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Federal Reserve Bank of St. Louis working papers are preliminary materials circulated to stimulate discussion and critial comment.

Applied Econometrics

Financial Stress Regimes and the Macroeconomy

We identify financial stress regimes using a model that explicitly links financial variables with the macroeconomy.

How Has Empirical Monetary Policy Analysis Changed After the Financial Crisis?

In the wake of the Great Recession, the Federal Reserve lowered the federal funds rate target essentially to zero and resorted to unconventional monetary policy.

Risk Aversion at the Country Level

In this paper we provide estimates of the coefficient of relative risk aversion for 80 countries using data on self-reports of personal well-being from the Gallup World Poll.

How Persistent are Monetary Policy Effects at the Zero Lower Bound?

Event studies show that Fed unconventional announcements of forward guidance and large scale asset purchases had large and desired effects on asset prices but do not tell us how long such effects last.

Parenthood and Productivity of Highly Skilled Labor: Evidence from the Groves of Academe

We examine the effect of pregnancy and parenthood on the research productivity of academic economists.

Countercyclical Policy and the Speed of Recovery After Recessions

The nature of the business cycle appears to have changed. Prior to the 1990s, recoveries from recessions were quick and steep; after the past three recessions, however, recoveries were weak and prolonged.

Understanding the Accumulation of Bank and Thrift Reserves during the U.S. Financial Crisis

The level of aggregate excess reserves held by U.S. depository institutions increased significantly at the peak of the 2007-09 financial crisis.

Which continuous-time model is most appropriate for exchange rates?

This paper determines the most appropriate ways to model diffusion and jump features of exchange rates. Simulations show that intraday periodicity in volatility prevents conventional tests from accurately identifying the frequency and location of jumps.

Conflict, Evolution, Hegemony, and the Power of the State

In a model of evolution driven by conflict between societies more powerful states have an advantage. When the influence of outsiders is small we show that this results in a tendency to hegemony.

Frictionless Technology Diffusion: The Case of Tractors

Many new technologies display long adoption lags, and this is often interpreted as evidence of frictions inconsistent with the standard neoclassical model.

Clustered Housing Cycles

Past studies have argued that housing is an important driver of business cycles. Housing markets, however, are highly localized, while business cycles are often measured at the national level.

Nonlinear Relationship between Permanent and Transitory Components of Monetary Aggregates and the Economy

This paper uses several methods to study the interrelationship among Divisia monetary aggregates, prices, and income, allowing for nonstationary, nonlinearities, asymmetries, and time-varying relationships among the series.

Evaluating the Accuracy of Forecasts from Vector Autoregressions

This paper surveys recent developments in the evaluation of point and density forecasts in the context of forecasts made by Vector Autoregressions.

How Did the Financial Crisis Alter the Correlations of U.S. Yield Spreads?

We investigate the pairwise correlations of 11 U.S. fixed income yield spreads over a sample that includes the Great Financial Crisis of 2007-2009.

Multi-Step Ahead Forecasting of Vector Time Series

This paper develops the theory of multi-step ahead forecasting for vector time series that exhibit temporal nonstationarity and co-integration.

Cognitive skills gaps in India: can (late) nutrition ameliorate them?

This paper explores the (late) nutrition-cognition link using novel panel data from India for very young children. We estimate a value-added model of cogni- tive development that corrects for biases in the previous literature.

Testing the Economic Value of Asset Return Predictability

Economic value calculations are increasingly used to compare the predictive performance of competing models of asset returns. However, they lack a rigorous way to validate their evidence.

Conflict and the Evolution of Societies

The Malthusian theory of evolution disregards a pervasive fact about human societies: they expand through conflict. When this is taken account of the long-run favors not a large population at the level of subsistence, nor yet institutions that maximize welfare or per capita output, but rather institutions that maximize free resources.

Comment on "Taylor Rule Exchange Rate Forecasting During the Financial Crisis"

In this note we discuss the paper on exchange rate forecasting by Molodtsova and Papell (2012).

Consistent Testing for Structural Change at the Ends of the Sample

In this paper we provide analytical and Monte Carlo evidence that Chow and Predictive tests can be consistent against alternatives that allow structural change to occur at either end of the sample.

International Channels of the Fed’s Unconventional Monetary Policy

Previous research has established that the Federal Reserve’s large scale asset purchases (LSAPs) significantly influenced international bond yields.

An Endogenously Clustered Factor Approach to International Business Cycles

Factor models have become useful tools for studying international business cycles. Block factor models [e.g., Kose, Otrok, and Whiteman (2003)] can be especially useful as the zero restrictions on the loadings of some factors may provide some economic interpretation of the factors.

Forecasting National Recessions Using State Level Data

A large literature studies the information contained in national-level economic indicators, such as financial and aggregate economic activity variables, for forecasting and nowcasting U.S. business cycle phases (expansions and recessions.)

Econometric Modeling of Exchange Rate Volatility and Jumps

This chapter reviews the rapid advances in foreign exchange volatility modeling made in the last three decades.

Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?

No. In this paper we use a regression discontinuity approach to investigate whether affordable housing policies influenced origination or affected prices of subprime mort- gages.

What do happiness and health satisfaction data tell us about relative risk aversion?

In this paper we provide estimates of the coefficient of relative risk aversion using information on self-reports of subjective personal well-being from multiple datasets.

The (Non-)Resiliency of Foreign Direct Investment in the United States during the 2007-2009 Financial Crisis

We study the contraction of foreign direct investment (FDI) flows in the United States during the recent financial crisis and show their unusual non-resiliency, which depends in part on the global nature of the economic recession, but also on the increases in the cost of financing FDI in the economies in which the flows originate.

The Effect of Neighborhood Spillovers on Mortgage Selection

In this paper we analyze how spillovers in mortgage adoption affect mortgage product choice across neighborhoods and across borrowers of different racial or ethnic groups.

Capital Flows and Japanese Asset Volatility

Characterizing asset price volatility is an important goal for financial economists. The literature has shown that variables that proxy for the information arrival process can help explain and/or forecast volatility.

Differences in Subprime Loan Pricing Across Races and Neighborhoods

We investigate whether race and ethnicity influenced subprime loan pricing during 2005, the peak of the subprime mortgage expansion


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