Research Staff Spotlights

The Value of Economic Statistics

Assistant Professor Diego Perez

Diego Perez

Every month, the Bureau of Labor Statistics and the Bureau of Economic Analysis publishes statistics on inflation, employment and several other economic variables. Providing macroeconomic statistics entails an economic cost associated with gathering and processing a large amount of data. At the same time, the public provision of economically relevant information is likely to confer certain benefits on society. After all, the availability of timely and accurate economic data is a common feature of any country with solid institutions. In this column I focus on the benefits associated with the provision of macroeconomic statistics. A proper understanding and measurement of these benefits is key to determining adequately how many resources need to be invested in the provision of public information. Read more…

Optimal Stress Tests and Bank Portfolio Choice

Assistant professor Basil Williams

Basil Williams

How can we properly monitor and regulate banks in order to lower the likelihood of bank failure during a crisis? One way of monitoring banks is by performing a stress test, which is a simulation that predicts whether a bank will be able to meet its obligations to creditors in the event of various stressors, such as a changing interest rate or a rise in unemployment. The Dodd-Frank Act requires large financial institutions to conduct stress tests twice per year, once by regulators, and once internally. If banks are found to perform poorly in a stress test, then regulators require them to adjust their capital and liquidity buffers so that they can respond better to stressful scenarios. Read more…