella supervisor, and that these dual roles benefit both the Fed and functional regulators.
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 February, 2008 The Review of Economics and Statistics, vol. 90, no. 1, pp. 182-5 ; Michael D Bordo; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Committing and Reneging: A Dynamic Model of Policy Regimes

 

 January, 2004 International Review of Economics and Finance, 2004, v. 13, iss. 1, pp. 1-18 ; Joseph A Ritter; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Getting the Most Out of a Mandatory Subordinated Debt Requirement

 

 January, 2004 Journal of Financial Services Research, vol. 24, no. 2/3, p 149. ; Rong Fan; Peter Ritchken; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank

 

 September, 2002 Corporate Ownership and Control, vol. 1 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Introduction to Conference Volume: Declining Treasury debt

 

 August, 2002 Journal of Money, Credit, and Banking, August 2002, pp. 701-966 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Dynamic Commitment and Incomplete Policy Rules

 

 November, 2000 Journal of Money, Credit, and Banking, vol. 32, no. 4, part 1, November 2000, pp. 766-84 ; Joseph A Ritter; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Subordinated Debt

 

 March, 1999 Journal of International Banking Regulation, vol. 1, no. 1, (March 1999). ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Risk Aversion, Performance Pay, and the Principal-Agent Problem

 

 January, 1999 In: The Economics of Executive Compensation, vol. 1, 1999, pp. 331-49 Elgar Reference Collection. International Library of Critical Writings in Economics, vol. 103. Cheltenham, U.K. and Northampton, Mass.: Elgar ; Article in Book
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Introduction to Conference Volume: Comparative Financial Systems

 

 August, 1998 Journal of Money, Credit, and Banking, vol. 30, no. 3, part 2, August 1998, pp. 421-425 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Loan Sales: Pacific Rim Trade in Non-Tradeable Assets

 

 January, 1998 Advances In International Banking and Finance, vol. 3, 1998, pp.73-98. ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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The Changing Role of Banks and the Changing Value of Deposit Guarantees

 

 January, 1998 In: Advances In International Banking and Finance, vol. 3,1998, Greenwich, CN: JAI Press Inc., 1-22 ; Ivilina Popova; Peter Ritchken; Article in Book
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Executive Compensation: A Calibration Approach

 

 January, 1998 Economic Theory, vol. 12, no. 3, 1998, pp. 561-581 ; Ivilina Popova; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Loan Sales, Implicit Contracts, and Bank Structure

 

 September, 1996 Review of Quantitative Finance and Accounting, vol. 7, no. 2, September 1996, pp. 137-62 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Introduction to Conference Volume: Derivatives and Intermediation

 

 August, 1996 Journal of Money, Credit, and Banking, vol. 28, August 1996, part 2, 421-425 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Dynamic Collusion in an Open Economy

 

 January, 1996 Economics Letters, vol. 20/21, 1986, pp. 75-78 ; Val E Lambson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Introduction to Conference Volume: Federal Credit Allocation: Theory, Evidence, and History

 

 August, 1994 Journal of Money, Credit, and Banking, vol. 26, no. 3 part 2, August 1994, pp. 517-522 ; James B Thomson; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Risk Aversion, Performance Pay, and the Principal-Agent Problem

 

 April, 1994 Journal of Political Economy, vol. 102 no. 2, April 1994, pp. 258-276 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Consumption and Fractional Differencing: Old and New Anomalies

 

 November, 1993 Review of Economics and Statistics, vol. 75 no. 4, November 1993, pp. 767-772 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Contracting Costs, Inflation, and Relative Price Variability: Comment

 

 August, 1993 Journal of Money, Credit, and Banking, vol. 25, no. 3, part 2, August 1993, pp. 609-11 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Comment on Reagan and Stulz

 

 August, 1993 Journal of Money, Credit, and Banking, vol. 25 no. 3, part 2, August 1993, pp. 609-611 ; Published Comments
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Capital Requirements and Shifts in Commercial Bank Portfolios

 

 January, 1993 New York University Salomon Brothers, Working Paper no. S-93-47 ; Working Paper, Other
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Sticky Prices, Money, and Business Fluctuations

 

 May, 1991 Journal of Money, Credit, and Banking, vol. 23, May 1991, pp. 243-259 ; Robert G King; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Banking and Insurance

 

 December, 1990 Journal of Monetary Economics, vol. 26, no. 3, December 1990, pp. 361-86 ; Robert G King; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Nonmonetary Effects of Financial Crises: Lessons from the Great Depression in Canada

 

 March, 1990 Journal of Monetary Economics, vol. 25, March 1990, pp. 223-252 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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The Loan Sales Market

 

 January, 1990 In: Research in Financial Services: Private and Public Policy, vol. 2, edited by G. G. Kaufman, 1990, pp. 85-135 ; Gary B Gorton; Article in Book
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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 April, 1989 National Bureau of Economic Research, Working Paper no. 2951 ; Andrew W Lo; Working Paper, Other
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Financial Intermediation: Delegated Monitoring and Long-Term Relationships

 

 January, 1989 Journal of Banking and Finance, vol. 13, 1989, pp. 9-20 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Optimal Financial Structure in Exchange Economies

 

 May, 1988 International Economic Review, vol. 29, May, 1988, pp. 217-235 ; Journal Article
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Assessing Deregulation: Further Considerations

 

 January, 1987 In: Bubbles and Other Essays, Carnegie-Rochester Conference Series, vol. 26, 1987, pp. 345-348 ; Gary B Gorton; Article in Book
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Bank Deregulation, Credit Markets and the Control of Capital

 

 January, 1987 In: Bubbles and Other Essays, Carnegie-Rochester Conference Series, vol. 26, 1987, pp. 289-348 ; Gary B Gorton; Article in Book
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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The Optimal Non-Linear Bank

 

 January, 1986 Differentiated Products and the Theory of Private Money, Rodney White Center Working Paper ; Working Paper, Other
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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Does the Potency of Monetary Policy Vary with Capacity Utilization? A Comment

 

 January, 1986 In: Carnegie-Rochester Conference Series on Public Policy, The National Bureau Method, International Capital Mobility, and Other Essays, Spring 1986, vol. 24, 1986, pp. 333-337. ; Published Comments
Abstract: This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post-World War II period.
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