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Institutional research & analysis

Source: Federal Reserve

CENTRAL BANK

Working PaperJune 26, 2026

FEDS Paper: Cyclical Fluctuations, Financial Frictions, and Productivity Differences across Firms

Luca Guerrieri, Jinill Kim, and Arsenii Mishin Within narrowly defined industries, the most productive firms produce far more than the least productive from the same inputs, and this dispersion widens in downturns. We build a tractable representative-agent model in which financial frictions—adverse selection and moral hazard—make firms sort endogenously into lenders, strategic defaulters, and producers. As credit conditions vary, the resulting misallocation gives aggregate total factor produc...

Federal Reserve1 min read
Working PaperJune 24, 2026

FEDS Paper: Sequence-Space Jacobians of Life-Cycle Models

Bence Bardóczy, Akshay Shanker, and Mateo Velásquez-Giraldo The sequence-space Jacobian (SSJ) method of Auclert et al. (2021a) has made heterogeneous-agent models far easier to solve, fueling an explosion of applications. But even SSJ strains against capacity constraints when state spaces grow very large, as in economies with overlapping generations of heterogeneous agents (HA-OLG). We show how to exploit the special properties of age—finite planning horizons and deterministic transitions bet...

Federal Reserve1 min read
Working PaperJune 24, 2026

FEDS Paper: An Evaluation of Difference-in-Differences Methods Using Placebo Event Studies

John Coglianese and Jade A. Fang Researchers are faced with the choice of which of the many recently developed difference-in-differences methods to use in practice. To assess these estimators' relative performance for single-unit event studies, we conduct 134,000+ state-level placebo event studies across 13 estimators. We find that no single method dominates. Performance is context-dependent, with synthetic-control-like methods sometimes outperforming and sometimes underperforming two-way-fix...

Federal Reserve1 min read
Working PaperJune 23, 2026

FEDS Paper: The Response of Equity Yields to a Long-Run Shock

Martijn Boons, Anthony M. Diercks, Petra Sinagl, and Andrea Tamoni We study how macroeconomic developments affect asset prices by analyzing the response of equity yields to a well-identified long-run growth shock. Using synthetic equity yield data from Giglio et al. (2024), we show that a positive long-run shock steepens the equity yield curve by increasing expected dividend growth while leaving discount rates largely unchanged. We examine how the investment driving this growth is financed an...

Federal Reserve1 min read
Working PaperJune 22, 2026

FEDS Paper: Local Labor Market Tightness and Job Quality: Evidence from Job Changers

Brad Hershbein, Katherine Lim, Douglas Webber, and Mike Zabek Using novel data from the Survey of Household Economics and Decisionmaking, we examine how labor market tightness affects workers’ job quality. We estimate that a 10 percent increase in job vacancies not only increases the probability of changing jobs, it yields an 11–18 percent increase in the (unconditional) probability of switching to a better job overall, and one with greater pay and benefits, interest in the work, and advancem...

Federal Reserve1 min read
Working PaperJune 22, 2026

FEDS Paper: A Static Capital Buffer is Hard To Beat

Matthew Canzoneri, Behzad Diba, Luca Guerrieri, and Arsenii Mishin In a model with endogenous risk-taking, deposit insurance and limited liability may lead banks to make risky loans that are socially inefficient. Capital requirements can prevent excessive risk-taking at the cost of reducing liquidity-producing bank deposits. A policy that sets capital requirements just high enough to prevent excessive risktaking will move capital requirements pro-, counter-, or a-cyclically depending on the s...

Federal Reserve1 min read
Working PaperJune 22, 2026

FEDS Paper: Beyond Reserves: The Federal Reserve's Balance Sheet and the Repo Market

Sriya Anbil, Alyssa Anderson, Ethan Cohen, and Romina Ruprecht We present a new constraint on the size of the Fed’s balance sheet: repo market capacity. Calibrating a structural model to the recent monetary tightening cycle, we show that repo market capacity—driven by money market fund liquidity supply—is the binding constraint on the Fed’s balance sheet, not bank reserve demand, which was highlighted in the events of September 2019. We also demonstrate a novel complementarity between interes...

Federal Reserve1 min read
Working PaperJune 22, 2026

FEDS Paper: The Spillovers of LSAPs on Banks in the Euro Area(Revised)

Marco Graziano, Marius Koechlin, and Andreas Tischbirek We study the spillovers of large-scale asset purchases (LSAPs) in the U.S. on financial intermediation in the euro area using bank-level supervisory data and high-frequency identified policy surprises. Our detailed panel data permit us to trace the impact of LSAPs through bank balance sheets. We find that the Federal Reserve affects credit provision in the euro area through a channel that we refer to as the “international bank capital ch...

Federal Reserve1 min read
Working PaperJune 22, 2026

IFDP Paper: Fiscal Policy, Portfolio Frictions, and International Transmission

Marcos Mac Mullen I study the international transmission of fiscal policy and its impact on the real exchange rate (RER) and net exports. I document that periods of high government debt are strongly associated with a depreciated RER and subsequent increases in net exports. I present causal evidence that debt-financed fiscal expansions transmit primarily through deviations from uncovered interest parity, leading to a depreciated RER and increases in net exports over time. I propose a model in ...

Federal Reserve1 min read
Working PaperJune 22, 2026

FEDS Paper: New U.S. Business Establishments: Surging or Stalling?

Dan Cao, Henry Hyatt, Toshihiko Mukoyama, and Erick Sager Since the 1990s, the Bureau of Labor Statistics (BLS) has reported much more rapid growth in U.S. private sector employer establishments than has the Census Bureau – the gap reached roughly 1.6 million by 2023. Using linked BLS-Census microdata, we document two main drivers. First, a large and growing number of employers providing services to the elderly and persons with disabilities are in scope for the BLS frame but not the Census Bu...

Federal Reserve1 min read