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Research Notes–May 2007


Featuring research published in April 2007

Macroeconomics

Dollar Depreciates in March
The average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta fell 0.6 percent in March from the previous month.

Financial Economics

Economic Review Q1/Q2 2007
This issue of the Economic Review presents the papers, commentaries, and discussions from an August 2006 conference that assessed the legislative and regulatory changes in the banking industry during the past two decades and discussed the challenges still ahead. Below are descriptions of the papers and commentaries from the conference.

Safe and Sound Banking Twenty Years Later: What Was Proposed and What Has Been Adopted
Economic Review Q1/Q2 2007
This article assesses the extent to which legislative, regulatory, and supervisory changes regarding depository institutions have aligned with the recommendations made twenty years ago in Perspectives on Safe and Sound Banking (Benston et al. 1986).

Safety, Soundness, and the Evolution of the U.S. Banking Industry
Economic Review Q1/Q2 2007
Analyzing the fundamental structural changes in the U.S. commercial banking industry since the 1980s, the author compares the “transactions banking” business model practiced by large financial companies to the more traditional relationship-based banking business model.

Supervising Bank Safety and Soundness: Some Open Issues
Economic Review Q1/Q2 2007
The author focuses on seven underresearched and underappreciated issues that affect bank safety and soundness or financial system stability. Many of these issues are similar those that Benston et al. discussed in 1986.

Roundtable Discussion: Reflection on Twenty Years of Bank Regulatory Reform
Economic Review Q1/Q2 2007
The authors commissioned by the American Bankers Association in 1986 to assess the banking industry and recommend regulatory policy options reflect on the industry’s past twenty years, its current status, and its future direction.

Corporate Social Responsibility and Shareholder’s Value: An Event Study Analysis
Working Paper 2007-6
The news of deletion from an index of socially responsible firms negatively affects a company’s returns, a penalty that may be related to the reaction of ethically screened investment funds.

Simple versus Optimal Rules as Guides to Policy
Working Paper 2007-7
The authors evaluate simple and model-based optimal policy rules when the true economic model is unknown. Given this uncertainty, optimal rules often produce inferior outcomes compared to simple rules.

International Economics

Remittances and the Dutch Disease
Working Paper 2007-8
In recipient countries, an increase in workers’ remittances leads to a decline in labor supply and an increase in consumption that is biased toward nontradables, further causing the real exchange rate to appreciate.