| Title |
Date |
Publication |
Author(s) |
Type |
| Bank Loans: Still Contracting
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August, 2010 |
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Timothy Bianco; Filippo Occhino; |
Economic Trends |
| Abstract: Information from various sources suggests that the number of loans that banks are making to businesses continues to fall. The contraction appears to be driven by both supply and demand; banks are extending less credit, and businesses are asking for less. The restriction of credit may be one important factor that is constraining the current recovery, since businesses, especially small ones, rely on bank loans and access to credit to finance their operations, capital expenditures, and growth.
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| The Yield Curve, July 2010
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August, 2010 |
|
Timothy Bianco; Joseph G Haubrich; |
Economic Trends |
| Abstract: The Yield Curve has a new look and location! We hope you find the new format better. Since last month, the yield curve has flattened, as long rates dropped and short rates edged up. Projecting forward using past values of the spread and GDP growth suggests that real GDP will grow at about a 1.14 percent rate over the next year, just up from June?s prediction of 1.00 percent. Although the time horizons do not match exactly, this comes in on the more pessimistic side of other forecasts, although, like them, it does show moderate growth for the year.
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| Recent Developments in Prices and Inflation Expectations
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July, 2010 |
|
Timothy Bianco; Mehmet Pasaogullari; |
Economic Trends |
| Abstract: As the economy recovers, interest has turned to the Fed’s strategy for exiting from the accommodative policy it adopted to deal with the crisis. Owing to the Fed’s dual mandate (maximum sustainable employment and price stability), the exit strategy will depend on the developments in prices as well as the real economy. Price statistics suggest that we are in a period of disinflation,and inflation expectations reveal no significant threat of inflation is anticipated.
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| Inflation: Noise, Risk, and Expectations
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June, 2010 |
|
Timothy Bianco; Joseph G Haubrich; |
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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| Survey-Based Measures of Inflation Expectations
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April, 2010 |
|
Timothy Bianco; Mehmet Pasaogullari; |
Economic Trends |
| Abstract: There are two sources of data on inflation expectations. One is derived from market prices of various financial securities; the other is surveys of the general public and professional forecasters and economists. Recent trends in survey-based measures show that there was substantial disagreement about future inflation expectations early in the recession, reflecting opposite concerns among survey participants: some fear deflation or disinflation and others fear higher inflation. The longer-term inflation expectations are currently around their historical levels, and the dispersion for these expectations also reflects a better anchoring of inflation rates over the longer-term.
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| Market Expectations for Monetary Policy in the U.S. and Europe
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March, 2010 |
|
Timothy Bianco; Kent Cherny; Ben R Craig; John Lindner; |
Economic Trends |
| Abstract: On March 16, the Federal Open Market Committee released a statement saying it would hold the Federal Funds target rate at 0 to 1/4 percent, and that “low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Was the market surprised by anything in this statement?
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| An Update on the High-Yield Corporate Bond Spread and Economic Activity
|
December, 2009 |
|
Timothy Bianco; Mehmet Pasaogullari; |
Economic Trends |
| Abstract: The financial crisis has brought into focus the importance of financial markets to a properly functioning economy. One important financial market is the corporate bond market. A look at current conditions in it can shed some light on ongoing financial market stabilization.
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| Inflation and Inflation Expectations
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November, 2009 |
|
Timothy Bianco; Andrea Pescatori; |
Economic Trends |
| Abstract: Inflation expectations play a crucial role in monetary policy making. Not only do they tell policymakers something about the real expected cost of borrowing and hence the viability of investment plans, they also help policymakers gauge the public?s perception of the central bank’s commitment to maintaining a low and stable rate of inflation. Especially in the current policy environment, where the Fed has been forced by events to take unconventional actions, it is more important than ever to make sure that long-run inflation expectations are well anchored and that the policy message is well understood by the public.
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| The High-Yield Corporate Bond Spread and Economic Activity
|
November, 2009 |
|
Timothy Bianco; Mehmet Pasaogullari; |
Economic Trends |
| Abstract: Measures of the external finance premium—the difference between the cost of external funds and the opportunity cost of internal funds—may contain valuable information about future economic activity. The high-yield corporate bond spread is probably a good measure of this premium. There is a theoretical underpinning for this connection, and empirically, the high-yield spread seems a good predictor of future economic activity. A simple empirical model of GDP and the high-yield spread predicts that real GDP will grow 2.8 percent in 2010.
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| Bank Lending, Capital, Booms, and Busts
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August, 2009 |
|
Timothy Bianco; Joseph G Haubrich; |
Economic Trends |
| Abstract: The current crisis has brought a lot of attention to the sometimes obscure role that bank capital plays in lending levels. One concern is that bank capital, which is intended to serve as a buffer against losses, tends instead to accentuate booms and busts. We check for a procyclical pattern in a variety of measures of capital.
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| Implementing Long-Term Security Purchases
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July, 2009 |
|
Timothy Bianco; John Lindner; Andrea Pescatori; |
Economic Trends |
| Abstract: During slowdowns in economic activity and periods of inflation, the optimal response is to lower the real rate. Traditionally, the Federal Reserve achieved this by reducing the target fed funds rate. In general (but with notable exceptions), this reduction has an effect also on yields of longer maturity, which can be thought of as a combination of current and future expected short-term rates, thus stimulating the economy. However, when short-term rates are close to zero the traditional tool is no longer feasible.
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| Consumer Credit Markets
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July, 2009 |
|
Timothy Bianco; Ozgur Emre Ergungor; |
Economic Trends |
| Abstract: Signs so far suggest that Fed programs designed to revive consumer credit markets are having a positive impact. The market for consumer asset-backed securities (ABS), which effectively shut down in September 2008, has returned to pre-crisis levels after the Fed lent $25 billion to investors against their ABS portfolios. With the Fed’s purchase of mortgage-backed securities (MBS) and Treasury bonds, Treasury yields as well as the spread between Fannie Mae MBS and Treasury securities have declined in recent months.
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