Full text of Research Update : Second Quarter 2004

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

S

econd Quarter 2004

Federal Reserve Bank of New York

Update
Research and Market Analysis Group

www.newyorkfed.org/research

Economic Policy Review Focuses on Exchange Rate
Dynamics, Treasury Market Trends
he latest issue of the Bank’s
Economic Policy Review (May
2004) features articles on two topics
of ongoing interest: exchange rate dynamics
and U.S. Treasury market developments.

T

In “Industry-Specific Exchange Rates for
the United States,” Linda S. Goldberg constructs several industry-specific exchange
rate indexes and analyzes the extent to
which each index moves with, or diverges
from, trade-weighted economywide measures. She finds that the effect of U.S. dollar
moves on industry profits can be more precisely identified when using the industryspecific indexes. These indexes are superior
to the trade-weighted measures because

they capture changes in industry competitive conditions that result from moves in
specific bilateral exchange rates.
Thomas Klitgaard and Laura Weir study
the relationship between the net positions
of futures market speculators and exchange
rates. Their article—“Exchange Rate
Changes and Net Positions of Speculators
in the Futures Market”—concludes that
knowing the direction of the change in a
particular currency’s net position gives one
a 75 percent chance of correctly guessing
the exchange rate’s direction over that same
week. However, net position data do not
appear to be useful in anticipating changes
over the following week.

Ne w R e s e a r c h : A p r i l - J u n e 2 0 0 4

Why were interest rates on certain
Treasury repos below zero in 2003?
New Staff Reports
Papers presented at conferences
Papers recently published by RMAG staff
Forthcoming in the Economic Policy Review

3
4
7
8
9

The 1970-75 period was a
milestone in the U.S.
Treasury market’s evolution
from fixed-price offerings of
notes and bonds to marketdriven auctions, according
to “The Institutionalization
of Treasury Note and Bond
Auctions, 1970-75.” In this

Research Update

■

Second Quarter 2004

study, Kenneth D. Garbade explains that
after two failed attempts to auction bonds
and notes, the Treasury succeeded in the
early 1970s. He points to three reasons for
the turnaround: the Treasury’s imitation of
its successful bill auction process, its gradual extension of the maturity of auction
offerings, and its modification of the auction process when shortcomings surfaced.
Since their introduction in 1997,
Treasury inflation-indexed debt securities
(TIIS) have not fulfilled a primary goal:
reducing the U.S. Treasury’s expected
financing costs. “Treasury InflationIndexed Debt: A Review of the U.S.
Experience,” by Brian Sack and Robert
Elsasser, observes that over most of the
post-1997 period, TIIS yields have been

surprisingly high relative to nominal
Treasury yields. The authors attribute the
low relative valuation of TIIS to investor
difficulty adjusting to a new asset class,
supply trends, the lower liquidity of
indexed debt, and investor willingness to
hold nominal securities with little inflation
risk premium. More recently, though, TIIS
market liquidity and investor participation
have increased, and the relative valuation of
TIIS appears to have improved.
Articles are available at <www.newyorkfed
.org/research/epr/index.html>.
To access the databases used in the
Goldberg study, visit <www.newyorkfed
.org/research/global_economy/industry_
specific_exrates.html>.

2

P ublications and Papers
The Research and Market Analysis Group produces a wide range of publications:
●

The Economic Policy Review—a policy-oriented journal focusing on economic
and financial market issues.

●

EPR Executive Summaries—online versions of selected Economic Policy Review
articles, in abridged form.

●

Current Issues in Economics and Finance—concise studies of topical economic
and financial issues.

●

Second District Highlights—a regional supplement to Current Issues.

●

Staff Reports—technical papers intended for publication in leading economic
and finance journals, available only online.

●

Publications and Other Research—an annual catalogue of the Group’s research output.

Federal Reserve Bank of New York

www.newyorkfed.org/research

Study Explains Last Year’s Negative Interest Rates
on Some “Repo” Contracts
rom early August to mid-November
of 2003, interest rates on certain
U.S. Treasury security repurchase
agreements (“repos”) were often below
zero. In “Repurchase Agreements with
Negative Interest Rates” (Current Issues in
Economics and Finance, vol. 10, no. 5),
Michael J. Fleming and Kenneth D.
Garbade argue that market participants
contracted to pay interest on money they
lent in order to obtain—as
The episode . . . shows collateral—the securities they
needed to meet delivery
that the ancillary costs of obligations.

