Federal Reserve

The Economic Consequences of Political Pressure on the Federal Reserve

Politicians often interfere with central banks, but it is not clear how to measure such political pressure systematically and therefore difficult to quantify its economic consequences. In new research, Thomas Drechsel finds that political pressure strongly and persistently raises inflation and inflation expectations but has little impact on economic activity.

Panic-driven Bank Runs and Public Communication

Using a household survey with information treatments conducted in the aftermath of the SVB’s collapse, we examine the potential for a large bank’s failure to trigger bank runs and the effectiveness of public communication in containing such a risk. We find that news about SVB’s collapse increases households’ propensity to withdraw bank deposits as people become more worried that their bank may fail and expect larger losses on deposits in case of bank failure. Communication by the Federal Reserve in support of the banking sector and information about FDIC deposit insurance can contain the risk of bank runs, while communication from politicians influences only their electoral base.

How Trust in Institutions Impacts Monetary Policy

Social trust in democratic institutions affects the ability of those institutions to carry out policy. In new research, Rustam Jamilov shows how decreasing trust in the U.S. institutions has reduced the ability of the Federal Reserve to influence the economy in states that exhibit lower levels of trust.

Nobel Laureate Douglas Diamond on How the Fed Could Have Prevented SVB’s Collapse

Nobel Laureate and bank run expert Douglas Diamond argues that the Fed’s choice to signal long-term low interest rates, and then suddenly reverse course...

In Search of the Monetary Standard

Central banks create the monetary standard. Standard Federal Reserve System (Fed) rhetoric is that the Federal Open Market Committee (FOMC) pursues the dual mandate...

The Cantillon Effect: Why Wall Street Gets a Bailout and You Don’t

According to the 18th-century French banker and philosopher Richard Cantillon, who benefits when the state prints money is based on its institutional setup. In...

Is Monetary Policy Independence Out of Date? A Mini-Course With Paul Tucker (Part 3)

The Federal Reserve and the ECB have been taking unprecedented steps to react to the financial impact of Covid-19. To frame the debate around the...

Constitutional Limits to Independent Agencies and Central Banks: A Mini-Course With Paul Tucker (Part 2)

The Federal Reserve and the ECB have been taking unprecedented steps to react to the financial impact of Covid-19. To frame the debate around the...

Should Central Banks Have Constraints During a Crisis? A Mini-Course With Paul Tucker (Part 1)

The Federal Reserve and the ECB have been taking unprecedented steps to react to the financial impact of Covid-19. To frame the debate around the...

The Economics of the Covid-19 Bailout: a Webinar

Princeton Professor Markus Brunnermeier and Nellie Liang, the former director of the Division of Financial Stability at the Federal Reserve, discuss the legacy of policy...

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