Federal Reserve Bank of St. Louis Review

A bimonthly research journal intended for an economically informed but broad readership—from the undergraduate student to the PhD. In print and online.


NOVEMBER/DECEMBER 2012 Vol. 94, No. 6

Demographics, Redistribution, and Optimal Inflation

The authors study the interaction among population demographics, the desire for intergenerational redistribution of resources in the economy, and the optimal inflation rate in a deterministic life cycle economy with capital. Young cohorts initially ...

The U.S. Deficit/Debt Problem: A Longer-Run Perspective

The U.S. national debt now exceeds 100 percent of gross domestic product. Given that a significant amount of this debt is the result of governmental efforts to mitigate the effects of the financial crisis, the recession, and the anemic recovery, it is tempting to think that the debt problem is a recent phenomenon. This article shows ...

Global European Banks and the Financial Crisis

This paper reviews some of the recent studies on international capital flows with a focus on the role of European global banks. It presents a revision to the commonly held “global saving glut” view that East Asian economies (along with oil-rich nations) were the dominant suppliers of capital that fueled the asset price boom in many parts of the world in the early 2000s. It argues that ...

Do Countries with Greater Credit Constraints Receive More Foreign Aid?

Donor nations may recognize that some developing nations face credit constraints in the world capital market. This knowledge may prompt donors to increase aid flows to alleviate the constraint. In such a situation ...

 

SEPTEMBER/OCTOBER 2012 Vol. 94, No. 5

Sovereign Debt: A Modern Greek Tragedy

The authors of this article provide a general introduction to the concept of sovereign debt—including the seductive nature of borrowing and the strategies associated with default—before analyzing the current debt crises in Europe. They focus on ...

The Boom and Bust of U.S. Housing Prices from Various Geographic Perspectives

This paper summarizes changes in housing prices during the recent U.S. boom and bust from various geographic perspectives. Nationally, the Standard & Poor’s/Case-Shiller house price index ...

Disentangling Diverse Measures: A Survey of Financial Stress Indexes

The recent financial crisis helped emphasize the need for measures of financial conditions. In the wake of the crisis...

Okun’s Law over the Business Cycle: Was the Great Recession All That Different?

In 1962, Arthur Okun posited an empirical relationship between the change in the unemployment rate and real output growth. Since then, the media, policymakers, pundits, and intermediate macro students...

 

JULY/AUGUST 2012

Evolution, Impact, and Limitations of Unusual Central Bank Policy Activism

In the United States and Europe, central banks have essentially been the only policymaking entities consistently willing and able to take bold measures to deal with an unusually complex set of national, regional, and global economic and financial challenges since the onset of the Great Recession and financial crisis...

Where There’s a Smoking Ban, There’s Still Fire

Since 2001, the pervasiveness of 100-percent smoke-free bans has increased dramatically—from 32 local laws in 2001 to 308 by the end of 2009. The authors use individual-level data from the Behavioral Risk Factor Surveillance System survey to examine the effect of these bans in workplaces, bars, and restaurants on changes in smoking initiation, continuation, and cessation...

The Extent and Impact of Outsourcing: Evidence from Germany

The authors use data from several sources, including plant-level data from the manufacturing sector in Germany, to expand the literature on outsourcing. They find that, in Germany, the extent of outsourcing among manufacturing industries is higher than among service industries and that the outsourcing intensity of these industries did not change much between 1995 and 2005...

Withdrawal History, Private Information, and Bank Runs

This paper provides a simple two-depositor, two-stage model to understand how a bank’s withdrawal history affects an individual’s decision about withdrawals, which could possibly trigger bank runs. Individual depositors have private information about their personal consumption types and receive noisy private signals about the quality of the bank’s portfolio...

 

MAY/JUNE 2012 Vol. 94, No. 3

Milton Friedman, the Demand for Money, and the ECB’s Monetary Policy Strategy

The European Central Bank (ECB) assigns greater weight to the role of money in its monetary policy strategy than most, if not all, other major central banks. Nevertheless, reflecting the ...

Liquidity Shocks, Real Interest Rates, and Global Imbalances

The author uses a simple neoclassical model to show how liquidity shocks at home and abroad can contribute to trade imbalances and low real interest rates. The author’s ...

An Application of Conventional Sovereign Debt Sustainability Analysis to the Current Debt Crises

The developing international debt crisis has unleashed unanticipated fears that more governments in some advanced economies may default on their sovereign debt and trigger a global financial tsunami. This article provides ...

Federal Reserve Lending to Troubled Banks During the Financial Crisis, 2007-2010

Numerous commentaries have questioned both the legality and appropriateness of Federal Reserve lend- ing to banks during the recent financial crisis. This article addresses ...

 

MARCH/APRIL 2012 Vol. 94, No. 2

Death of a Theory

The author discusses the effectiveness of fiscal approaches to stabilization policy. The conventional wisdom before 2007 was ...

How Home Loan Modification through the 60/40 Plan Can Save the Housing Sector

Many well-respected economists have suggested plans for mortgage restructuring built on the idea of share appreciation mortgages, which generate rather complex transactions with conflicting interests between the lender and the homeowner. The 60/40 Plan, ...

The Dual Mandate: Has the Fed Changed Its Objective?

The Federal Reserve is said to have a dual mandate of price stability and full employment. While the Fed ...

Many Moving Parts: The Latest Look Inside the U.S. Labor Market

The U.S. economy has gained roughly 2.8 million jobs since early 2010. That may be cold comfort ...

 

JANUARY/FEBRUARY 2012 Vol. 94, No. 1

Persistent Macroeconomic Imbalances in the Euro Area: Causes and Consequences

In this paper, the authors document a growing divergence between current account imbalances in northern and southern euro area countries from 1992 to 2007. The imbalance occurred ...

How Good Are the Government’s Deficit and Debt Projections and Should We Care?

Each year, the Congressional Budget Office (CBO) publishes its Budget and Economic Outlook. The CBO’s deficit ...

Taylor-Type Rules and Total Factor Productivity

This paper examines the impact of a persistent shock to the growth rate of total factor productivity in a New Keynesian model in which the central bank does not observe the shock. The authors then ...

How Did We Get to Inflation Targeting and Where Do We Need to Go to Now? A Perspective from the U.S. Experience

The Federal Reserve is not formally inflation targeting. Nevertheless, it is commonly believed ...

 


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