Household balance sheets and the recovery

Falling home and financial asset prices have combined to weaken the average household’s balance sheet, and this has helped to slow down the current recovery. We examine the role that household balance sheets have typically played in postwar business cycles and assess their importance in explaining why some recoveries, including the current one, have been weaker than others.Households - Finance ; Households - Economic aspects ; Economic conditions

Inflation: noise, risk, and expectations

The most frequently cited measures of inflation expectations, from TIPS-derived indicators to survey-based estimates like Blue Chip forecasts, have some inherent limitations when it comes to applying them to questions of monetary policy. Recently, researchers developed a model that takes information from a number of sources and produces estimates of inflation expectations that are superior to these popular measures in a number of respects. This Commentary explains how these estimates are better and what they imply for current monetary policy.Inflation (Finance)

THREE ESSAYS ON CREDIT MARKETS AND THE MACROECONOMY

Historically, credit market conditions have been shown to impact economic activity, at times severely. For instance, in the late 2000s, the United States experienced a financial crisis that seized domestic and foreign credit markets. The ensuing lack of access to credit brought about a steep decline in output and a sluggish recovery. Accordingly, policymakers commonly take steps to mitigate the effects of adverse credit market conditions and, at times, conduct unconventional monetary policy once traditional policy tools become ineffective. This dissertation is a collection of essays regarding monetary policy, the flow of credit, financial crises, and the macroeconomy. Specifically, I describe monetary policy’s impact on the allocation of credit in the U.S. and analyze the role of upstream and downstream credit conditions and financial crises on international trade in a global supply chain. The first chapter assesses the impact of monetary policy shocks on credit reallocation and evaluates the importance of theoretical transmission mechanisms. Compustat data covering 1974 through 2017 is used to compute quarterly measures of credit flows. I find that expansionary monetary policy is associated with positive long-term credit creation and credit reallocation. These impacts are larger for long-term credit and for credit of financially constrained firms and firms that are perceived as risky to the lender. This is predicted by the balance sheet channel of monetary policy and mechanisms that reduce lenders’ risk perceptions and increase the tendency to search for yield. Furthermore, I find that, on average, the largest increases in credit creation resulting from monetary expansion are to firms that exhibit relatively low investment efficiency. These estimation results suggest that expansionary monetary policy may have a negative impact on future economic growth. The second chapter evaluates the quantitative effects of unconventional monetary policy in the late 2000s and early 2010s. This was a period when the traditional monetary policy tool (the federal funds rate) was constrained by the zero lower bound. We compute credit flow measures using Compustat data, and we employ a factor augmented vector autoregression to analyze unconventional monetary policy’s impact on the allocation of credit during the zero lower bound period. By employing policy counterfactuals, we find that unconventional monetary policy has a positive and simultaneous impact on credit creation and credit destruction and these impacts are larger in long-term credit markets. Applying this technique to analyze the flows of financially constrained and non-financially constrained borrowing firms, we find that unconventional monetary policy operates through the easing of collateral constraints because these effects are larger for small firms or those with high default probabilities. During the zero lower bound period, we also find that unconventional monetary policy brings about increases in credit creation for firms of relatively high investment efficiency. The third chapter pertains to the global trade collapse of the late 2000s. This collapse was due, in part, to strained credit markets and the vulnerability of exporters to adverse credit market conditions. The chapter evaluates the impact of upstream and downstream credit conditions and the differential effects of financial crises on bilateral trade. I find that upstream and downstream sectors’ needs for external financing is negatively associated with trade flows when the exporting or importing country’s cost of credit is high. However, I find that this effect is dampened for downstream sectors. I also find that downstream sectors’ value of collateral is positively associated with trade when the cost of credit is high in the importing country. High downstream trade credit dependence coupled with high costs of credit in the importing country also cause declines in imports. There are amplifying effects of credit costs for sectors that are highly dependent on external financing when the importing or exporting country is in financial crisis. Further, the magnitude is larger when the exporting country is in financial crisis. Finally, I find that these effects on trade flows are large when the exporting country is a developed economy, but they are muted for developing economies

