Cryptocurrency markets rely on stablecoins maintaining their peg to fiat currencies like the US dollar. Customers trade between these stablecoins and their counterparts on exchanges that operate like banks without consumer protections to mitigate run risk. We investigate whether exchange breaches break the peg of Tether, the leading stablecoin. Using an event study, we find that shocks are associated with a break in Tether's peg but return quickly to its par value. By contrast, we find no effect on the price of Bitcoin. We also observe diminishing effects over time, consistent with a maturing market and the adaptive market hypothesis.

We reexamine the contemporaneous causal effects between the U.S. stock prices, crude oil prices, and monetary policy from 2005 to 2022. Our study offers two main contributions. First, we generalize a novel identification approach based on exogenous intraday shifts in the volatility in futures markets from two markets to multiple markets. Second, we examine contemporaneous causal effects between the U.S. stock prices, crude oil prices, and monetary policy. We show that the coefficients measuring contemporaneous causality have substantially changed over time. Specifically, we find that since 2008 stock returns affect crude oil returns. This time variation is also evident in the effect of monetary policy on the crude oil returns. We show that this time variation is consistent with two explanations: the zero lower bound (ZLB) and increased synchronization of crude oil prices with the business cycle.

The 1974 trade act substantially increased the executive branch's authority in trade negotiations through the granting of fast-track and Section 301 authority. This paper evaluates the effect on U.S. voting behavior resulting from trade with Japan over 1976-1992 time period. To capture U.S. trade exposures to Japan, we develop the Bartik index from Autor et al. (2013) for import competition with Japan and show that local exposure to import competition had statistically significant negative impacts on Republican presidential candidates over the 1976-1984 period. Although the second Reagan administration used Section 301 to open Japan's markets and Japanese firms shifted production to the United States, job-creation effects of exports and foreign direct investment did not have any influence on voting outcomes.

One difficulty in testing the efficient market hypothesis (EMH) is overcoming Fama's (1970) joint hypothesis problem of market rationality and the unknown equilibrium E(R). We exploit the fact that the equilibrium expected rate of return for stablecoins is E(R)=0 and employ traditional market efficiency tests to examine the efficient market hypothesis for Tether. We find that deviations of Tether from a dollar do exhibit significant autocorrelation. Second, we use security breaches of cryptocurrency exchanges as a proxy for “survivability shocks”; our results are more consistent with Lo’s (2004) Adaptive Market Hypothesis (AMH) than the EMH.

This paper aims to clarify the relationship between monetary policy shocks and wage inequality. We emphasize the relevance of within and between wage group inequalities in explaining total wage inequality in the United States. Relying on the quarterly data for the period 2000-2020, our analysis shows that racial disparities explain 12% of observed total wage inequality. Subsequently, we examine the role of monetary policy in wage inequality. We do not find compelling evidence that shows that monetary policy plays a role in exacerbating the racial wage gap. However, there is evidence that accommodative monetary policy plays a role in magnifying between group wage inequalities but the impact occurs after 2008.

Cryptocurrencies have exploded in popularity, due in no small part to the rising value of Bitcoin. Yet much of their success relies upon stablecoins maintaining a consistent value pegged to fiat currencies like the US dollar. Customers of cryptocurrency exchanges regularly trade between these stablecoins and their more volatile counterparts. These exchanges operate like banks and Money Market Mutual Funds (MMMFs), but without the regulatory oversight or consumer protections to mitigate run risk. This paper investigates whether two types of shocks -- security breaches at exchanges and derivative liquidations prompted by price volatility -- can break the peg of Tether, the leading stablecoin. Using an event study, we find that both types of shocks are associated with a break in the Tether's peg to the dollar but return relatively quickly to its par value. The cumulative effect of a security breach is approximately -0.5%. We conclude that by permitting the stablecoin price to float (rather than having the price fixed to $1 as in MMMFs), exchanges have mitigated some of the financial contagion risk associated with panic-runs thus far.

We propose a novel identification approach based on a predictable change in the intraday volatility of index futures to estimate the Federal Reserve's reaction to stock returns. This identification approach relies on a weaker set of assumptions than required under identification through heteroskedasticity based on lower frequency data. Our approach also allows the examination of changes in the reaction of monetary policy to the stock market. We document an asymmetric response of policy expectations to changes in stock prices in adverse and positive economic environments. Specifically, the results show a sharp increase in the response of monetary policy expectations to stock returns during recessions and bear markets. This finding is consistent with the existence of the so-called “Fed put.”

In this paper, we employ a new dataset to measure the impact of investor sentiment regarding oil prices on the U. S. inflation premium. Our empirical analysis relies on Structural Vector Autoregression (SVAR) and out-of -sample forecasts. The results indicate that a one standard deviation positive shock to overall investor senti-ment regarding oil prices results in a significant increase in the U.S. inflation premium by approximately 1.2% over the subsequent 10 weeks. Compared to individual investor sentiment, institutional investor sentiment regarding oil prices has a larger impact on the U.S. inflation premium. Finally, we find an out-of-sample evidence that the overall investor sentiment regarding oil prices has predictive power on the U.S. inflation premium.

