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Corporate Leverage and Investment
By W. Blake Marsh, David Rodziewicz, Karna Chelluri
Publication V1 The rise in corporate debt over the last decade has led to increased concerns about risks to financial stability and economic growth, as highly indebted firms are more likely to default in the event of an economic downturn. However, elevated corporate debt can influence a firm’s decision-making even in the absence of financial stability risks. Debt service payments reduce net income that could otherwise finance future investment, and higher debt levels drive credit costs up as default risk rises, incentivizing firms to invest in riskier projects. In addition, some investors may be unwilling to finance new firm investments if they fear that any investment returns will accrue only to senior debt holders. W. Blake Marsh, David Rodziewicz, and Karna Chelluri examine the relationship between high corporate leverage and future firm spending on structures, machinery, and equipment. They find that, on average, more leveraged firms across industries tend to have lower levels of investment activity in the future. This negative relationship between debt and investment is strongest for the most highly indebted firms and is evident in both economic downturns and expansions.
Mobile Banking Use and Consumer Readiness to Benefit from Faster Payments
By Fumiko Hayashi, Ying Lei Toh
Publication V1 The U.S. payments industry is currently implementing faster payments that will enable consumers and businesses to send and receive payments almost instantly at any time of day, any day of the year. Mobile banking in particular may allow consumers to realize the full benefits of faster payments. As a result, a consumer’s use of mobile banking is a good indicator of their readiness to benefit from faster payments. Fumiko Hayashi and Ying Lei Toh examine which consumer characteristics are associated with mobile banking use as well as what other factors may influence consumer readiness. They find that banked households that are younger, higher income, college-educated, employed, or that occasionally use alternative financial services are significantly more likely to have used mobile banking for transactions. Their results suggest three additional factors may influence consumer readiness to fully benefit from faster payments: the availability and cost of digital infrastructure, the availability of mobile banking and its transaction functions, and consumers’ perceptions of and savviness with mobile banking and related technologies.
Population Turnover and the Growth of Urban Areas
By Jason P. Brown, Colton Tousey
Publication V1 People in the United States are relocating nearly half as much they did in the early 1980s. Lower population turnover—the propensity of people to move into or out of a given location—may mean a decline in labor market adjustment across industries and occupations; when people move across regions for job-related reasons, they may help smooth out changes that hit certain labor markets harder than others. Population turnover may also lead to better matches between employer and employee, an important factor in the growth of urban areas. Jason P. Brown and Colton Tousey examine the relationship between population turnover and overall population growth across urban areas of various sizes from 2000 to 2017. They find that larger urban areas tend to have higher population turnover and that higher initial levels of turnover are correlated with faster population growth over subsequent decades. Their findings, which are consistent with other studies showing economic activity increasingly concentrating in larger urban areas, suggest that areas with small populations and lower levels of labor market adjustment face greater economic challenges.
Long-Run Uncertainties for U.S. Agriculture
By , Rosamond L. Naylor
Summary Special Issue 2019 Changes in global food and fuel demand, the effects of climate change, and regional depletion of groundwater resources for irrigation create uncertainty for U.S. farmers.
The “Normal” Normal: Supply and Demand Drivers over the Next 10 Years
By , Seth Meyer, Joe Glauber
Summary Special Issue 2019 A growing population, evolving food and fuel consumption, and trade with China and other parts of the world will all influence U.S. agriculture over the next decade.
Agricultural Cycles and Implications for the Near Term
By , Ani L. Katchova, Ana Claudia Sant’Anna
Summary Special Issue 2019 While several indicators suggest that a repeat of the 1980s farm crisis is unlikely, the length of the current agricultural downturn may take a toll.
Transitioning to the Long Term
By , Michael Gunderson
Summary Special Issue 2019 To be successful in the future, agricultural producers will need to take leadership as production conditions, the climate, and technologies evolve.
Summary Special Issue 2019 In July 2019, the Federal Reserve Bank of Kansas City hosted a symposium titled “Exploring Agriculture’s Path to the Long Term.” Esther L. George, the Bank’s President and Chief Executive Officer, notes both positive trends and challenges facing the agricultural sector today and in the future.
Spending Patterns and Cost of Living for Younger versus Older Households
By Jun Nie, Akshat Gautam
Publication Fourth Quarter 2019 Aggregate measures of inflation can mask large differences in the actual cost of living faced by households with different spending patterns. For example, older houses typically spend more on health-related services, while younger households spend more on education. If prices in the health-care and medical services sectors rise at a faster pace than prices in the education sector, older households may, in turn, experience a higher inflation rate than younger households. Jun Nie and Akshat S. Gautam use a rich household-level expenditure data set along with price data to measure and examine differences in spending patterns and the cost of living across different age groups. They find that older households in general have faced slightly higher inflation rates than younger households over the past four decades due to health-related expenses. However, they also find that the inflation gap between older and younger households has narrowed significantly over the same period as the inflation rate of health-related expenses has declined.
Payment Card Fraud Rates in the United States Relative to Other Countries since Migrating to Chip Cards
By Fumiko Hayashi
Publication Fourth Quarter 2019 The United States has lagged somewhat behind other countries in implementing steps to mitigate payment card fraud, such as chip card technology and personal identification numbers. Small delays in implementing fraud mitigation strategies could translate to large fraud losses relative to other countries. Although comparing fraud rates across countries can be challenging, Fumiko Hayashi examines payment card fraud rates in the United States along with three countries with the best available data—Australia, France, and the United Kingdom—and finds that the United States has the highest overall fraud rate. Even after migrating to chip card technology, the United States has a significantly higher in-person fraud rate than all three countries but a lower remote fraud rate than Australia and France. Fewer safeguards and differences in prevalent types of transactions may help explain this.