Digital Vapor Trails: Using Website Behavior to Nowcast Entrepreneurial Activity

[EN] Following recent research, we explore virtually contemporaneous, and geographically granular, user online activity related to entrepreneurship. In this paper, we present evidence that data harvested by Dstillery can complement efforts of, and data collected by, government agencies and organizations advocating for entrepreneurship, business formation and economic growth, e.g., the Kauffman Foundation. Our website-based behavior data is close to real time and at a geographically granular level. We find that the concentration of a region’s visits to website resources for entrepreneurship and business development are statistically related to business start-up and, particularly, growth activity. Visits to websites related to entrepreneurship are more strongly associated with growth entrepreneurship, in contrast to start-up entrepreneurship. While data capture and analysis related to entrepreneurship website activity is in its infancy, this analysis points to the potential of this data source to nowcast business formation and growth at a regional level.Slaper, T.; Bianco, A.; Lenz, P. (2018). Digital Vapor Trails: Using Website Behavior to Nowcast Entrepreneurial Activity. En 2nd International Conference on Advanced Reserach Methods and Analytics (CARMA 2018). Editorial Universitat Politècnica de València. 107-113. https://doi.org/10.4995/CARMA2018.2018.8327OCS10711

Third Places and Art Spaces: Using Web Activity to Differentiate Cultural Dimensions of Entrepreneurship Across U.S. Regions

[EN] We use unconventional, web-based user data to assess regional entrepreneurial activity and regional variations in characteristics and culture that drive differences in business formation. Using geographically granular, user-online activity to estimate a region’s proclivity for entrepreneurship, we assess the statistical relationship between business formation, operationalized as establishment births, and a region’s general interest in “third places” – informal gathering and mixing locations – and websites related to arts, music and design – “arts spaces.” We operationalize interest in, or intention to patronize, third places and arts spaces by individuals within a geographical unit of analysis (U.S. counties) who access website information and resources related to those third places. Controlling for regional interest in entrepreneurship related web resources, we find that interest in third places and art spaces is strongly associated with regional variation in business formation. This work corroborates research showing that regions with a high concentration of interest (and participation) in third places and art spaces may attract the attention of would be entrepreneurs as desirable places to live, work and explore business opportunities, and help identify and address a critical missing ingredient in regions that have lower rates of start-ups and business growth.Slaper, T.; Bianco, A.; Lenz, P. (2020). Third Places and Art Spaces: Using Web Activity to Differentiate Cultural Dimensions of Entrepreneurship Across U.S. Regions. Editorial Universitat Politècnica de València. https://doi.org/10.4995/CARMA2020.2020.11638OCS23924

The financial stress index: identification of systemic risk conditions

This paper develops a financial stress index for the United States, the Cleveland Financial Stress Index (CFSI), which provides a continuous signal of financial stress and broad coverage of the areas that could indicate it. The index is based on daily public-market data collected from four sectors of the fi nancial markets—the credit, foreign exchange, equity, and interbank markets. A dynamic weighting method is employed to capture changes in the relative importance of these four sectors as they occur. In addition, the design of the index allows the origin of the stress to be identified. We compare the CFSI to alternative indexes, using a detailed benchmarking methodology, and show how the CFSI can be applied to systemic stress monitoring and early warning system design. To that end, we investigate alternative stress-signaling thresholds and frequency regimes and then establish optimal frequencies for filtering out market noise and idiosyncratic episodes. Finally, we quantify a powerful CFSI-based rating system that assigns a probability of systemic stress to ranges of CFSI outcomes.Systemic risk ; Risk assessment

