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14 posts from March 2014

March 07, 2014

Crisis Chronicles: The Credit and Commercial Crisis of 1772

James Narron and David Skeie

During the decade prior to 1772, Britain made the most of an expansion in colonial lands that required significant capital investment across the East and West Indies and North America. As commodities like tobacco flowed from colonial lands to Britain, merchandise and basic supplies flowed back to the colonies. With capital scarce in the American colonies, colonial planters were eager to borrow cheap capital from British creditors. But because planters often maintained open lines of credit through multiple trade channels, creditors had no way of knowing a particular planter’s indebtedness. So when two banks in London failed, contagion spread and the credit boom suddenly ended. In this edition of Crisis Chronicles, we learn the perils of private indebtedness and offer an inverse comparison of today’s “originate-to-distribute” mortgage market.

Continue reading "Crisis Chronicles: The Credit and Commercial Crisis of 1772" »

Posted by Blog Author at 7:00 AM in Credit, Crisis Chronicles , Inflation | Permalink | Comments (0)

March 05, 2014

Just Released: Harsh Winter Weather Hampers Economic Activity in the Region

Jaison R. Abel and Jason Bram

The New York Fed’s latest Beige Book report indicates that harsh winter weather hampered economic activity in the region in early 2014.

     Eight times a year, each of the nation’s twelve Federal Reserve Banks produces a report on current economic conditions in its District, based largely on anecdotal information obtained from regional business contacts. The New York Fed’s report covers New York State, northern New Jersey, and southwestern Connecticut. The twelve District reports are combined with a national summary to produce what’s come to be known as the Beige Book—a report that provides some of the most timely information available on economic conditions.

Continue reading "Just Released: Harsh Winter Weather Hampers Economic Activity in the Region" »

Posted by Blog Author at 2:05 PM in Regional Analysis | Permalink | Comments (0)

Risk Aversion, Global Asset Prices, and Fed Tightening Signals

Jan J.J. Groen and Richard Peck

The global sell-off last May of emerging market equities and currencies of countries with high interest rates (“carry-trade” currencies) has been attributed to changes in the outlook for U.S. monetary policy, since the sell-off took place immediately following Chairman Bernanke’s May 22 comments concerning the future of the Fed’s asset purchase programs. In this post, we look back at global asset market developments over the past summer, and measure how changes in global risk aversion affected the values of carry-trade currencies and emerging market equities between May and September of last year. We find that the initial signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion, which put downward pressure on global asset prices.

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Posted by Blog Author at 7:00 AM in Euro Area, Exchange Rates, Fed Funds, Financial Markets, International Economics, Monetary Policy | Permalink | Comments (2)

March 03, 2014

How Unconventional Are Large-Scale Asset Purchases?

Carlo Rosa and Andrea Tambalotti

The large-scale asset purchases (LSAPs) undertaken by the Fed starting in late November 2008 are widely considered to be a form of “unconventional” monetary policy. Although these interventions are certainly unprecedented, this post shows that their effect on financial conditions is not that unconventional, in the sense that the relative effects of the LSAPs on returns across broad asset classes—nominal and real government bonds, stocks, and foreign exchange—are quite similar to those of more conventional policies, such as a reduction in the federal funds rate (FFR).

Continue reading "How Unconventional Are Large-Scale Asset Purchases?" »

Posted by Blog Author at 7:00 AM in Exchange Rates, Fed Funds, Financial Markets, Monetary Policy | Permalink | Comments (0)

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