F

failing on an obligation

As the authors explain, settlement problems in the tento deliver Treasury year Treasury note in the
securities can sometimes summer of 2003 set the stage
for this development. Exbe significant. tremely low short-term interest
rates, coupled with a sharp
increase in intermediate-term Treasury
yields, led to an extraordinary volume of
settlement “fails.” In a fail, a seller of securities does not meet its obligation to deliver
the securities to the buyer on the scheduled
date.

Under normal circumstances, there is
no explicit penalty attached to a fail. By
early August of 2003, however, the ancillary costs of failing were becoming significant as settlement problems in the ten-year
note persisted. Dealers were incurring regulatory capital charges on “aged” fails (those
more than five days overdue)—capital that
could otherwise have been used to support
profitable activities. Moreover, dealers
were facing higher labor costs because they
were forced to mobilize their back-office
personnel to reduce the accumulation of
unsettled trades. The failure to deliver purchased securities also led to a rise in customer dissatisfaction, creating an additional
cost for dealers.
Under these circumstances, some dealers became willing to pay interest on the
money they lent to borrow the ten-year
note. They concluded that it would be less
expensive to pay interest to borrow the
notes needed to remedy their settlement
fails than to continue to incur the capital
charges, labor costs, and customer dissatisfaction associated with the fails.
Read the article at <www.newyorkfed.org/
research/current_issues/ci10-5.html>.

Research and Market Analysis Group

3

Research Update

■

Second Quarter 2004

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. 182, April 2004

4

Benefits and Spillovers of Greater Competition
in Europe: A Macroeconomic Assessment
Tamim Bayoumi, Douglas Laxton,
and Paolo Pesenti
The authors estimate the benefits and spillovers of increased competition using a generalequilibrium simulation model with nominal
rigidities and monopolistic competition in
product and labor markets. They draw three
conclusions after calibrating the model to the
euro area against the rest of the industrial
world. First, greater competition produces
large effects on macroeconomic performance.
In particular, differences in competition can
account for more than half of the current gap
in GDP per capita between the euro area and
the United States. Second, greater competition
may improve macroeconomic management by
increasing wage and price responsiveness to
market conditions. Third, increased competition can generate positive spillovers to the rest
of the world through its effect on the terms of
trade.
No. 188, June 2004

The Linkage between Regional Economic
Indexes and Tax Bases: Evidence
from New York
Jason Bram, Andrew F. Haughwout, James Orr,
Robert Rich, and Rae Rosen
This study examines the linkage between economic activity and tax revenues for New York
State and New York City. Drawing upon the
methodology of Stock and Watson, the authors
use a dynamic single-factor model to estimate
indexes of coincident economic indicators; they
also construct measures of the sales and withholding tax bases. To conduct an empirical

Federal Reserve Bank of New York

analysis of the relationship between the indexes
of economic activity and the tax base series,
they use vector autoregression and error
correction models. The results provide strong
evidence that the coincident indexes contain
useful information for explaining monthly
growth in the tax bases. However, much less evidence exists of a statistically significant linkage
from the tax bases to the coincident indexes.

International
No. 183, April 2004

Financial-Sector Foreign Direct Investment
and Host Countries: New and Old Lessons
Linda S. Goldberg
Many lessons from foreign direct investment
(FDI) research on manufacturing and extractive resource industries are applicable to FDI
research on the financial sector. This paper
summarizes the main findings and policy
themes of FDI research, focusing on the implications of FDI for host countries, especially
emerging market economies. Goldberg reviews
evidence of technology transfers, productivity
spillovers, wage effects, macroeconomic growth,
and fiscal and tax concerns. She stresses
throughout that parallel findings often arise
from studies of general FDI and of financialsector FDI. Goldberg also emphasizes important
differences between FDI’s effects in these
sectors, particularly regarding local institution
building and business cycles. She contends that
these differences—more so than the similarities—should be the focus of research efforts.

