Search

Begin New Search Topic Fiscal Policy Political Geography North America

31. U.S. Real Interest Rates and Default Risk in Emerging Economies

Author:
Nathan Foley-Fisher and Bernardo Guimaraes
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper empirically investigates the impact of changes in U.S. real interest rates on sovereign default risk in emerging economies using the method of identification through heteroskedasticity. Policy-induced increases in U.S. interest rates starkly raise default risk in emerging market economies. However, the overall correlation between U.S. real interest rates and the risk of default is negative, demonstrating that the effects of other variables dominate the anterior relationship.
Topic:
Economics, Interest Rates, Risk, and Fiscal Policy
Political Geography:
North America and United States of America

32. Foreign Banks in the U.S.: A Primer

Author:
William Goulding and Daniel E. Nolle
Publication Date:
11-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper describes the foreign banking landscape in the United States. It begins by establishing a vocabulary for discussion of the subject, and then identifies a number of important data-related issues. With that information in hand, the remainder of the paper focuses on identifying the most important underlying trends on both sides of the balance sheets of foreign-owned banks' U.S. operations. At each step, the investigation considers how foreign-owned banks compare to U.S.-owned domestic banks, and how two types of foreign banks operations in the U.S. -- branches and agencies of foreign banks (FBAs), and foreign-owned subsidiary banks (FSUBs) -- compare to each other. The banking sector in the U.S. experienced substantial swings in performance and stability over the decade surrounding the 2008-2009 financial crisis and changes in every major dimension of foreign-owned banks' assets and liabilities were even larger than for domestic banks. Changes were especially large at FBAs. For example, cash balances came to dominate the assets side of FBAs’ aggregate balance sheet, with the absolute level of cash balances larger than those of domestic U.S. banks beginning in 2011, despite the fact that total assets of domestic U.S. banks are five times the assets of FBAs. Further, the recent unprecedented build-up of cash balances by FBAs was almost entirely composed of excess reserves. Changes in FBAs' liabilities-side activities have also been large, with much funding coming from large wholesale deposits and net borrowing from their foreign parents and related offices abroad.
Topic:
Foreign Direct Investment, Fiscal Policy, Capital, Banking, and Funding
Political Geography:
North America and United States of America

33. The Variance Risk Premium Around the World

Author:
Juan M. Londono
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper investigates the variance risk premium in an international setting. First, I provide new evidence on the basic stylized facts traditionally documented for the US. I show that while the variance premiums in several other countries are, on average, positive and display significant time variation, they do not predict local equity returns. Then, I extend the domestic model in Bollerslev, Tauchen and Zhou (2009) to an international setting. In light of the qualitative implications of my model, I provide empirical evidence that the US variance premium outperforms that of all other countries in predicting local and foreign equity returns.
Topic:
Economics, Risk, Fiscal Policy, and Equity
Political Geography:
North America and United States of America

34. Does “Starve the Beast” Work?

Author:
Jerry H. Tempelman
Publication Date:
10-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Starve-the-beast proponents believe that in order to tame the beast, one needs to starve it, with the beast being an obvious reference to Thomas Hobbes’s Leviathan depiction of an out-of-control state apparatus. The idea of tax reductions as a way to enforce discipline in government spending holds regardless of whether the nation is in the midst of an economic expansion or a recession. Following the recurrence of federal budget deficits that coincided with the enactment of federal tax cuts during 2001–2003, the starvethe-beast approach to fiscal policy that once was one of the underpinnings of the Reagan Revolution has become increasingly controversial. It is no longer mainly the political left that criticizes the starve-the-beast approach. Even some Republicans who once participated in the move to a smaller government during the Reagan presidency now criticize starve-the-beast thinking. Recently, William Niskanen (2005) has used statistical evidence to demonstrate that a decrease in taxes in a given year is followed by an increase in spending the next. Bruce Bartlett (2005) has proposed raising taxes, namely by introducing a value-added tax, presumably to prevent having to increase less efficient income taxes later.
Topic:
Budget, Economy, Tax Systems, and Fiscal Policy
Political Geography:
North America and United States of America

35. Limiting Government: The Failure of “Starve the Beast”

Author:
William A. Niskanen
Publication Date:
10-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For nearly 30 years, many Republicans have argued that the most effective way to control federal government spending is to “starve the beast” by reducing federal tax revenues. Moreover, two Nobel laureate economists, Milton Friedman and Gary Becker, have endorsed this argument. Friedman (2003) summarized this perspective as follows: How can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance. For governments, this means cutting taxes. Resulting deficits will be an effective—I would go so far as to say, the only effective—restraint on the spending propensities of the executive branch and the legislature. The public reaction will make that restraint effective. Becker and his colleagues Ed Lazear and Kevin Murphy (2003) described this effect as “the double benefit of tax cuts.” (Lazear is the recently appointed chairman of the Council of Economic Advisers.) This argument has been effective in unifying the Republican Party in favor of reducing federal taxes, but at the cost of undermining the more traditional Republican concern about fiscal responsibility.
Topic:
Government, Economy, Tax Systems, Fiscal Policy, and Public Spending
Political Geography:
North America and United States of America

36. An Unconventional Perspective on the Greenspan Record

Author:
William A. Niskanen
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
On his nomination as chairman of the Federal Reserve Board, Ben Bernanke stated, “My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years.” For that statement to provide much information, however, it is useful to understand the record of the Greenspan years.
Topic:
Financial Crisis, Federal Reserve, and Fiscal Policy
Political Geography:
North America and United States of America