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Insights / Research BriefFeb 01, 2022

Liquidity, Liquidity Everywhere, not a Drop to Use: Why Flooding Banks with Central Bank Reserves May Not Expand Liquidity

Viral V. Acharya, Raghuram Rajan
Despite a significant expansion in central bank balance sheets, some markets like the US money market have experienced increasing interest rate volatility, including significant spikes in the repo rate, notably in September 2019 (see Copeland, Duffie and Yang (2021), Correa, Du, and Liao (2021), D’Avernas and Vanderweyer (2021), and Yang (2021)). This apparent disruption in money markets that depend intimately on the availability of liquidity seems puzzling when the cash and central bank reserves held by the US private sector at the end of 2019 were around 4 times their holdings before the Global Financial Crisis in 2007. Greater liquid holdings do not seem to have made markets for liquidity more immune to liquidity shocks. Indeed, markets were disrupted yet again in March 2020 at the onset of the COVID-19 pandemic and the banking system was found short in its ability to accommodate the demand for liquidity. In response, the Federal Reserve expanded its balance sheet yet more (see, for example, Kovner and Martin (2020)), buying financial assets from the private sector and placing large quantities of liquid reserves with it (or promising to do so). Where had all the prior liquidity gone?
Topics:  Monetary Policy
Insights / Research BriefJan 13, 2022

Selection in Surveys

When COVID-19 swept the world in early 2020 and closed or restricted business activity, researchers and policymakers scrambled to determine the virus’s economic impact on everything from employment, income, and childcare to business closures, commercial property, and work-from-home strategies. Policymakers needed answers fast to plan the most efficacious responses and direct limited resources to benefit those who needed it the most.
Topics:  COVID-19, Employment & Wages
Insights / Research BriefJan 12, 2022

Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth

Nittai K. Bergman, David Matsa, Michael Weber
In recent years, and especially in the wake of the Great Recession of 2008-09, the Federal Reserve has paid increasing attention to employment data that go beyond the broad unemployment rate. For example, a low aggregate unemployment rate may mask higher rates for groups that, on average, are not as firmly attached to the labor market, like women, Blacks, and the least educated.
Topics:  Monetary Policy
Insights / Podcast episodeJun 16, 2021

Vaccine Lotteries: Worth a Shot?

Eduardo Porter, Tess Vigeland, Steve Levitt, Jeff Severts
More than a dozen states have announced large lotteries to incentivize vaccinations. On this episode,...
Topics:  COVID-19
Insights / Podcast episodeApr 07, 2021

WFH … Forever?

Eduardo Porter, Tess Vigeland, Steven J. Davis, Kate Lister
The pandemic forced many Americans into a mass social experiment: working from home (WFH). Now,...
Topics:  COVID-19, Employment & Wages
Insights / Podcast episodeMar 25, 2021

Incentives and the Race to Vaccinat‪e‬

Eduardo Porter, Tess Vigeland, Joshua Gottlieb, David Pitrak
With COVID-19 variants proliferating, administering vaccines as quickly as possible is a key policy priority....
Topics:  Health care, COVID-19
Insights / Video

Watch: Michael Kremer World Bank Keynote Lecture: Conference on Vaccinating South Asia

On March 4, Michael Kremer presented his recent research during the South Asia Economic Policy...
Topics:  COVID-19
Insights / Podcast episodeMar 12, 2021

Is the Future Cashless‪?‬

Eduardo Porter, Tess Vigeland, Fernando Alvarez, Raghuram Rajan
When COVID lockdowns started a year ago, the use of cash plummeted. But the pandemic...
Topics:  COVID-19