Microeconomics
No. 186, May 2004

How Should Suburbs Help Their
Central Cities?
Andrew F. Haughwout and Robert P. Inman
This paper examines whether suburbs should
help finance the core public services of their
central cities. The authors review three arguments in favor of such assistance. First, the
central city provides public services that benefit
suburban residents. Second, the central city

www.newyorkfed.org/research

may provide redistributive services to lowincome central city residents that benefit
suburbanites with redistributive preferences
for such transfers. Third, the central city’s private economy may be an efficient production
center because of agglomeration economies;
distributive city finances may undermine those
economies by driving away businesses or residents. The authors analyze the effects of suburban transfers in a structural model of a
metropolitan economy consistent with the
third argument and with the city-suburban interdependence literature.

Banking and Finance
No. 181, April 2004

Time-Varying Consumption Correlation
and the Dynamics of the Equity Premium:
Evidence from the G-7 Countries
Asani Sarkar and Lingjia Zhang
This study examines the implications of time
variation in the correlation between the equity
premium and nondurable consumption
growth for equity return dynamics in G-7
countries. Using a VAR-GARCH (1,1) model,
the authors find that the correlation increases
with recession indicators and with proxies for
stock market wealth. The combined effect is
that the correlation increases during a recession.
The authors find that the effect of a countercyclical correlation is that the equity premium,
Sharpe ratio, and risk aversion are also generally countercyclical. These findings withstand
such robustness checks as allowing the mean
return to depend on its conditional variance
and controlling for lower consumption volatility
during the post-1990 period. The evidence is
stronger for countries with larger stock market
capitalization relative to GDP.

No. 184, May 2004

Anomalous Bidding in Short-Term Treasury
Bill Auctions
Michael J. Fleming, Kenneth D. Garbade,
and Frank Keane
This paper shows that Treasury bill auction
procedures create classes of price-equivalent
discount rates for bills with fewer than seventytwo days to maturity. The authors argue that it
is inefficient for market participants to bid at a
discount rate that is not the minimum rate in
its class. The inefficiency of bidding at a rate
other than the minimum is related to a quantity shortfall rather than an unexploited profit
opportunity. Auction results for weekly offerings of four-week bills and occasional offerings
of cash management bills show that market
participants frequently bid at inefficient rates.
However, they are more likely to bid at efficient
rates than chance would suggest.
No. 185, May 2004

A General Approach to Integrated Risk
Management with Skewed, Fat-Tailed Risks
Joshua V. Rosenberg and Til Schuermann
The goal of integrated risk management in a
financial institution is to measure and manage
risk and capital across business activities. This
requires an approach for aggregating risk types
whose distributional shapes vary considerably.
The authors use the method of copulas to construct the joint risk distribution for a typical
large, internationally active bank. It allows
them to incorporate realistic marginal distributions that capture essential empirical features of these risks—such as skewness and fat
tails—while allowing for a rich dependence
structure. They explore the impact of business
mix and inter-risk correlations on total risk,
whether measured by value at risk or expected
shortfall. They find that given a risk type, total
risk is more sensitive to differences in business
mix or risk weights than to differences in interrisk correlations.

Research and Market Analysis Group

5

Research Update

■

Second Quarter 2004

Banking and Finance (continued)
No. 187, May 2004

6

Inference, Arbitrage, and Asset Price Volatility
Tobias Adrian
Adrian models the effect on stock prices when
arbitrageurs are uncertain about the drift of
the dividend process of a risky asset. Uncertain
arbitrageurs condition their investment strategy
on the observation of dividends and trading
volume. In such a setting, they can increase the
equilibrium volatility of asset returns. The
arbitrageurs’ inference problem leads to rich
dynamics of asset prices and investment strategies: the optimal trading strategy of arbitrageurs can be upward sloping in prices, the
price response to news can be nonlinear, and
minor news can have large effects. These
results are driven by arbitrageurs’ inability to
distinguish temporary from permanent shocks
perfectly. They would like to sell assets in
response to temporary price increases and buy
in response to permanent increases.

No. 189, June 2004

Are Bank Holding Companies a Source
of Strength to Their Banking Subsidiaries?
Adam B. Ashcraft
Ashcraft presents evidence that the crossguarantee authority granted to the FDIC by
the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 has unexpectedly
strengthened the Federal Reserve’s source-ofstrength doctrine. In particular, he finds that a
bank affiliated with a multibank holding company is significantly safer than a stand-alone
bank or a bank affiliated with a one-bank
holding company. Not only does affiliation
reduce the probability of financial distress, but
distressed affiliated banks are more likely to
receive capital injections and recover faster
than other banks. Moreover, affiliation’s effects
are strengthened for an expanding bank holding company, but are weakened when the parent has less than full ownership of the subsidiary. Most interestingly, Ashcraft’s results
show that these behavior differences across
affiliation did not exist before the crossguarantee authority was introduced.

