Authors: Skanda Amarnath, Alex Williams, and Arnab Datta
This piece provides an overview of how the Federal Reserve (“Fed”) decided to require all emergency lending authorized under Section 13(3) of the Federal Reserve Act be conducted at a “penalty rate,” as well as its policy ramifications.
In December 2013, when…
The Fed has chosen to double down on an inflation-oriented framework for setting monetary policy. While there are some advantages in the current environment to an “average inflation targeting” scheme that affirmatively permits inflation to rise at least modestly past 2%, this approach is not particularly robust to a scenario…
Author: Skanda Amarnath & Sudiksha Joshi
While the Federal Reserve (Fed) cannot unilaterally deliver a swift recovery from the COVID-19 economic recession, it can still play a useful supporting role through its commitment to keep interest rates low. The Fed faces the same zero lower bound (ZLB) constraint that it…
Summary:
- The pricing of the Municipal Liquidity Facility (MLF) makes it virtually irrelevant for most municipal debt issuers because current market prices are well above those that the Federal Reserve (Fed) is offering. The success or failure of the MLF should be judged not solely by current municipal bond yields…
Regulators have now repeatedly encouraged financial institutions to err on the side of leniency for borrowers. Avoiding delinquencies may be in the collective interest, but individual incentives are poorly aligned to the collective interest in periods of grave economic uncertainty. The voluntary efforts of individual banks will not be enough…
Authors: Skanda Amarnath (Employ America), Yakov Feygin (Berggruen Institute)
State governments are on the front line of the COVID-19 pandemic and its economic fallout. In the coming weeks, they will be subject to increasing demands to expand healthcare capacity and support existing initiatives, all while tax revenue dries up and…
COVID-19 and Low Interest Rates Make Fiscal Stimulus And Enhanced Automatic Stabilizers A No-Brainer
The impact of COVID-19 is likely to be sizeable. Regardless of the precise composition of the shock to supply and demand, further macroeconomic policy action is now necessary. The Fed can cut the benchmark Federal Funds Rate a few more times, but only Congress and the White House can provide…
This article is intended to serve as a follow-up to the #FloorGLI proposal in “Floor It! Fixing the Fed’s Framework With Paychecks, Not Prices.”
The official national accounts estimate of gross labor income (GLI) is based on the Quarterly Census of Employment and Wages (QCEW), but because of sharp revisions…
The Fed now recognizes that its interventions have helped to create millions of jobs and promoted a better equilibrium in the long run. A deeper shift to its reaction function is now needed.
Fed Communication Suggests Recognition Of A New Reality
Chair Powell’s recent statements reveal a fundamental shift in…
