FRBSF Economic Letters are brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve. This section contains Economic Letters on monetary economics and macro-finance topics.
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Why Are Overall Profits Outpacing Financing Costs?
Anton Bobrov, Carter Davis, Alexandre Sollaci, James Traina
Since the 1980s, decreasing interest rates have reduced the cost of financing for publicly traded corporations, which in turn has lowered their cost of capital by more than a third. Data show that their profits have likewise declined. At the same time, however, economy-wide corporate profits have increased substantially. Combining these data indicates that the…
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Economic Effects of Tighter Lending by Banks
Vasco Cúrdia
Banks tightened the criteria used to approve loans over the past year. Analysis shows that their tighter lending standards can be partially explained by economic conditions that reduce demand for loans and increase their potential risk, such as policy rate increases and a slowing economy. The unexplained part may reflect a restrained credit supply, specifically…
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How Quickly Do Prices Respond to Monetary Policy?
Zoe Arnaut, Leila Bengali
With inflation still above the Federal Reserve’s 2% objective, there is renewed interest in understanding how quickly federal funds rate hikes typically affect inflation. Beyond monetary policy’s well-known lagged effect on the economy overall, new analysis highlights that not all prices respond with the same strength or speed. Results suggest that inflation for the most…
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Does Monetary Policy Have Long-Run Effects?
Òscar Jordà, Sanjay R. Singh, Alan M. Taylor
Monetary policy is often regarded as having only temporary effects on the economy, moderating the expansions and contractions that make up the business cycle. However, it is possible for monetary policy to affect an economy’s long-run trajectory. Analyzing cross-country data for a set of large national economies since 1900 suggests that tight monetary policy can…