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F e d e r a l R e s e r v e B a n k o f N e w Yo r k

Number 2

2008

ResearchUpdate
Research and Statistics Group

www.newyorkfed.org/research

Eric Ghysels Is Research Group’s New Resident Scholar

T

he Research Group welcomes
founding co-president of the Society for
Eric Ghysels to its Program for
Financial Econometrics. For the past fifResident Scholars for 2008-09.
teen years, he has been a visiting scholar
Professor Ghysels is the Edward M.
at the Board of Governors of the Federal
Bernstein Distinguished Professor of
Reserve System and at the Federal
Economics at the University of North
Reserve Bank of New York.
Carolina at Chapel Hill as well as a proThe Research Group established its
fessor of finance at the university’s KenanProgram for Resident Scholars in 2004
Flagler Business School. A renowned
to attract to the New York Fed, for a stay
researcher on time series econometrics
of at least six months, outstanding
and finance, he has published in the
researchers with an international reputaJournal of the American Statistical
tion. The scholars are selected from the
Association, the Journal of Econometrics,
top academic and policy institutions in
the Journal of Finance, the Journal of
areas related to the Bank’s broad policy
Financial Economics, the Review of
interests. Resident scholars pursue their
Economics and Statistics, and the Review
own research agendas while participating
of Financial Studies. Professor Ghysels is
fully in the Research Group’s activities.
a former coeditor of the Journal of
They work closely with the director of
Business and Economic
Statistics and currently
Also in this issue…
coeditor of the Journal of
Financial Econometrics.
Earnings on cross-border investments assume
Professor Ghysels has
a larger role in the U.S. current account . . . . . . . . . . . . 2
served on the editorial
Current Issues…en español . . . . . . . . . . . . . . . . . . . . . . . 3
boards of several other
Upcoming in the Economic Policy Review . . . . . . . . . . . 4
academic journals, has
Staff Reports: New titles . . . . . . . . . . . . . . . . . . . . . . . . . . 6
chaired the Business and
Papers presented at conferences . . . . . . . . . . . . . . . . . . . . 9
Economic Statistics Section Papers recently published
of the American Statistical
by Research Group economists . . . . . . . . . . . . . . . . . . 11
Association, and is the
Publications and papers: April-June. . . . . . . . . . . . . . . . 12

RV oe ls ue ma rec h9 , U Np du amtbee r■ 4N, u 2m0b0e 6r 2 , 2 0 0 8

research, contribute to policymaking discussions, and provide intellectual leadership by advising and collaborating with
the Group’s economists.
Previous resident scholars are Mark
Gertler, the Henry and Lucy Moses
Professor of Economics at New York
University; Nobuhiro Kiyotaki, professor

2

of economics at Princeton University;
Suresh M. Sundaresan, the Chase
Manhattan Bank Foundation Professor
of Financial Institutions at Columbia
Business School; and Jiang Wang, the
Mizuho Financial Group Professor at
MIT’s Sloan School of Management. ■

Earnings on Cross-Border Investments Assume a Larger Role
in the U.S. Current Account

F

or many observers, the U.S. current
account is virtually synonymous with
the trade deficit. Export and import
flows determine the nation’s balance of
payments with the rest of the world,
while the income from international
investments plays only a minor role.
In “The Changing Nature of the U.S.
Balance of Payments” (Current Issues in
Economics and Finance, vol. 14, no. 4),
authors Rebecca Hellerstein and Cédric
Tille dispute this view, arguing that earnings on cross-border investments represent an increasingly large share of the
gross flows between the United States
and other nations.
This development, the authors note,
has important implications: Because
these earnings fluctuate much more
sharply than trade flows, they will almost
certainly heighten the volatility of the
U.S. current account going forward.
Nevertheless, the international financial
linkages that underlie this increased
volatility will distribute risk across countries and help secure the U.S. economy
against the uncertainties of its business
cycle.