SAFE: An early warning system for systemic banking risk

This paper builds on existing microprudential and macroprudential early warning systems (EWSs) to develop a new, hybrid class of models for systemic risk, incorporating the structural characteristics of the fi nancial system and a feedback amplification mechanism. The models explain fi nancial stress using both public and proprietary supervisory data from systemically important institutions, regressing institutional imbalances using an optimal lag method. The Systemic Assessment of Financial Environment (SAFE) EWS monitors microprudential information from the largest bank holding companies to anticipate the buildup of macroeconomic stresses in the financial markets. To mitigate inherent uncertainty, SAFE develops a set of medium-term forecasting specifi cations that gives policymakers enough time to take ex-ante policy action and a set of short-term forecasting specifications for verification and adjustment of supervisory actions. This paper highlights the application of these models to stress testing, scenario analysis, and policy.Systemic risk ; Liquidity (Economics)

Sexually transmitted Human Papillomavirus type variations resulting in high grade cervical dysplasia in North-East North Dakota and North-West Minnesota

BACKGROUND: A review of Pap smear diagnoses from a reference laboratory in Grand Forks, North Dakota over a 3-year period (07/00 to 10/03) revealed a two-fold higher rate of high grade squamous intraepithelial lesion in a community in northwest Minnesota (Roseau, 0.486%) than in northeast North Dakota (Grand Forks, 0.249%), in spite of both having similar rates of low-grade squamous intraepithelial lesion (1.33% vs.1.30% respectively) OBJECTIVES: To identify the different types of HPV present in patient populations showing high-grade dysplasia in Grand Forks, ND and Roseau, MN. STUDY DESIGN: Formaldehyde-fixed paraffin-embedded cervical tissue samples were analyzed using polymerase chain reaction (PCR) to detect the presence of HPV type 16, 18 and 31. RESULTS: Our studies showed that 41 % of samples from Roseau were triply infected with HPV serotypes 16, 18 and 31 in comparison to 12 % from Grand Forks. CONCLUSION: Due to the small sample size we were unable to prove the study to be statistically significant. However, our results suggest that the presence of HPV 16, 18 and 31 in triply infected samples may be the cause of the higher percentage of high-grade dysplasia in Roseau, MN when compared to Grand Forks, ND

Progression of mitral regurgitation in rheumatic valve disease : role of left atrial remodeling

Introduction: Mitral regurgitation (MR) is the most common valve abnormality in rheumatic heart disease (RHD) often associated with stenosis. Although the mechanism by which MR develops in RHD is primary, longstanding volume overload with left atrial (LA) remodeling may trigger the development of secondary MR, which can impact on the overall progression of MR. This study is aimed to assess the incidence and predictors of MR progression in patients with RHD. Methods: Consecutive RHD patients with non-severe MR associated with any degree of mitral stenosis were selected. The primary endpoint was a progression of MR, which was defined as an increase of one grade in MR severity from baseline to the last follow-up echocardiogram. The risk of MR progression was estimated accounting for competing risks. Results: The study included 539 patients, age of 46.2 ± 12 years and 83% were women. At a mean follow-up time of 4.2 years (interquartile range [IQR]: 1.2–6.9 years), 54 patients (10%) displayed MR progression with an overall incidence of 2.4 per 100 patient-years. Predictors of MR progression by the Cox model were age (adjusted hazard ratio [HR] 1.541, 95% CI 1.222–1.944), and LA volume (HR 1.137, 95% CI 1.054–1.226). By considering competing risk analysis, the direction of the association was similar for the rate (Cox model) and incidence (Fine-Gray model) of MR progression. In the model with LA volume, atrial fibrillation (AF) was no longer a predictor of MR progression. In the subgroup of patients in sinus rhythm, 59 had an onset of AF during follow-up, which was associated with progression of MR (HR 2.682; 95% CI 1.133–6.350). Conclusions: In RHD patients with a full spectrum of MR severity, progression of MR occurs over time is predicted by age and LA volume. LA enlargement may play a role in the link between primary MR and secondary MR in patients with RHD