O ther New Publications
The Regional Economy of Upstate New York. This quarterly newsletter, produced
by the New York Fed’s Buffalo Branch, focuses on issues of importance to upstate
New York.
Although upstate’s economy is typically associated with manufacturing, tourism is
developing into an engine of growth in parts of the region. In “Tourism’s Role in the
Upstate New York Economy” (spring 2004), economist Richard Deitz examines the
effects of the tourism industry upstate. He finds that tourism is important in such
areas as Glens Falls, Jamestown, and Dutchess and Niagara counties. However, it is not
an especially large factor elsewhere, nor is it growing particularly rapidly—but the
industry is still a contributor to the state’s local economies.
www.newyorkfed.org/research/regional_economy/upstatenews.html

Federal Reserve Bank of New York

www.newyorkfed.org/research

Papers Presented by
Economists in the
Research and Market
Analysis Group

“Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment,” Paolo Pesenti. European University
Institute’s Robert Schuman Centre seminar,
Florence, Italy, April 1. With Tamim Bayoumi
and Douglas Laxton.

“Entry into Banking Markets and the FirstMover Advantage,” Astrid Dick. Northwestern
University’s Kellogg School of Management’s
Annual International Industrial Organization
Conference, Chicago, Illinois, April 23.

“Welfare-Based Monetary Policy Rules in an
Estimated Model of the U.S. Economy,”
Paolo Pesenti. International Monetary Fund
Workshop on Dynamic Stochastic General
Equilibrium Models, Washington, D.C.,
April 26. With Michel Juillard, Philippe
Karam, and Douglas Laxton.

“Do Distribution Margins Solve the Exchange
Rate Disconnect Puzzle?” Linda Goldberg.
Central Bank of Iceland and Société Universitaire Européenne de Recherches Financières
seminar on the Interaction of Monetary and
Financial Stability in Small Open Economies,
Reykjavík, Iceland, June 3.
“Exchange Rate Pass-Through Implications for
Small Open Economies,” Linda Goldberg.
Central Bank of Iceland and Société Universitaire Européenne de Recherches Financières
seminar on the Interaction of Monetary and
Financial Stability in Small Open Economies,
Reykjavík, Iceland, June 4.
“Inventories and the Information Revolution:
Implications for Output Volatility,” Margaret
McConnell. State University of New York at
Albany Department of Economics seminar,
Albany, New York, April 26. With James Kahn.
Also presented at a Wesleyan University Department of Economics seminar, Middletown,
Connecticut, May 5.
“Regulation, Subordinated Debt, and Incentive Features of CEO Compensation in the
Banking Industry,” Hamid Mehran. Financial
Intermediation Research Society Conference
on Banking, Insurance, and Intermediation,
Capri, Italy, May 13. With Kose John and
Yiming Qian.
“Board Committee Structures, Ownership,
and Firm Performance,” Hamid Mehran. London Business School and BSI GAMMA Foundation Corporate Governance Conference,
London, England, June 4. With Rachel Hayes
and Scott Schaefer.

“An Introduction to General Equilibrium
Open Economy Models,” Paolo Pesenti. International Monetary Fund Workshop on
Dynamic Stochastic General Equilibrium
Models, Washington, D.C., April 29.
“The Global Economy Model (GEM): Design
and Applications,” Paolo Pesenti. Northwestern
University and University of Quebec at Montreal Conference on Open Macroeconomics
Models and Policy Analysis, Montreal, Canada,
April 30. With Douglas Laxton. Extended version also presented at an International Monetary
Fund Institute economics training program,
Washington, D.C., June 2-3.
“Macroeconomics and Credit Risk: A Global
Perspective,” Til Schuermann. University of
Montreal International Conference on Credit
Risk, Montreal, Canada, April 16. With M.
Hashem Pesaran, Bjorn-Jakob Treutler, and
Scott M. Weiner.
“Integrated Risk Management in a Financial
Conglomerate,” Til Schuermann. World Bank
Advanced Risk Management Workshop,
Washington, D.C., May 18. With Andrew
Kuritzkes and Joshua Rosenberg.
“Future Public Debt Accumulation and Saving in
the United States,” Charles Steindel. Bank of Italy
Workshop on Public Debt, Perugia, Italy, April 1.
“Stabilization, Competitiveness, and Risk
Sharing: A Model of Monetary Interdependence,” Cédric Tille. New York University seminar, New York City, April 13. With Paolo Pesenti.