F e d e r a l R e s e r v e B a n k o f N e w Yo r k

As the authors explain, the rise in
cross-border financial holdings created
by globalization entails significant
increases in dividend and interest earnings. As a share of gross income from the
rest of the world, U.S. earnings on foreign
assets nearly doubled between 1970 and
2007, rising from 17 percent to 32 percent. Over the same period, earnings by
foreign investors in the United States
claimed an increasing share of U.S. gross
payments to other nations, advancing
from 9 percent to 23 percent.
With earnings streams on international
assets figuring more prominently in gross
flows to and from the United States, the
current account has become more sensitive to fluctuations in international financial yields. As evidence of this heightened
sensitivity, the authors point to a recent
revision of the balance of payments data
by the U.S. Bureau of Economic Analysis.
An upward adjustment in U.S. net
income on international assets and liabilities—driven largely by an adjustment to
yields, combined with large underlying
holdings—led to a sizable reduction in the
current account deficit after 2001. The

www.newyorkfed.org/research

reduction was especially marked for the
years 2004-06, with the amended data
lowering the deficit by 0.22 percent to
0.34 percent of GDP.
Although the heightened exposure of
the current account to movements in
financial yields can be expected to create
greater current account volatility,
Hellerstein and Tille do not see grounds
for concern. The authors show that
although the yield differential between
U.S. international assets and liabilities is
volatile, it is negatively correlated with
U.S. growth. This means that the United

States earns a higher return on its assets
than it pays on its liabilities during downturns in the economy.
Noting that this “insurance benefit”
has strengthened over the last ten years,
the authors conclude, “The greater
volatility of the current account going
forward does not imply lower economic
welfare. To the contrary, it is the channel
through which business cycle risk is
shared across countries.”
The article is available at
www.newyorkfed.org/research/
current_issues/ci14-4.html.

Current Issues…en Español
A special Spanish-language version of “Trends and Developments in the Economy
of Puerto Rico,” by Jason Bram, Francisco E. Martinez, and Charles Steindel, has
recently been published.
“Tendencias y cambios en la economía de Puerto Rico” is available at
www.newyorkfed.org/research/current_issues/ci14-2_spanish.pdf. The English
version of the article was first published in the March 2008 issue of Current Issues
in Economics and Finance.

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Number 2, 2008

Upcoming in the Economic Policy Review

T

he articles below are now available
on our website (www.newyorkfed.org/
research/epr/index.html). All but the
first one will be part of an upcoming volume devoted to payments systems.

4

Why the U.S. Treasury Began Auctioning
Treasury Bills in 1929
Kenneth D. Garbade
The U.S. Treasury began auctioning zerocoupon bills in 1929 to complement the
fixed-price subscription offerings of
coupon-bearing certificates of indebtedness, notes, and bonds that it had previously
relied upon. Bills soon came to play a central role in Treasury cash and debt management. This article explains that the
Treasury began auctioning bills to mitigate
flaws in the structure of its financing operations that had become apparent during the
1920s. The flaws included the underpricing
of new issues to limit the risk of a failed
offering; borrowing in advance of actual
requirements, resulting in negative carry on
Treasury cash balances at commercial
banks; and the redemption of maturing
issues in advance of tax receipts, resulting
in short-term borrowings from Federal
Reserve Banks that sometimes led to transient fluctuations in reserves available to
the banking system and undesirable volatility
in overnight interest rates.
Intraday Liquidity Management:
A Tale of Games Banks Play
Morten L. Bech
Over the last few decades, most central
banks, concerned about settlement risks
inherent in payment netting systems, have
implemented real-time gross settlement
(RTGS) systems. Although RTGS systems
can significantly reduce settlement risk,
they require greater liquidity to smooth
nonsynchronized payment flows. Thus, central banks typically provide intraday credit

F e d e r a l R e s e r v e B a n k o f N e w Yo r k

to member banks, either as collateralized
credit or priced credit. Because intraday
credit is costly for banks, how intraday
liquidity is managed has become a competitive
parameter in commercial banking and a
policy concern of central banks. This article uses a game-theoretical framework to
analyze the intraday liquidity management
behavior of banks in an RTGS setting. The
games played by banks depend on the
intraday credit policy of the central bank
and encompass two well-known paradigms
in game theory: “the prisoner’s dilemma”
and “the stag hunt.” The former strategy
arises in a collateralized credit regime,
where banks have an incentive to delay
payments if intraday credit is expensive, an
outcome that is socially inefficient. The latter strategy occurs in a priced credit
regime, where postponement of payments
can be socially efficient under certain circumstances. The author also discusses how
several extensions of the framework affect
the results, such as settlement risk, incomplete information, heterogeneity, and
repeated play.
Global Trends in Large-Value Payments
Morten L. Bech, Christine Preisig,
and Kimmo Soramäki
Globalization and technological innovation
are two major forces affecting the financial
system and its infrastructure. Perhaps
nowhere are these trends more apparent
than in the internationalization and
automation of payments. While the effects
of globalization and technological innovation are most obvious on retail payments,
the influence is equally impressive on
wholesale, or interbank, payments. Given
the importance of payments and settlement
systems to the smooth operation and
resiliency of the financial system, it is
important to understand the potential
consequences of these developments. This
article presents ten major long-range trends

