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Economic Research

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The Zero Lower Bound Remains a Medium-Term Risk
In December 2008, the bottom of the target range for the federal funds rate reached the zero lower bound (ZLB), the point where the policy rate could not fall further to stimulate the economy if needed. It remained there until December 2015. The authors examine the perceived risk of interest rates returning to the ZLB in the future and find that the risk varies over time, driven mainly by the expected level of interest rates.
By Sophia Cho, Thomas M. Mertens, and John C. Williams
New Dataset Maps Losses from Natural Disasters to the County Level
The Federal Reserve’s mission and regional structure ask that it always work to better understand local and regional economic activity. This requires gauging the economic impact of localized events, including natural disasters. The authors introduce Losses from Natural Disasters, the first publicly available comprehensive dataset on county-level damages, injuries, and fatalities from natural disasters in the United States.
By Matteo Crosignani and Martin Hiti
Financial Intermediaries and the Changing Risk Sensitivity of Global Liquidity Flows
Global risk conditions have historically been major drivers of cross-border capital flows and the global financial cycle. What happens to these global liquidity flows when risk sentiment changes? The authors examine how the sensitivity to risk of global financial flows changed following the global financial crisis (GFC) and find that while the risk sensitivity of cross-border bank loans was lower following the GFC, that of international debt securities remained the same as before.
By Stefan Avdjiev and Linda S. Goldberg
Decorative Photo: Stacks of Hundred Dollar Bills Securely Stored in a Steel Safe for Bank Reserves Concept
Reserves and Where to Find Them
Banks use central bank reserves for a multitude of purposes including making payments, managing intraday liquidity outflows, and meeting regulatory and internal liquidity requirements. Data on aggregate reserves for the U.S. banking system are readily accessible, but information on the holdings of individual banks is confidential. The authors summarize how non-confidential data can be used as a proxy to investigate questions about bank-level reserves.
By Gara Afonso, Marco Cipriani, JC Martinez, and Matthew Plosser
The New York Fed DSGE Model Forecast—June 2025
The authors present an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. They describe their forecast and its change since March 2025.
By Marco Del Negro, Ibrahima Diagne, Pranay Gundam, Donggyu Lee, and Brian Pacula
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How Much Does Immigration Data Explain the Employment-Gap Puzzle?
Recent official U.S. employment statistics have shown an increase in the gap between the nonfarm payroll and household employment numbers. This discrepancy is not trivial. The authors investigate one potential explanation for this gap: a sharp rise in undocumented immigration during the post-COVID period that would be differentially reflected in the two surveys. They leverage industry-level data that suggest factors besides undocumented immigration likely contributed to the emergence of the gap between the two measures.
By Richard Audoly and Roshie Xing
RESEARCH TOPICS
A Danger to Self and Others: Health and Criminal Consequences of Involuntary Hospitalization
The intent of involuntary hospitalization is to prevent individuals from harming themselves or others. Does it achieve its goals? The authors investigate and find that, for individuals whose cases are judgment calls, contrary to the intended effects of the policy, hospitalization nearly doubles the probability of dying by suicide or overdose and nearly doubles the probability of being charged with violent crime in the three months after evaluation. They provide evidence of earnings and housing disruptions as potential mechanisms.
Natalia Emanuel, Pim Welle, and Valentin Bolotnyy, Staff Report 1158, July 2025
Management and Firm Dynamism
Recent studies suggest that management plays an important role in driving productivity in firms. The authors focus on whether and how management affects firm dynamism around entry, exit, acquisitions, and divestitures. Drawing on U.S. Census and international data, their findings suggest that better-managed firms have lower costs of plant opening, closing, acquisition, and disposal, allowing them to be more dynamic. These firms also produce better-managed plants and improve the performance of the plants they acquire.
Nicholas Bloom, Jonathan S. Hartley, Raffaella Sadun, Rachel Schuh, and John Van Reenen, Staff Report 1157, July 2025
Losses from Natural Disasters: County-Level Data on Damages, Injuries, and Fatalities
The authors introduce the first comprehensive publicly available dataset on county-level damages, injuries, and fatalities from natural disasters in the U.S., including sources which report losses for geographic areas largely based on meteorological science. They map these areas to counties using geographic tools together with the spatial distribution of population, housing stock, and economic activity. Losses from Natural Disasters can be linked with other administrative data to better assess local economic conditions after natural disasters, thus supporting the Federal Reserve’s mission.
Matteo Crosignani and Martin Hiti, Staff Report 1156, July 2025
The Theory of Financial Stability Meets Reality
Banking is a heavily regulated industry, yet it remains prone to large and costly disruptions which occur despite the regulatory infrastructure that emerged from the Great Depression. A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. The authors bridge insights from the economics, finance, and accounting literatures to synthesize knowledge about the design and implementation of bank regulation and identify areas where more work is needed.
Nina Boyarchenko, Kinda Hachem, and Anya Kleymenova, Staff Report 1155, June 2025
Information Spillovers Within Couples: Evidence from a Sequential Survey of Spouses
Many economic decisions are made jointly at the household level. However, little is known about information flow within couples, and whether spouses hold aligned expectations about the same outcomes. The authors conduct an online survey of 2,200 middle-aged married couples in the U.S., in which both spouses report their expectations about the same outcomes. They use these novel data to test the assumption of equality of expectations within couples and then quantify the extent of information spillovers to investigate the factors that facilitate or hinder information flow between partners.
Adeline Delavande, Gizem Koşar, and Basit Zafar, Staff Report 1154, June 2025
The Price of Processing: Information Frictions and Market Efficiency in DeFi
A central question in financial economics concerns price discovery, or how new information be-comes embedded in asset prices. The authors study this question within the context of hacks in decentralized finance (DeFi). They precisely time both when the hacks begin on the public blockchain record and when the news is later announced on social media, becoming common knowledge. Their central finding is that prices move significantly before the news becomes common knowledge.
Pablo D. Azar, Sergio Olivas, and Nish D. Sinha, Staff Report 1153, April 2025
Component-Based Dynamic Factor Nowcast Model
The authors propose a component-based dynamic factor model for nowcasting GDP growth, evaluating its performance against existing models. They demonstrate that, on average, the performance of the standard dynamic factor model can be improved by 15 percent and its density nowcast performance can be improved by 20 percent over a large historical sample.
Hannah O’Keeffe and Katerina Petrova, Staff Report 1152, April 2025
Uniform Inference with General Autoregressive Processes
Imposing short memory assumptions in macroeconomic and financial models is convenient, since it delivers standard econometric inference on the models’ parameters with conventional asymptotic distributions. However, such stationarity assumptions are often empirically unrealistic. The authors propose a unified, distribution-free framework for inference in autoregressive, predictive regression, and local projection models, when the regressor’s autoregressive root is in (-∞, ∞). They demonstrate how their procedure can be used to construct valid confidence intervals in standard epidemiological models.
Tassos Magdalinos and Katerina Petrova, Staff Report 1151, April 2025
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