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Chicago Fed Letter

Richard H. Mattoon and Sarah Wetmore

Illinois is one of several states facing severe state and local public pension crises, but it is uniquely constrained in its ability to address the problem due to recent judicial rulings that all but prohibit pension benefit changes for current and retired public employees. A conference cosponsored by the Federal Reserve Bank of Chicago and the Civic Federation on April 17, 2018, examined the state’s options.

Zain Mohey-Deen and Richard J. Rosen

This article examines what happens when incorrect assumptions are made in pricing new insurance products. The focus is on the mispricing of long-term care (LTC) insurance—which led to the insolvency of Penn Treaty.

Thomas Haasl, Anna Paulson, and Sam Schulhofer-Wohl

Currency is traditionally the largest liability of a central bank and today accounts for 36% of the Federal Reserve’s liabilities, or $1.59 trillion. The Fed supplies currency to meet demand, so changes in the demand for currency will be an important determinant of how the Fed’s balance sheet evolves in the future. In this Chicago Fed Letter, we examine currency demand around the world and over time to learn about the range of possibilities for how U.S. currency demand might change. We then project currency demand over the next decade in several illustrative scenarios.

Thomas Haasl, Anna Paulson, and Sam Schulhofer-Wohl

Throughout the financial crisis and its aftermath from late 2008 through October 2014, the Federal Reserve used asset purchases as a potent tool of monetary policy—buying longer-term Treasury and mortgage-backed securities to provide economic stimulus beyond what traditional policy approaches could produce. Consequently, the size and composition of the Fed’s balance sheet changed significantly over this period.

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