www.newyorkfed.org/research

in the settlement of large-value payments
worldwide. The trends are driven by technological innovation, structural changes in
banking, and the evolution of central bank
policies. The authors observe that banks, to
balance risks and costs more effectively,
are increasingly making large-value payments in real-time systems with advanced
liquidity-management and liquidity-saving
mechanisms. Moreover, banks are settling a
larger number of foreign currencies directly
in their home country by using offshore
systems and settling a greater number of
foreign exchange transactions in
Continuous Linked Settlement Bank or
through payment-versus-payment mechanisms in other systems. The study also
shows that the service level of systems is
improving, through enhancements such as
longer operating hours and standardized
risk management practices that adhere to
common standards, while transaction fees
are decreasing. Payments settled in largevalue payments systems are more numerous, but on average of smaller value.
Furthermore, the overall nominal total
value of large-value payments is increasing,
although the real value is declining.

An Economic Perspective on the
Enforcement of Credit Arrangements:
The Case of Daylight Overdrafts
in Fedwire
Antoine Martin and David C. Mills
A fundamental concern for any lender is
credit risk—the risk that a borrower will fail
to fully repay a loan as expected. Thus,
lenders want credit arrangements that are
designed to compensate them for—and help
them effectively manage—this type of risk.
In certain situations, central banks engage
in credit arrangements as lenders to banks,
so they must manage their exposure to
credit risk. This article discusses how the
Federal Reserve manages its credit risk
exposure associated with daylight overdrafts. The authors first present a simple
economic framework for thinking about
the causes of credit risk and the possible
tools that lenders have to help them manage it. They then apply this framework to
the Federal Reserve’s Payments System
Risk policy, which specifies the use of a
variety of tools to manage credit risk. The
study also analyzes a possible increase in
the use of collateral as a credit risk management tool, as presented in a recent proposal
by the Federal Reserve concerning changes
to the Payments System Risk policy. ■

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Number 2, 2008

New Titles in the Staff Reports
Series
The following new staff reports are available at www.newyorkfed.org/
research/staff_reports.

MACROECONOMICS
AND GROWTH
No. 323, April 2008
Optimal Monetary Policy under
Sudden Stops
Vasco Cúrdia

6

This paper analyzes what monetary policy
should accomplish in the event of a sudden
stop of capital inflows from abroad. In such
an event, optimal monetary policy induces
higher interest rates and exchange rate
depreciation. This policy is fairly well
approximated by a flexible targeting rule,
which stabilizes a basket composed of
domestic price inflation, the exchange rate,
and output. Cúrdia shows that from a welfare perspective, the success of a fixed
exchange rate regime depends on the economic environment. For the benchmark
parameterization, the peg performs the
worst of the simple rules considered. For
alternative parameterizations that feature
low nominal rigidities or high elasticity of
foreign demand, the fixed exchange rate
regime performs relatively better.

No. 324, April 2008
Globalization and Inflation Dynamics:
The Impact of Increased Competition
Argia M. Sbordone
This study analyzes the potential effect of
global market competition on inflation
dynamics. Using the Calvo model of staggered price-setting, Sbordone modifies the
assumption of a constant elasticity of

F e d e r a l R e s e r v e B a n k o f N e w Yo r k

demand to provide a channel through
which an increase in the number of traded
goods may affect the degree of strategic
complementarity in price setting and hence
alter the dynamic response of inflation to
marginal costs. She discusses the behavior
of the variables that drive the impact of
trade openness on this response and then
evaluates whether an increase in the variety of traded goods of the magnitude
observed in the United States in the 1990s
might have a significant quantitative
impact. The author finds it difficult to
argue that such an increase in trade would
have generated a sufficiently large increase
in U.S. market competition to reduce the
slope of the inflation–marginal cost
relationship.