We examine the correlation between nominal gas prices and consumer inflation expectations. Using data from the mid-1980s through the present, we do not find evidence that the relationship is time varying. Instead, our results suggest that the correlation between gas prices and inflation expectations is stable at approximately 0.30. Our results contribute to the vast literature regarding energy prices and the expectations augmented Phillips curve. We find very little evidence that the changing relationship between energy prices and inflation expectations has had any impact on the Phillip's curve or the missing inflation after the recession in 2008.

We use the Taylor curve to gauge deviations of monetary policy from an efficiency locus for the United Kingdom (UK) and the four largest economies of the eurozone (Germany, France, Italy, Spain) for the period 2000-2018. For this purpose, we use shadow interest rates, which is a common metric for both conventional and unconventional monetary policies, and the newly proposed Hamilton-filter to measure output gap, which improves upon the drawbacks of the traditionally used Hodrick-Prescott filter. Our findings suggest that deviations in the UK mostly occurred amid the global financial crisis and the post-Brexit period, whereas eurozone members experienced more volatile deviations around 2001, during the global financial crisis and the eurozone sovereign debt crisis.

We explore the asymmetric high-frequency daily response of U.S. equities to financial uncertainty over the 1936-2016 period. We find positive growth of uncertainty reduces stock returns and increases volatility, while, a negative growth of uncertainty primarily reduces variance. More importantly, the impact of uncertainty on volatility is found to be asymmetric. We also model rolling window estimation and find significant time variation in the impact of uncertainty, though the direction largely confirms with the static case. Our study provides new evidence that the response of U.S. equities to uncertainty is intuitively consistent even in the historical and high-frequency context.

In this paper, we investigate the cross-quantile dependence between investor sentiment and exchange rate returns using an extreme quantile approach and based on daily data covering the period January 4, 1905 to January 3, 2006. As a proxy of investor sentiment, we use the bull (positive) minus bear (negative) spread of the sentiment measure constructed by Garcia (2013). We find that the lower quantiles of investor sentiment have a positive and significant effect on the quantiles of dollar-pound exchange rate returns. However, the sign of dependence is reversed for the median to higher quantiles of the distribution of the sentiment. Our finding holds even after controlling for the performance of the equity market, and provides additional evidence that investor sentiment can augment conventional predictors with respect to the future evolution of exchange rate returns.

Using quarterly real GDP data from 2005 to 2019 for all U. S. states from the Bureau of Economic Analysis, we construct an economic inequality measure which is additively decomposable into within and between-region inequality. We find increases in economic disparity in terms of total real GDP across the states. The results show that states belonging to the South and West regions are growing apart, contributing significantly toward the level of total economic disparity in the country. However, in terms of per-capita real GDP, economic disparity across states is much smaller. The results emphasize the role of population dynamics in mitigating economic disparity across U. S. states.

This paper investigates the impact of the Federal Reserve’s monetary policy on the economy of South Africa, particularly during the period of quantitative easing and thereafter from 2009 to 2018. A VAR model, including South Africa’s inflation, output, a stock market index, exchange rate, and South Africa’s policy rate is examined to determine the impact of the Federal Reserve’s actions. Our results show that the Federal Reserve’s quantitative easing programs had only slight overall effects on South Africa’s economy. However, the way monetary policy is measured appears to have important effects for studies of international monetary spillovers as the results differ depending on the type of monetary policy measure used.

In this paper, we analyse the asymmetric impact of financial uncertainty shocks on stock returns and volatility of the U.S. equity market over the period of 18th March, 1936 to 30th November, 2016, by controlling for impact of monetary policy shocks and recessions. We find that positive growth rates of uncertainty reduce stock returns and increases volatility, while, negative growth rates of uncertainty primarily reduce stock market variance. Further, the impact of changes in uncertainty on volatility is found to be asymmetric in the statistical sense. A rolling window estimation over the period of 30th June, 1954 to 30th November, 2016, shows that there is significant time variation in the impact of uncertainty, though the direction of impact largely confirms with the static case. Our study provides new evidence that the impact of financial uncertainty on the U.S. equity markets is intuitively consistent even in the historical and high-frequency context.

This paper analyzes new measures for output and unemployment gaps proposed by Hamilton (2017) and estimates Okun's law. We compare the Hamilton (2017) approach to the popular Hodrick and Prescott (1997) filter. Our results show that HP filter tends to underestimate the magnitude of Okun's law relationship across 20 OECD countries.

This study examines the effect that sentiment has on the conditional variance of stock returns. We find that the effect is asymmetric and differs depending upon the state of the economy. We also examine whether the effect is time-varying. To capture time-varying effects, we use rolling 10-year windows of daily data in a GARCH (1,1) model that allows positive and negative sentiment to have an asymmetric effect on the conditional variance of stock returns. We find that the negative sentiment has a positive effect on the conditional variance but dissipates after 1970.