How large-scale asset purchase (LSAP) programs affect financial markets is an important question for policy makers that face the zero lower bound. While so-called “stock effects”–that is, persistent shifts in asset prices observed as the result of an LSAP program–are relatively well...

In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and...

Whether bank failures have adverse effects on local economies is an important question for which there is conflicting and relatively scarce evidence. In this study, I use county-level data to examine the effect of bank failures and resolutions on local economies. Using quasi-experimental...

In this study, I model the predictors and manifestation of bank stress during the financial crisis using a Multiple Indicator Multiple Cause model. Unlike most early warning models that predict failure probabilities, this article describes a framework for predicting a broader notion of bank...

This paper presents an empirical test of the balance sheet channel of monetary policy. I take advantage of a panel data set containing nearly all domestic banks to search for an adjustment in lending patterns induced by changes in the stance of monetary policy. I find that in response to...

Beginning in October 2011, the Federal Reserve began ongoing purchases of Mortgage Backed Securities (MBS). I test the extent to which these purchases were associated with disruptions in indicators of market functioning by using daily data on Federal Reserve MBS purchase operations. I find that...

Why do asset price bubbles continue to appear in various markets? What types of events give rise to bubbles and why do arbitrage forces fail to quickly burst them? Do bubbles have real economic consequences and should policy makers do more to prevent them? This paper provides an overview of...

In this paper, we re-examine the relationship between money and interest rates with a focus on the past few years, when the opportunity cost of M2 has dropped below zero. Until the late 1980s, a stable relationship between monetary aggregates and the opportunity cost of holding money--measured...

We extract an index of interest rate spreads from various money market segments to assess the level of funding stress in real time. We find that during the 2007–2009 financial crisis, money markets switched between low and high stress regimes except for brief periods of extreme stress....