No. 325, May 2008
Durable Goods Inventories
and the Great Moderation
James A. Kahn
Kahn revisits the hypothesis that changes
in inventory management were an important contributor to volatility reductions
during the Great Moderation. He documents how changes in inventory behavior
contributed in particular to the stabilization
of the U.S. economy within the durable
goods sector and develops a model of
inventory behavior consistent with the key
facts about volatility decline in that sector.
The model addresses concerns raised by a
number of researchers who criticize the
inventory literature’s focus on finished
goods inventories, given that stocks of
works-in-process and materials are actually
larger and more volatile that those of
finished goods. The model adapts the
stockout-avoidance concept to a productionto-order setting and shows that much of the
intuition and many of the results regarding
production volatility still apply.

www.newyorkfed.org/research

INTERNATIONAL
No. 329, June 2008
Inflation Dynamics in a Small OpenEconomy Model under Inflation
Targeting: Some Evidence from Chile
Marco Del Negro and Frank Schorfheide
This paper estimates a small open-economy
dynamic stochastic general equilibrium
(DSGE) model, specified along the lines of
Galí and Monacelli (2005) and Lubik and
Schorfheide (2007), using Chilean data for
the full inflation-targeting period of 1999
to 2007. The authors study the specification
of the policy rule followed by the Central
Bank of Chile, the dynamic response of
inflation to domestic and external shocks,
and the change in these dynamics under
different policy parameters. They use the
DSGE-VAR methodology from their earlier
work (2007) to assess the robustness of
the conclusion to the presence of model
misspecification.

BANKING AND FINANCE
No. 328, May 2008
Liquidity and Leverage
Tobias Adrian and Hyun Song Shin
In a financial system in which balance
sheets are continuously marked to market,
asset price changes appear immediately as
changes in net worth, eliciting responses
from financial intermediaries who adjust
the size of their balance sheets. Adrian and
Shin document evidence that marked-tomarket leverage is strongly procyclical.
Such behavior has aggregate consequences.
Changes in dealer repos—the primary margin of adjustment for the aggregate balance
sheets of intermediaries—forecast changes
in financial market risk as measured by the
innovations in the Chicago Board Options
Exchange Volatility Index. Aggregate liquidity can be seen as the rate of change of
the aggregate balance sheet of the financial
intermediaries.

No. 330, June 2008
Corporate Performance, Board Structure,
and Their Determinants
in the Banking Industry
Renée B. Adams and Hamid Mehran
Using a sample of banking firm data
spanning forty years, Adams and Mehran
examine the relationship between board
structure (size and composition) and bank
performance as well as determinants of
board structure. The authors document
that merger-and-acquisition activity influences bank board composition and provide
new evidence that organizational structure
is significantly associated with bank board
size. They argue that these factors may
explain why banking firms with larger
boards do not underperform their peers
in terms of Tobin’s Q. The study’s findings
suggest caution in applying regulations to
banking firms motivated by research on the
governance of nonfinancial firms. Since
organizational structure is not specific to
banks, it may be an important determinant
for the boards of nonfinancial firms with
complex organizational structures, such as
business groups.

No. 331, June 2008
The Welfare Effects of a Liquidity-Saving
Mechanism
Enghin Atalay, Antoine Martin,
and James McAndrews
This paper considers the welfare effects of
introducing a liquidity-saving mechanism
(LSM) in a real-time gross settlement payments system. The authors study the planner’s problem to get a better understanding
of the economic role of an LSM and find
that an LSM can achieve the planner’s
allocation for some parameter values. The
planner’s allocation cannot occur without
an LSM, as long as some payments can be
delayed without cost. They show that, in
equilibrium with an LSM, there can be
either too few or too many payments settled early compared with the planner’s

Research and Statistics Group

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Number 2, 2008

allocation, depending on the parameter
values. Using Fedwire data to calibrate
their model, the authors describe the equilibrium that would arise with an LSM and
compare welfare with and without the
mechanism. Their results suggest that
introducing an LSM could have significant
benefits.

for the sample countries, including
European and euro-area countries; and
3) convergence in the volatility of business
cycles across countries.

