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

Monetary Policy/Macroeconomics

Sovereign Default and the Choice of Maturity

Sovereigns borrow from international markets at a duration that typically exceeds one year and with positive term spreads.

Fiscal Policy Spillovers: Points of Employment to Places of Residence

In this paper, we study the effects of interregional spillovers from the government spending component of the American Recovery and Reinvestment Act of 2009 (the Recovery Act).

Rural-Urban Migration, Structural Transformation, and Housing Markets in China

This paper explores the role played by structural transformation and the resulting relocation of workers from rural to urban areas in the recent housing boom in China. This development process has fostered an ongoing increase in urban housing demand, which, combined with a relatively inelastic supply due to land and entry restrictions, has raised housing and land prices.

Three Scenarios for Interest Rates in the Transition to Normalcy

This article develops time-series models to represent three alternative, potential monetary policy regimes as monetary policy returns to normal. The first regime is a return to the high and volatile inflation rate of the 1970s.

Central Bank Purchases of Private Assets

A model is constructed in which consumers and banks have incentives to fake the quality of collateral. Conventional monetary easing can exacerbate these problems, in that the mispresentation of collateral becomes more profitable, thus increasing haircuts and interest rate differentials.

Occupational Hazards and Social Disability Insurance

Lifetime occupational exposure accounts for 42% of differences in disability risk across individuals.

The 2009 Recovery Act: Stimulus at the Extensive and Intensive Labor Margins

This paper (i) estimates the local effects of government stimulus spending on labor market outcomes and (ii) shows how these effects can be obtained from a firm's optimal policy in the presence of costs to hiring workers.

The Great Housing Boom of China

This paper provides a theory to explain the paradoxical features of the great housing boom in China —the persistently faster-than-GDP housing price growth, exceptionally high capital returns, and excessive vacancy rates.

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.

Corporate Income Tax, Legal Form of Organization, and Employment

We adopt a dynamic stochastic occupational choice model with heterogeneous agents and evaluate the impact of a potential reduction in the corporate income tax on employment.

Taxing Top Earners: A Human Capital Perspective

We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model.

QE: When and How Should the Fed Exit?

The essence of Quantitative Easing (QE) is to reduce the costs of private borrowing through large-scale purchases of privately issue debts, instead of public debts (Ben Bernanke, 2009).

The Cost of Business Cycles with Heterogeneous Trading Technologies

This paper investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies.

Implications of Heterogeneity in Preferences, Beliefs and Asset Trading Technologies for the Macroeconomy

This paper analyzes and computes the equilibria of economies with large numbers of heterogeneous agents who have different asset trading technologies, preferences, and beliefs.

Navigating Constraints: The Evolution of Federal Reserve Monetary Policy, 1935-59

The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s.

Capital Goods Trade and Economic Development

Almost 80 percent of capital goods production in the world is concentrated in 10 countries. Poor countries import most of their capital goods.

Credit Markets, Limited Commitment, and Government Debt

A dynamic model with credit under limited commitment is constructed, in which limited memory can weaken the effects of punishment for default.

Keynesian Inefficiency and Optimal Policy: A New Monetarist Approach

A simple model of monetary/labor search is constructed to study Keynesian indeterminacy and optimal policy.

Scarce Collateral, the Term Premium, and Quantitative Easing

A model of money, credit, and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium — an upward-sloping nominal yield curve.

Withstanding Great Recession like China

The Great Recession was characterized by two related phenomena: (i) a jobless recovery and (ii) a permanent drop in aggregate output.

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.

Money, Liquidity and Welfare

This paper develops an analytically tractable Bewley model of money demand to shed light on some important questions in monetary theory, such as the welfare cost of inflation.

Labor Market Upheaval, Default Regulations, and Consumer Debt

In 2005, reforms made formal personal bankruptcy much more costly. Shortly after, the US began to experience its most severe recession in seventy years, and while personal bankruptcy rates rose, they rose only modestly given the severity of the rise in unemployment.

The Limitations of Forward Guidance

This paper examines the economic effects of Odyssean forward guidance—a promise by the central bank to keep future policy rates lower than its policy rule suggests.

Mortgages and Monetary Policy

Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt.

The Analytics of Technology News Shocks

This paper constructs several models in which, unlike the standard neoclassical growth model, positive news about future technology generates an increase in current consumption, hours and investment.

Creating Jobs Via the 2009 Recovery Act: State Medicaid Grants Compared to Broadly-Directed Spending

Researchers have used cross-state differences to assess the jobs impact of the 2009 American Recovery and Reinvestment Act (the Recovery Act).

The Macroeconomics of Microfinance

We provide a quantitative evaluation of the aggregate and distributional impact of microfinance or credit programs targeted toward small businesses.

An Evaluation of Event-Study Evidence on the Effectiveness of the FOMC’s LSAP Program: Are the Announcement Effects Identified?

The consensus in monetary policy circles that the Fed’s large-scale asset purchases, known as quantitative easing (QE), have significantly reduced long-term yields is due in part to event studies, which show that long-term yields decline on QE announcement days.

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