second half of last year and into early 2015, and labor market conditions moved closer to those the Federal Open Market Committee (FOMC) judges consistent with its maximum employment mandate. Since the middle of last year, monthly payrolls have expanded by about 280,000, on average, and the unemployment rate has declined nearly 1/2 percentage point on net. Nevertheless, a range of labor market indicators suggest that there is still room for improvement. In particular, at 5.7 percent, the unemployment rate is still above most FOMC participants' estimates of its longer-run normal level, the...

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Fed-eral Reserve to conduct an annual stress test of BHCs with $50 billion or more in total consolidated assets and all nonbank financial companies designated by the Financial Stability Oversight Council (FSOC) for Federal Reserve supervision. The Board adopted rules implementing this requirement in October 2012. For this year's stress test cycle (DFAST 2015), the Federal Reserve conducted supervisory stress tests of 31 BHCs. This report provides background on Dodd-Frank Act stress testing; details of...

We argue that the vast bulk of movements in aggregate real economic activity during the Great Recession were due to Onancial frictions interacting with the zero lower bound. We reach this conclusion looking through the lens of a New Keynesian model in which Orms face moderate degrees of price rigidities and no nominal rigidities in the wage setting process. Our model does a good job of accounting for the joint behavior of labor and goods markets, as well as inaation, during the Great Recession. According to the model the observed fall in total factor productivity and the rise in the cost of...

Although the recovery of the labor market from the deep recession following the financial crisis was frustratingly slow for quite a long time, progress has been more rapid of late. The unemployment rate has fallen markedly over the past few years and now stands at 5.5 percent, down from 10 percent at its peak. Payroll gains have averaged 275,000 per month over the past year, well above the pace needed to sustain further declines in the unemployment rate. Of course, we still have some way to go to reach our maximum employment goal. The unemployment rate has not yet declined to the 5.0 to 5.2...

The approach of liftoff reflects the significant progress we have made toward our objectives of maximum employment and price stability. The extraordinary monetary policy accommodation that the Federal Reserve has undertaken in response to the crisis has contributed importantly to the economic recovery, though the recovery has taken longer than we expected. The unemployment rate, at 5.5 percent in February, is nearing estimates of its natural rate, and we expect that inflation will gradually rise toward the Fed's target of 2 percent. Beginning the normalization of policy will be a significant...

The April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. This book discusses the responses from 76 domestic banks and 23 U.S. branches and agencies of foreign banks. Regarding loans to businesses, the April survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the first quarter of 2015. On net, banks reported having eased some price terms. With respect to...

Often when we discuss the effects of taxes, we focus on the effects on the mean of firm value and de-emphasize the effects on the variance of the distribution. The existing literature on dividend taxation has analyzed the effect on firm stock price (Auerbach and Hassett (2005) and Amromin, Harrison and Sharpe (2008)). However, there are two important moments for the stock: the level of the stock price and the volatility of the stock. In a world where executives are more risk averse than most shareholders (since they are unable to diversify away firm-speciffc risk), we want to focus on both...

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Board of Governors of the Federal Reserve System (Board) to conduct an annual supervisory stress test of bank holding companies (BHCs) with $50 billion or greater in total consolidated assets (large BHCs), and to require BHCs and state member banks with total consolidated assets of more than $10 billion to conduct company-run stress tests at least once a year. This publication describes the three supervisory scenarios "baseline, adverse, and severely adverse" that the Board will use in its supervisory stress test for...