QUANTITATIVE METHODS

Groen and Kapetanios revisit a number of
data-rich prediction methods that are widely
used in macroeconomic forecasting and
compare them with a lesser known alternative: partial least squares regression. The
authors provide a theorem showing that
when the data comply with a factor structure, principal components and partial least
squares regressions provide asymptotically
similar results. They also argue that forecast combinations can be interpreted as a
restricted form of partial least squares
regression. The study applies partial least
squares, principal components, and
Bayesian ridge regressions to a large panel
of monthly U.S. macroeconomic and financial data to forecast CPI inflation, core CPI
inflation, industrial production, unemployment, and the federal funds rate across different subperiods and finds that partial
least squares regression usually has the
best out-of-sample performance when
compared with the two other data-rich
prediction methods. ■

No. 326, May 2008
Dynamic Factor Models with TimeVarying Parameters: Measuring Changes
in International Business Cycles
Marco Del Negro and Christopher Otrok
Del Negro and Otrok develop a dynamic
factor model with time-varying factor loadings and stochastic volatility in both the
latent factors and idiosyncratic components. They employ this new measurement
tool to study the evolution of international
business cycles in the post–Bretton Woods
period, using a panel of output growth
rates for nineteen countries. The authors
find: 1) statistical evidence of a decline in
volatility for most countries, with the timing, magnitude, and source (international
or domestic) of the decline differing across
countries; 2) some evidence of a decline
in business cycle synchronization for Group
of Seven countries, but otherwise no
evidence of changes in synchronization

F e d e r a l R e s e r v e B a n k o f N e w Yo r k

No. 327, May 2008
Revisiting Useful Approaches to DataRich Macroeconomic Forecasting
Jan J. J. Groen and George Kapetanios

www.newyorkfed.org/research

Papers Presented by Economists
in the Research and Statistics
Group
“Human Capital and Economic Activity
in Urban America,” Jaison Abel. Southern
Regional Science Association conference,
Washington, D.C., March 29. With Todd M.
Gabe.
“The Relative Importance of Amenities
and Firm Productivity Advantages in
Metropolitan Areas,” Jaison Abel and
Richard Deitz. Southern Regional Science
Association conference, Washington, D.C.,
March 28.
“Liquidity and Contagion,” Tobias Adrian.
Banque de France workshop, Paris, France,
June 10. With Hyun Song Shin.
“Procyclical Leverage,” Tobias Adrian.
Toulouse School of Economics–Banque de
France conference, Paris, France, June 24.
With Hyun Song Shin.
“Spillover Risk of Financial Institutions,”
Tobias Adrian. Joint workshop of the
Research Task Force of the Basel
Committee on Banking Supervision, the
Centre for Economic Policy Research, and
the Journal of Financial Intermediation,
held at the Bank for International
Settlements, Basel, Switzerland, May 29.
With Markus Brunnermeier.
“Are Charter Schools Perceived to Be
Better Than Regular Public Schools?
Evidence from a New Approach Using
Private School Enrollment Patterns,”
Rajashri Chakrabarti. American Education
Finance Association conference, Denver,
Colorado, April 12. With Joydeep Roy.
“Optimal Monetary Policy under Sudden
Stops,” Vasco Cúrdia. Banco de Portugal
seminar, Lisbon, Portugal, May 19.

“Current Account Dynamics and Monetary
Policy,” Andrea Ferrero. Cornell University
Department of Economics seminar, Ithaca,
New York, April 24. With Mark Gertler and
Lars Svensson. Also presented at the 2008
Summer Meeting of the Econometric
Society, held at the David A. Tepper School
of Business, Carnegie Mellon University,
Pittsburgh, Pennsylvania, June 19.
“Monetary Policy Tick-by-Tick,” Michael
Fleming. Queens University Management
School seminar, Belfast, Northern Ireland,
April 11. With Monika Piazzesi.
“Banking Globalization, Monetary
Transmission, and the Lending Channel,”
Linda Goldberg. Deutsche Bundesbank
conference, Eltville, Germany, May 23.
With Nicola Cetorelli.
“European Competitiveness and Exchange
Rate Pass-Through,” Linda Goldberg.
European Central Bank workshop,
Frankfurt, Germany, April 29.
“Macroeconomic Interdependence and the
International Role of the Dollar,” Linda
Goldberg. European Central Bank seminar,
Frankfurt, Germany, April 28. With Cédric
Tille. Also presented at a Fordham
University Graduate School of Business
seminar, Bronx, New York, May 19.
“Public Disclosure, Risk, and Performance
by Bank Holding Companies,” Beverly
Hirtle. Financial Intermediation Research
Society conference, Anchorage, Alaska,
June 8.
“Liquidity Crises and Productivity Growth,”
Todd Keister. Midwest Macroeconomics
Meetings, University of Pennsylvania,
Philadelphia, Pennsylvania, May 9.
With Huberto M. Ennis.

