In March 2020, banks faced the largest increase in liquidity demands ever observed. Firms drew funds on a massive scale from preexisting credit lines in anticipation of cash flow and financial disruptions stemming from the advent of the COVID-19 crisis. The increase in liquidity demands was concentrated at the largest banks, who serve the largest firms. Precrisis financial condition did not constrain large banks’ liquidity supply. Coincident inflows of funds from both the Federal Reserve’s liquidity injection programs and depositors, along with strong preshock bank capital, explain why banks were able to accommodate these liquidity demands. (JEL G21, G28) Received June 7, 2020; editorial decision June 23, 2020 by Editor Isil Erel.

Family income is a positive predictor of children's health, human capital, and later-life earnings, but determining the extent to which these associations reflect causal effects is challenging. A recent wave of natural and randomized experiments, together with increased accessibility of large-scale administrative data, are allowing us to gain new perspectives about the importance of families' monetary resources in the U.S. and other high-income countries. This review pulls the emerging literature together to provide deeper insights into what we know, and what we don't know, about the extent to which policies that provide more generous income transfers could make a difference to children's life chances. My reading of the evidence suggests that policies providing financial resources to economically vulnerable families have the potential to improve children's outcomes. The magnitude of predicted impacts varies considerably across studies, however, and may be related to specific features of the income-generating event that researchers' leverage.

This essay reviews new histories of the role of game theory and rational decision making in shaping the social sciences, economics among them, in the postwar period. The recent books The World the Game Theorists Made by Paul Erickson and How Reason Almost Lost Its Mind: The Strange Career of Cold War Rationality by Paul Erickson, Judy Klein, Lorraine Daston, Rebecca Lemov, Thomas Sturm, and Michael Gordin raise a number of complex historical questions about the interconnections among game theory, utility theory, decision theory, optimization theory, information theory, and theories of rational choice. Moreover, the contingencies of time, place, and person call into question the usefulness of economists' linear narratives about the autonomous and progressive development of modern economics. The essay finally reflects on the challenges that these issues present for historians of recent economics.

Pre-announcement information is private information gathered in anticipation of a public disclosure. Event-period information is private information useful in conjunction with the announcement itself. Typically rational models of trade are based exclusively on one type of information. Such models are less descriptive of real market settings and misspecified empirically. Therefore, we introduce a model of rational trade with both features and discuss its implications.

The paper analyzes the use of reported accounting earnings and price as a basis for compensating a manager when he trades on private information, and share price is set rationally based on privately held information, publicly available and contractible information, and publicly available but noncontractible information. In addition, we analyze the comparative statics of the compensation on reported earnings and price with respect to changes in the economy.

I uncover heterogeneous effects of macroprudential policy on GDP growth distribution by bringing together the literature on the impact of macroprudential policy and recent developments on the use of quantile regressions. I identify important benefits of macroprudential policy on the left-tail of the GDP growth distribution which contrast with the negative effects found in previous studies using conditional mean models. These benefits may offset the deterioration on growth-at-risk produced by the build-up of cyclical vulnerabilities and the materialization of financial crises. I also find that the impact of macroprudential policy is dependent on the position in the financial cycle, the type of instrument, and the time elapsed since its implementation. In particular, tightening capital measures during expansions may take up to two years to show evidence of benefits on growth-at-risk, while the positive impact of borrower-based measures is rapidly observed. Conversely, in downturns the benefits of loosening capital measures are more immediate, while those of borrower-based measures are limited. This suggests the importance of timing in macroprudential policy. Overall, this study provides a useful framework to assess the impact of macroprudential policy in terms of GDP growth and to identify the term-structure of specific instruments.

This article establishes the cyclical properties of a novel measure of worker reallocation: long-distance migration rates within the United States. Combining evidence from a number of data sets spanning the entire postwar era, we find that internal migration within the United States is procyclical. This result cannot be explained by cyclical variation in relative local economic conditions, suggesting that the net benefit of moving rises during booms. Migration is most procyclical for younger labor-force participants. Therefore, cyclical fluctuations in the net benefit of moving appear to be related to conditions in the labor market and the spatial reallocation of labor.

H. Gregg Lewis' estimates of the relative wage effect of unionism between 1920 and 1958 are routinely cited though they have rarely been subject to scrutiny. This paper extends Lewis' data to 1980 and, in particular, we construct a series on union membership that links up with the data available in the 1970's from the Current Population Surveys. We proceed to reexamine the effects of trade unions both on relative wages and on relative manhours worked.

This paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates. A simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution. In the general non-linear income tax problem, this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of Mirrlees. The optimal non-linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution. These formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters.

Why is the mere announcement of an open-market share repurchase program, which involves no commitment to purchase shares, regarded as good news by the market? We develop a theoretical model to resolve this puzzle. The model predicts that firms with large underpricing can attract attention from speculators by announcing repurchases, and the subsequent trades from these speculators lead to value corrections. Firms with small underpricing, however, cannot attract attention by announcing repurchases, and these firms have to use costly share repurchases as a value-correcting signal. We then provide empirical evidence corroborating the predictions of the theoretical model.