Research and Market Analysis Group

7

Research Update

■

Second Quarter 2004

Recently Published
Tobias Adrian. 2004. “The Degree of Openness and the Costs of Fixing the Exchange
Rate,” with Daniel Gros. Economics Letters 83,
no. 1 (April): 141-6.
Andrew Haughwout. 2004. “Local Revenue
Hills: Evidence from Four U.S. Cities,” with
Robert Inman, Steven Craig, and Thomas
Luce. Review of Economics and Statistics 86,
no. 2 (May): 570-85.
Stavros Peristiani. 2004. “The Role of Bank
Advisors in Mergers and Acquisitions,” with
Linda Allen, Julapa Jagtiani, and Anthony
Saunders. Journal of Money, Credit, and
Banking 36, no. 2 (April): 197-224.

Robert Rich and Joseph Tracy. 2004. “Uncertainty
and Labor Contract Durations.” Review of
Economics and Statistics 86, no. 1 (February):
270-87.
Kevin Stiroh. 2004. “Do Community Banks
Benefit from Diversification?” Journal of
Financial Services Research 25, no. 2-3
(April/June): 135-60.
Giorgio Topa. 2004. “Religious Intermarriage
and Socialization in the United States,” with
Alberto Bisin and Thierry Verdier. Journal of
Political Economy 112, no. 3 (June): 615-64.
George Zanjani. 2004. “Terrorism Insurance
Policy and the Public Good,” with Darius
Lakdawalla. Journal of Legal Commentary 18,
no. 2 (spring): 463-9.

8

Jo i n O u r F r e e E - A l e r t S e r v i c e
Readers interested in learning of our new research quickly and conveniently
are encouraged to join our free Electronic Alert notification service.
As a subscriber to Electronic Alert, you receive an e-mail as soon as
new research publications are posted on our website—enabling you
to download research well before print copies are available.
The e-mails also offer you:
●
●

●
●

full abstracts of the new publications,
links to the publications, their press releases, author home pages,
and research on similar topics,
access to a range of data and charts on economic and financial conditions,
information on upcoming conferences and calls for papers.
Simply visit www.newyorkfed.org/alertservices/ and select “Research Alert.”

Federal Reserve Bank of New York

www.newyorkfed.org/research

Forthcoming in the
Economic Policy Review
The Historical and Recent Behavior
of Goods and Services Inflation
Richard W. Peach, Robert Rich,
and Alexis Antoniades
Since the late 1990s, the combination of relatively high services inflation and declining
goods prices has produced a record-level gap in
these inflation rates. Some commentators
argue that if the gap between services and
goods inflation continues to expand in this
manner, the outcome will be either faster overall inflation or deflation. This article examines
the relationship between these divergent inflation rates from 1967 to 2002. The authors
find that while the level of each inflation rate
is subject to permanent shifts, the gap between
services inflation and goods inflation over time
remains stable. Moreover, when the gap is
above its long-run value, as it currently is,
equilibrium is restored through a rise in goods
inflation and a slowing of services inflation.
The authors’ results suggest that concerns over
an imminent marked acceleration or dramatic
slowing in inflation may be unwarranted.

the housing market and the effect of a sharp
price decline on the U.S. economy. This article
assesses two measures frequently cited to support a bubble—the rising price-to-income
ratio and the declining rent-to-price ratio—
and finds the measures to be flawed and the
conclusions drawn from them unpersuasive. In
particular, the measures do not fully account
for the effects of declining nominal mortgage
interest rates and fail to use appropriate home
price indexes. The authors also estimate a
structural model of the housing market and
find that aggregate prices are not inconsistent
with long-run demand fundamentals.
Accordingly, they conclude that market fundamentals are strong enough to explain the
recent path of home prices and that no bubble
exists. Nevertheless, weakening fundamentals
could have an impact on home values on the
east and west coasts, where the new housing
supply appears to be relatively inelastic.
However, prices in these regions have typically
been volatile, and previous declines have not
had a sizable negative effect on the overall
economy.
Both articles are available at www.newyork
fed.org/research/epr/forthcoming.html.

