Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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The Science (and Art) of Monetary Policy
Carl E. Walsh
During most of the 1990s, the United States experienced exceptionally good times, and the Federal Reserve received some of the credit for the booming economy and low inflation.
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Modeling Credit Risk for Commercial Loans
Jose A. Lopez
In the past few years, there have been several developments in the field of modeling the credit risk in banks’ commercial loan portfolios. Credit risk is essentially the possibility that a bank’s loan portfolio will lose value if its borrowers become unable to pay back their debts.
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Rising Price of Energy
Mary C. Daly
Wholesale prices of natural gas and electricity have risen dramatically in the West in recent months. These wholesale price increases are showing through to rates paid by households, particularly in the unregulated retail market for natural gas.
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Uncertainties in Projecting Federal Budget Surpluses
Kevin J. Lansing
In January 2001, the non-partisan U.S. Congressional Budget Office (2001a) issued updated federal budget projections for fiscal years 2002 through 2011. According to the CBO’s baseline projections, the federal government will accumulate $5.6 trillion in total surpluses over the coming decade.
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What’s Different about Banks—Still?
Milton Marquis
New financial instruments, new information technologies, and a new regulatory environment have blurred the distinctions between commercial banks and nonbank financial intermediaries in the U.S. in recent years. Furthermore, just as many nonbank financial institutions have increased their use of securitization, commercial banks also have shifted their emphasis from on-balance sheet to off-balance sheet activities (Boyd and Gertler 1994).
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How Costly Are IMF Stabilization Programs?
Michael Hutchison
After the 1997 balance of payments problems and currency crises that hit Korea, Indonesia, Thailand, and other countries, the stabilization programs supported by the International Monetary Fund (IMF) came under critical fire. At issue was the cost of these programs in terms of forgone output and employment in the countries that adopted them. Stiglitz (2000), for example, argued that “…the IMF’s economic ‘remedies’ often make things worse—turning slowdowns into recessions and recessions into depressions.” Similar statements by other leading economists have been commonplace.
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Financial Crises in Emerging Markets
Reuven Glick, Ramon Moreno, and Mark Spiegel
The causes of the currency crises in emerging markets during the late 1990s have been the subject of much debate—especially considering that, before the crises, many of the Asian countries involved tended to have balanced budgets and generally sound macroeconomic performance. Some observers argue that the generally favorable macroeconomic conditions indicate that the crises were not caused by incompatibility between fiscal and monetary policies and exchange rate pegs, but rather by the unexpected and self-fulfilling panics of foreign investors.
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The Return of the “Japan Premium”: Trouble Ahead for Japanese Banks?
Mark Spiegel
In January of 2001, overseas financial markets saw the re-emergence of the “Japan premium,” a term used to describe the extra interest charged on offshore loans to Japanese banks relative to similarly risky banks from other developed countries. So far, the magnitude of the Japan premium has been small, never exceeding 0.05% and 0.07%, depending on the bank examined.
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How Sluggish Is the Fed?
Glenn D. Rudebusch
How quickly does the Fed adjust monetary policy in response to developments in the economy? A common view among economists is that the Fed changes the short-term policy interest rate at a very sluggish pace over several quarters.
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Economic Impact of Rising Natural Gas Prices
Mary C. Daly
Natural gas prices have risen significantly in recent months, surpassing nearly all forecasts. In December, the spot price at the Henry Hub—the benchmark for U.S. natural gas prices—averaged $6.31 per million British Thermal Units (MMbtu), more than three times the average spot price one year earlier.