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Insights / Research BriefJun 17, 2024

Inflation and Trading

Philip Schnorpfeil, Michael Weber, Andreas Hackethal
Beliefs about how inflation impacts asset returns vary widely across investors, who are often overly optimistic. Information about past returns during periods of high inflation causes investors to update their beliefs, which feeds into their return expectations and subsequent trading behavior.
Topics:  Monetary Policy
Insights / Research BriefJun 12, 2024

Discount Factors and Monetary Policy: Evidence from Dual-Listed Stocks

Quentin Vandeweyer, Minghao Yang, Constantine Yannelis
Surprise changes in US monetary policy rates directly affect asset prices, with a 100-basis point surprise cut resulting in a 30-basis point increase in the ratio of stock prices over 5 days; this effect grows after the initial announcement because higher-frequency strategies likely underestimate the effects of policy transmission.
Topics:  Monetary Policy
Insights / Research BriefMay 01, 2024

Access to Credit Reduces the Value of Insurance

Sonia Jaffe, Anup Malani, Julian Reif
Insurance is less valuable when people can also smooth their spending using loans. Access to a five-year loan decreases the average value of insurance by $232–$366, or 58–61%.
Topics:  Financial Markets
Insights / Research BriefApr 16, 2024

Sticky Discount Rates

Masao Fukui, Niels Joachim Gormsen, Kilian Huber
Firms often keep their nominal discount rates constant even in the face of changing inflation expectations. Increases in expected inflation therefore lower firms’ real discount rates and raise real investment.
Topics:  Monetary Policy
Insights / Research BriefApr 11, 2024

On Digital Currencies

Harald Uhlig
In a work summarizing his previous research, the author argues that prices of private digital currencies follow random walks, while for central bank digital currencies the challenge is to address three objectives, price stability, efficiency, and monetary trust, of which only two are achievable.
Topics:  Monetary Policy
Insights / Research BriefApr 03, 2024

The High Frequency Effects of Dollar Swap Lines

Rohan Kekre, Moritz Lenel
News about expanded dollar swap lines causes a reduction in liquidity premia, compression of deviations from covered interest parity (CIP), and depreciation of the dollar; also, equity prices rise and the VIX falls, while the response of long-term government bond prices is mixed.
Topics:  Monetary Policy
Insights / Research BriefMar 25, 2024

Banks in Space

Ezra Oberfield, Esteban Rossi-Hansberg, Nicholas Trachter, Derek Wenning
The banking deregulation of the 1980s and 90s provides unique evidence of the way in which banks set up their branches across locations. Two forms of sorting explain observed location patterns well. Sorting on size, whereby top banks locate in the largest markets and smaller banks in marginal ones, and sorting according to funding needs whereby banks locate in regions that allow them to balance their loans and deposits.
Topics:  Financial Markets
Insights / Research BriefMar 20, 2024

Do Information Frictions and Corruption Perceptions Kill Competition? A Field Experiment on Public Procurement in Uganda

Emanuele Colonnelli, Francesco Loiacono, Edwin Muhumuza, Edoardo Teso
Informing companies about opportunities to sell to the government does not increase their participation in public procurement, but enhancing their trust in the government’s procurement integrity does.
Topics:  Monetary Policy