Are Home Prices the Next “Bubble”?
Jonathan McCarthy and Richard W. Peach
The strong rise in home prices since the mid-1990s
has raised concerns over a possible bubble in

Research and Market Analysis Group

9

Research Update

■

Second Quarter 2004

Research and Market
Analysis Group
Publications and Papers:
April-June 2004
Publications are available at www.newyorkfed.org/
research/publication_annuals/index.html.

Economic Policy Review, vol. 10, no. 1

10

Industry-Specific Exchange Rates
for the United States
Linda S. Goldberg
Exchange Rate Changes and Net Positions
of Speculators in the Futures Market
Thomas Klitgaard and Laura Weir
The Institutionalization of Treasury Note
and Bond Auctions, 1970-75
Kenneth D. Garbade
Treasury Inflation-Indexed Debt: A Review
of the U.S. Experience
Brian Sack and Robert Elsasser

Forthcoming
The Historical and Recent Behavior
of Goods and Services Inflation
Richard W. Peach, Robert Rich,
and Alexis Antoniades
Are Home Prices the Next “Bubble”?
Jonathan McCarthy and Richard W. Peach
Papers from the conference “Beyond Pillar 3
in International Banking Regulation:
Disclosure and Market Discipline of Financial
Firms,” cosponsored by the Federal Reserve
Bank of New York and Columbia Business
School’s Jerome A. Chazen Institute of
International Business
Rebalancing the Three Pillars of Basel II
Jean-Charles Rochet
Disclosure, Volatility, and Transparency:
An Empirical Investigation into the Value
of Bank Disclosure
Ursel Baumann and Erlend Nier

Federal Reserve Bank of New York

Market Indicators, Bank Fragility,
and Indirect Market Discipline
Reint Gropp, Jukka Vesala, and Giuseppe Vulpes
A Reconsideration of the Risk Sensitivity
of U.S. Banking Organization Subordinated
Debt Spreads: A Sample Selection Approach
Daniel M. Covitz, Diana Hancock,
and Myron L. Kwast
Risk and Return of Publicly Held versus
Privately Owned Banks
Simon H. Kwan

Current Issues in Economics
and Finance, vol. 10
No. 4, April 2004
Revenue Implications of New York City’s
Tax System
Jesse Edgerton, Andrew F. Haughwout,
and Rae Rosen
Second District Highlights
No. 5, April 2004
Repurchase Agreements with Negative
Interest Rates
Michael J. Fleming and Kenneth D. Garbade
No. 6, May 2004
What Investment Patterns across Equipment
and Industries Tell Us about the Recent
Investment Boom and Bust
Jonathan McCarthy
No. 7, June 2004
Economic Restructuring in New York State
Erica L. Groshen, Simon Potter,
and Rebecca J. Sela
Second District Highlights

Staff Reports
Available only online.
No. 181, April 2004
Time-Varying Consumption Correlation
and the Dynamics of the Equity Premium:
Evidence from the G-7 Countries
Asani Sarkar and Lingjia Zhang

www.newyorkfed.org/research

No. 182, April 2004
Benefits and Spillovers of Greater Competition
in Europe: A Macroeconomic Assessment
Tamim Bayoumi, Douglas Laxton,
and Paolo Pesenti
No. 183, April 2004
Financial-Sector Foreign Direct Investment
and Host Countries: New and Old Lessons
Linda S. Goldberg
No. 184, May 2004
Anomalous Bidding in Short-Term Treasury
Bill Auctions
Michael J. Fleming, Kenneth D. Garbade,
and Frank Keane
No. 185, May 2004
A General Approach to Integrated Risk
Management with Skewed, Fat-Tailed Risks
Joshua V. Rosenberg and Til Schuermann

No. 186, May 2004
How Should Suburbs Help Their
Central Cities?
Andrew F. Haughwout and Robert P. Inman
No. 187, May 2004
Inference, Arbitrage, and Asset Price Volatility
Tobias Adrian
No. 188, June 2004
The Linkage between Regional Economic
Indexes and Tax Bases: Evidence
from New York
Jason Bram, Andrew F. Haughwout, James Orr,
Robert Rich, and Rae Rosen
No. 189, June 2004
Are Bank Holding Companies a Source
of Strength to Their Banking Subsidiaries?
Adam B. Ashcraft

11

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.
Research and Market Analysis Group