The Russian invasion of Ukraine increased uncertainty around the world. Although most U.S. companies have limited direct exposure to Ukrainian and Russian trading partners, increased global uncertainty may still have an indirect effect on funding conditions through tightening financial conditions. In this post, we examine how conditions in the U.S. corporate bond market have evolved since the start of the year through the lens of the U.S. Corporate Bond Market Distress Index (CMDI). As desc...| Liberty Street Economics
With more than $6 trillion outstanding, the U.S. corporate bond market is a significant source of funding for most large U.S. corporations. While prior literature offers a variety of measures to capture different aspects of corporate bond market functioning, there is little consensus on how to use those measures to identify periods of distress in the market as a whole. In this post, we describe the U.S. Corporate Bond Market Distress Index (CMDI), which offers a single measure to quantify joi...| Liberty Street Economics
Richard Crump, Domenico Giannone, and David Lucca discuss different conceptual approaches to dating the business cycle and study their past performance for the U.S. economy.| Liberty Street Economics
Corporate bonds are a key source of funding for U.S. non-financial corporations and a key investment security for insurance companies, pension funds, and mutual funds. Distress in the corporate bond market can thus both impair access to credit for corporate borrowers and reduce investment opportunities for key financial sub-sectors. In a February 2021 Liberty Street Economics post, we introduced a unified measure of corporate bond market distress, the Corporate Bond Market Distress Index (CMD...| Liberty Street Economics
This post uses the New York Fed DSGE model to simulate how interest rates, output, and inflation would have performed had the Fed followed an average inflation targeting (AIT)-type reaction function since the second quarter of 2021, when inflation began to rise—instead of keeping the federal funds rate at the zero lower bound until March 2022, and then raising it aggressively thereafter. The authors show that actual policy was more accommodative in 2021 than implied by the AIT reaction func...| Liberty Street Economics
Although inflation has fallen recently, it remains above target, and the economy continues to expand at a robust pace. Does this resilience imply that monetary policy has been ineffectual? Or does it mean that we haven’t yet observed the full effect of the monetary tightening that has already taken place? This post uses a Bayesian vector autoregressive model to study the behavior of the U.S. economy over the last few years.| Liberty Street Economics
The authors examine the unemployment-inflation trade-off over the past few years through the lens of a New Keynesian Phillips curve.| Liberty Street Economics