The Role of Central Banks in Fostering Efficiency and Stability in the Global Financial System

Fed Vice Chairman Roger W. Ferguson stressed the important role Central banks play in the global financial system and also provided a great look at the changing landscape of commercial banking. This one would make a great introduction or conclusion to a Money and Banking course! [ Annotation]

Reducing Budget Deficits (Remarks by Federal Reserve Board Governor Edward M. Gramlich)

Fed Governor Gramlich just gave an interesting and informative speech on the Federal Budget Deficit. He points out the difficulty in forecasting it, the fact that it is based on cash basis accounting which brings its own problems (example future social security problems!), and even suggests ways to improve the budgeting process. My take is that budget deficits are not in and of themselves bad, … [ Read more ]

How Stable Is the Predictive Power of the Yield Curve?

Empirical research over the last decade has uncovered predictive relationships between the slope of the yield curve and subsequent real activity and inflation. Some of these relationships are highly significant, but their theoretical motivations suggest that they may not be stable over time. We use recent econometric techniques for break testing to examine whether the empirical relationships are in fact stable. We consider continuous models, … [ Read more ]

A Nation of Spendthrifts? An Analysis of Trends in Personal and Gross Saving

The steep drop in the U.S. personal saving rate over the last decade has fueled speculation that Americans are spending recklessly. But alternative measures of personal saving show that households are actually setting aside a larger share of their resources than the official figures suggest. In addition, government saving has risen markedly, leading to an increase in overall domestic saving that has helped finance a … [ Read more ]

Stock Prices and Fundamentals in a Production Economy

This paper by the Federal Reserve Board compares the predictions for the market value of firms from the Gordon growth model with those from a dynamic general equilibrium model of production. Special attention is focused on the prediction for movements in the market value of firms in response to a decline in the required return or an increase in the growth rate of the … [ Read more ]

Globalization of Financial Institutions: Evidence from Cross-Border Banking Performance

This 117 page .pdf paper addresses the causes, consequences and implications of cross-border consolidation of financial institutions. It finds that, on average, domestic banks have higher profit efficiencies than foreign banks (with the exception of U.S. banks which operate efficiently at home and abroad). The results do not preclude successful international expansion but they do suggest limits to global consolidation.