Journal publications
"Expectations about the Federal Reserve’s Balance Sheet and the Term Structure of Interest Rates," with Jane Ihrig, Elizabeth Klee, Canlin Li, and Min Wei. International Journal of Central Banking, 14(2): 341-390. 2018.
https://www.ijcb.org/journal/ijcb18q1a8.htm
Working papers
1. Central bank balance sheet size, net interest income, and policy rate amplification (R&R - Journal of Money, Credit and Banking)
Abstract: This paper builds a New Keynesian model with a central bank balance sheet, fiscal policy, and banks facing liquidity uncertainty to study how central bank net income changes the effects of interest rate policy when reserves are abundant. Because remittances enter the government budget constraint, the effects depend on how the fiscal authority finances fluctuations in central bank income. I map cumulative fluctuations jointly over balance sheet size and the split between tax and debt financing. With tax financing, costly tax collection crowds out government purchases while the policy rate is elevated: monetary policy shocks have larger real effects, inflation fluctuations after demand and supply shocks are lower, and these effects grow steadily with the balance sheet. With debt financing, lower central bank income after a rate increase is covered by new bonds held by banks. More bonds relative to reserves raise the risk of a reserve shortfall, raising deposit rates relative to the policy rate. This channel peaks at intermediate balance sheets and reverses once reserves are abundant enough that deposit rates stop responding to bank-held debt.
2. Asymmetric interest rate smoothing and financial stability (w/ Scott Abrahams and Isaac Green)
Abstract: Central banks tend to lower policy rates at a faster pace than they raise them. Using a panel dataset of policy rates from 38 countries, this paper shows that during rate cut cycles, central banks reach terminal rates more quickly than during rate hike cycles. This asymmetry persists even after controlling for inflation and output gaps in Taylor-type rules, suggesting that it may reflect factors beyond policymakers' responses to real side economic fluctuations. We find that this asymmetry is more pronounced in countries with higher financial stability risks as measured by bank capital ratios, net interest margins, and credit-to-GDP ratios. Taken together, these results highlight the importance of macro-financial linkages in central bank decision-making and an implicit interaction between monetary policy and financial stability mandates.
Works in Progress
1. Fiscal support for exchange rate targets (w/ Joao Hernández)
2. Central bank finances in the digital economy (w/ Sarah Bell, Zan Fairweather, Richard Finlay, and Jon Frost)
Other publications
"Bitcoin’s decentralized decision structure," with Ben Craig. Federal Reserve Bank of Cleveland Economic Commentary. 2019-12.