Debt, Asset Prices, and Financial Crises

How tightly are debt, asset prices, and financial crises linked?  The results in my recent research may surprise you.

My research on “heat” in the U.S. financial system has appeared in print

Find it here.  From the abstract: We provide a framework for assessing the build-up of vulnerabilities to the U.S. financial system. We collect forty-six indicators of financial and balance-sheet conditions, cutting across measures of valuation pressures, nonfinancial borrowing, and financial-sector health. We place the data in economic categories, track their evolution, and develop an algorithmic approach to monitoring vulnerabilities that can complement the more judgmental approach of most official-sector organizations.

Summer’s End — and a reading list to catch up on what you may have missed

Labor Day weekend brings the end of summer.  Some papers you may have missed:

Nakata and Schmidt: A description of how to adjust settings from simple Taylor rules to achieve an inflation target, on average, when interest rates are affected by the effective lower bound.

Ajello, Laubach, Lopez-Salido, and Nakata find that Bayesian and robust central banks will respond more aggressively to financial instability when the probability and severity of financial crises are uncertain.

David Reifschneider suggests that large-scale asset purchases and forward guidance about the future path of the federal funds rate should be able to provide enough additional accommodation to fully compensate for a more limited to cut short-term interest rates in most, but probably not all, circumstances.