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Economic Research

Recent Publications
Health Spending Slowed Down in Spite of the Crisis
There is disagreement about why the growth rate of health care spending has fallen to historically low levels since 2009. The authors use a set of credit reforms to provide evidence that, contrary to conventional wisdom, the financial crisis and the Great Recession increased health care spending rather than decreased it.
By Marco DiMaggio, Andrew Haughwout, Amir Kermani, Matthew Mazewski, and Maxim Pinkovskiy, Staff Reports 781, June 2016
Repurchase Agreements as an Instrument of Monetary Policy at the Time of the Accord
Following the Treasury-Federal Reserve Accord of March 1951, the Federal Open Market Committee focused on free reserves—the difference between excess reserves and borrowed reserves—as the touchstone of U.S. monetary policy. The author surveys the two leading policy instruments for managing free reserves: 1) open market purchases and sales of Treasury bills and 2) repurchase agreements.
By Kenneth Garbade, Staff Reports 780, June 2016
The Payment System Benefits of High Reserve Balances
The authors document a shift in the timing of payments over the Fedwire® Funds Service since the financial crisis. They present regression results suggesting that the vast majority of the shift toward early settlements is explained by an increase in aggregate bank reserve balances, and they discuss the benefit of high balances going forward.
By James McAndrews and Alexander Kroeger, Staff Reports 779, June 2016
Newer Need Not Be Better: Evaluating the Penn World Tables and the World Development Indicators Using Nighttime Lights
Nighttime lights data are a measure of economic activity, with a measurement error that is plausibly independent of the measurement errors of most conventional indicators. The authors use nighttime lights as an independent benchmark to assess which vintages of existing measures of economic activity better estimate true income per capita.
By Maxim Pinkovskiy and Xavier Sala-i-Martin, Staff Reports 778, June 2016
The Early Years of the Primary Dealer System
Primary dealers serve as trading counterparties of the Federal Reserve Bank of New York in its implementation of monetary policy. In this paper, the author presents a history of the primary dealer system from the late 1930s to the early 1950s.
By Kenneth Garbade, Staff Reports 777, June 2016
How to Escape a Liquidity Trap with Interest Rate Rules
The author studies interest rate rules for an economy in a liquidity trap. He asks, among other questions, How long should central banks promise to keep short-term nominal interest rates low, and should that period be extended if inflation turns out to be lower than expected?
By Fernando Duarte, Staff Reports 776, May 2016
The Term Structure of Expectations and Bond Yields
The authors characterize the expected path of nominal and real short-term interest rates, as well as inflation, by using the universe of U.S. macroeconomic forecasts covering more than 500 survey-horizon pairs. Among their findings: Term premiums are very important for explaining yield curve dynamics.
By Richard K. Crump, Stefano Eusepi, and Emanuel Moench, Staff Reports 775, May 2016