Christopher Healy

Some observers have argued that the short selling of bank stock contributes to bank runs and bank failures. Previously, no evidence has been available. We find no evidence that more short selling of bank stock is associated with materially larger outflows of bank deposits. We believe this means that proposals to restrict the short selling of bank stock should be supported by other arguments.

We study the effects of surprises in inflation and labor market conditions on the markets’ expected FFR path to gain insights into the FOMC’s data-dependent approach.

SEP data indicate the FOMC expected to keep the FFR near zero in 2021 and catch up to inflation later. We use economic literature to explain this strategy.