Research and Statistics Group

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Number 2, 2008

“Run Equilibria in a Model of Financial
Intermediation,” Todd Keister. 2008
Summer Meeting of the Econometric
Society, held at the David A. Tepper School
of Business, Carnegie Mellon University,
Pittsburgh, Pennsylvania, June 19.
With Huberto M. Ennis.
“Review of U.S. Home Price Indices,”
Jonathan McCarthy and Richard Peach.
New Jersey League of Community Bankers
conference, Iselin, New Jersey, April 9.

10

“The Effect of Employee Stock Options on
Bank Investment Choice, Borrowing, and
Capital,” Hamid Mehran. Johns Hopkins
University seminar, Baltimore, Maryland,
February 28. With Joshua Rosenberg.
“The Impact of Tax Law Changes on the
Bank Conduct and Industry Structure,”
Hamid Mehran. Stern Financial Intermediation Group seminar, New York City,
March 11. With Michael Suher. Also presented at an MIT Sloan School of Management seminar, Cambridge, Massachusetts,
April 28, and a Brandeis University seminar, Waltham, Massachusetts, April 29.
“Open-Economy Models for Policy
Evaluation,” Paolo Pesenti. Workshop
cosponsored by the Centre for Economic
Performance and the Economic and Social
Research Council, held at the London
School of Economics, London, England,
May 2.
“Varieties and the Transfer Problem:
The Extensive Margin of Current Account
Adjustment,” Paolo Pesenti. George
Washington University Department of
Economics seminar, Washington, D.C.,
April 16. With Giancarlo Corsetti and
Philippe Martin.

F e d e r a l R e s e r v e B a n k o f N e w Yo r k

“How Do Treasury Dealers Manage Their
Positions?” Joshua Rosenberg. Rutgers
University Department of Economics seminar, New Brunswick, New Jersey, May 1.
With Michael Fleming.
“The Information Content of FOMC
Minutes,” Joshua Rosenberg. Fordham
University Graduate School of Business
seminar, Bronx, New York, April 24.
“Banks as Liquidity Providers of Secondto-Last Resort,” Til Schuermann. Columbia
University Center for Financial Engineering
seminar, New York City, April 4.
“Liquidity, Securitization, and Policy,”
Til Schuermann. 5th Annual Credit Risk
Conference, cosponsored by Moody’s
Corporation and New York University’s
Stern School of Business, New York City,
May 14.
“Measuring the Impact of Securitization on
Imputed Bank Output,” Charles Steindel. 2008
World Congress on National Accounts and
Economic Performance Measures for Nations,
Arlington, Virginia, May 13. With Adam Ashcraft.
“Social Spillovers in Personal Bankruptcies,”
Giorgio Topa. Universitat Autònoma de
Barcelona conference, Barcelona, Spain,
May 29. With Astrid Dick and Andreas
Lehnert.
“Performance Maximization of Actively
Managed Funds,” Zhenyu Wang. Society
for Financial Econometrics Inaugural
Conference, held at New York University’s
Stern School of Business, New York City,
June 4. With Gur Huberman and Paolo
Guasoni. ■

www.newyorkfed.org/research

Recently Published
Tobias Adrian and Arturo Estrella. 2008.
“Monetary Tightening Cycles and the
Predictability of Economic Activity.”
Economics Letters 99, no. 2 (May): 260-4.
Rajashri Chakrabarti. 2008. “Can
Increasing Private School Participation and
Monetary Loss in a Voucher Program Affect
Public School Performance? Evidence from
Milwaukee.” Journal of Public Economics
92, no. 5-6 (June): 1371-93.
Gauti Eggertsson. 2008. “The Liquidity
Trap.” In Steven N. Durlauf and Lawrence
E. Blume, eds., The New Palgrave
Dictionary of Economics, 2nd ed. London:
Palgrave Macmillan.
Antoine Martin. 2008. “Financial
Intermediaries, Markets, and Growth,”
with Falko Fecht and Kevin X. D. Huang.
Journal of Money, Credit, and Banking 40,
no. 4 (June): 701-20.
Antoine Martin. 2008. “Who Is Afraid
of the Friedman Rule?” with Joydeep
Bhattacharya, Joseph Haslag, and Rajesh
Singh. Economic Inquiry 46, no. 2 (April):
113-30.
Antoine Martin and James McAndrews.
2008. “Liquidity-Saving Mechanisms.”
Journal of Monetary Economics 55, no. 3
(April): 554-67.
Paolo Pesenti. 2008. “The Global Economy
Model: Theoretical Framework.” IMF Staff
Papers 55, no. 2: 243-84.
Paolo Pesenti. 2008. “Oil Price Movements
and the Global Economy: A Model-Based
Assessment,” with Selim Elekdag, René
Lalonde, Douglas Laxton, and Dirk Muir.
IMF Staff Papers 55, no. 2: 297-311.

