Policy Discussion Papers
Providing you with in-depth analysis of monetary and financial policy.
2007
- No. 23
- The 2007 Summer Workshop on Money, Banking and Payments: An Overview
- The 2007 Summer Workshop on Money, Banking, Payments and Finance met at the Federal Reserve Bank of Cleveland this summer, as we have over the past several years. The following document summarizes and ties together the contributions presented at the workshop this year. (PDF)
- No. 22
- Does Government Intervention in the Small-Firm Credit Market Help Economic Performance?
- The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. The SBA’s fiscal year 2008 performance budget calls for $25 billion in guaranteed loans for small businesses-a new record for the agency. Some critics of SBA programs suggest they do not help small businesses or overall economic performance. Other critics suggest that these programs unfairly benefit the financial institutions that participate in SBA’s guaranteed lending programs. While very little serious empirical evidence exists on whether the net economic impact of the SBA’s guaranteed lending programs is positive or negative, a few recent studies provide some insight into the question. In general, they suggest a small positive impact of the SBA’s programs on economic performance. However, the results are very tentative and further research is needed to declare a more definitive position. We provide a general overview of the SBA’s guaranteed lending programs and summarize the results of these studies. (PDF)
- No. 21
- On the Resolution of Financial Crises: The Swedish Experience
- Sweden was one of the Scandinavian countries experiencing a severe financial crisis In the late 1980s and early 1990s. This paper reviews the policy choices and external factors that pushed the country’s financial system over the edge and then examines the steps the government took to make its resolution of the crisis one of the most successful in the past 30 years. (PDF)
- No. 20
- Who Holds the Toxic Waste? An Investigation of CMO Holdings
- "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. (PDF)
- No. 19
- Some Lessons on the Rescue of Long-Term Capital Management
- 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. (PDF)
- No. 18
- 2006 Summer Workshop on Money, Banking, and Payments?An Overview
- This Policy Discussion Paper summarizes the papers presented at the 2006 Summer Workshop on Money, Banking, and Payments. Every summer since 2002, some of the best researchers in the areas of theory, policy, and quantitative analysis relating to money, banking, and payments systems have met in Cleveland to discuss their latest work. The papers presented at the 2006 workshop cover a vast spectrum of issues and use a wide variety of methods. Still, there is an underlying theme, which is an effort to enhance our understanding of monetary economics, broadly defined, and to uncover new ways to think about important substantive issues. Hopefully, this helps not only theoretical monetary economists, but also economists such as central bankers with a more practical policy-oriented view. (PDF)
- No. 17
- Inertial Taylor Rules: The Benefit of Signaling Future Policy
- We trace the consequences of an energy shock on the economy under two different monetary policy rules: a standard Taylor rule where the Fed responds to inflation and the output gap; and a Taylor rule with inertia where the Fed moves slowly to the rate predicted by the standard rule. We show that with both sticky wages and sticky prices, the outcome of an inertial Taylor rule is superior to that of the standard rule, in the sense that inflation is lower and output is higher following an adverse energy shock. However, if prices alone are sticky, things are less clear and the standard rule delivers substantially less inflation than the inertial rule in the short run. (PDF)