João Santos. 2008. “Bank Loans, Bonds,
and Information Monopolies across the
Business Cycle,” with Andrew Winton.
Journal of Finance 63, no. 3 (June):
1315-59.
Til Schuermann. 2008. “Credit Rating
Dynamics and Markov Mixture Models,”
with Halina Frydman. Journal of Banking
and Finance 32, no. 6 (June): 1062-75.
Wilbert van der Klaauw. 2008. “Breaking
the Link between Poverty and Low
Student Achievement: An Evaluation of
Title I.” Journal of Econometrics 142,
no. 2 (February): 731-56.
Wilbert van der Klaauw. 2008.
“Regression-Discontinuity Analysis.” In
Steven N. Durlauf and Lawrence E. Blume,
eds., The New Palgrave Dictionary of
Economics, 2nd ed. London: Palgrave
Macmillan.
Wilbert van der Klaauw. 2008.
“Regression-Discontinuity Analysis:
A Survey of Recent Developments in
Economics.” Review of Labor Economics
and Industrial Relations 22, no. 2 (June):
219-45.
Wilbert van der Klaauw. 2008. “The Work
Disincentive Effects of the Disability
Insurance Program in the 1990s,” with
Susan Chen. Journal of Econometrics 142,
no. 2 (February): 757-84.
Zhenyu Wang. 2008. “Arbitrage Pricing
Theory,” with Gur Huberman. In Steven N.
Durlauf and Lawrence E. Blume, eds., The
New Palgrave Dictionary of Economics, 2nd
ed. London: Palgrave Macmillan. ■

Research and Statistics Group

11

Research Update

■

Number 2, 2008

Research and Statistics Group
Publications and Papers:
April-June 2008
Publications are available at
www.newyorkfed.org/research/
publication_annuals/index.html.

ECONOMIC POLICY REVIEW,
FORTHCOMING
12

Why the U.S. Treasury Began Auctioning
Treasury Bills in 1929
Kenneth D. Garbade
Intraday Liquidity Management:
A Tale of Games Banks Play
Morten L. Bech
Global Trends in Large-Value Payments
Morten L. Bech, Christine Preisig,
and Kimmo Soramäki
An Economic Perspective on the
Enforcement of Credit Arrangements:
The Case of Daylight Overdrafts
in Fedwire
Antoine Martin and David C. Mills

CURRENT ISSUES IN ECONOMICS
AND FINANCE, VOL. 14
No. 3, April-May 2008
The Price of Land in the New York
Metropolitan Area
Andrew Haughwout, James Orr,
and David Bedoll
Second District Highlights
No. 4, June 2008
The Changing Nature of the U.S. Balance
of Payments
Rebecca Hellerstein and Cédric Tille

STAFF REPORTS
No. 323, April 2008
Optimal Monetary Policy under Sudden Stops
Vasco Cúrdia
No. 324, April 2008
Globalization and Inflation Dynamics:
The Impact of Increased Competition
Argia M. Sbordone
No. 325, May 2008
Durable Goods Inventories
and the Great Moderation
James A. Kahn
No. 326, May 2008
Dynamic Factor Models with TimeVarying Parameters: Measuring Changes
in International Business Cycles
Marco Del Negro and Christopher Otrok
No. 327, May 2008
Revisiting Useful Approaches to DataRich Macroeconomic Forecasting
Jan J. J. Groen and George Kapetanios
No. 328, May 2008
Liquidity and Leverage
Tobias Adrian and Hyun Song Shin
No. 329, June 2008
Inflation Dynamics in a Small OpenEconomy Model under Inflation
Targeting: Some Evidence from Chile
Marco Del Negro and Frank Schorfheide
No. 330, June 2008
Corporate Performance, Board Structure, and
Their Determinants in the Banking Industry
Renée B. Adams and Hamid Mehran
No. 331, June 2008
The Welfare Effects of a Liquidity-Saving
Mechanism
Enghin Atalay, Antoine Martin,
and James McAndrews

The views expressed in the publications and papers summarized in Research Update are those of the authors
and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve
System.

F e d e r a l R e s e r v e B a n k o f N e w Yo r k