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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

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. The top of the model Laffer curve occurs at a 53 percent top tax rate.

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, bankruptcy laws were reformed significantly, making personal bankruptcy substantially more costly to file than before. Shortly after, the US began to experience its most severe recession in seventy years.

The Stimulative Effect of Forward Guidance

This paper examines the stimulative effect of central bank forward guidance—the promise to keep future policy rates lower than its policy rule suggests—when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).

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.

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.

Monetary Policy with Asset-Backed Money

We study the use of intermediated assets as media of exchange in a neo- classical growth model. An intermediary is delegated control over productive capital and finances itself by issuing claims against the revenue generated by its operations.

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.

Evaluating Unconventional Monetary Policies ─Why Aren’t They More Effective?

We use a general equilibrium finance model that features explicit government purchases of private debts to shed light on some of the principal working mechanisms of the Federal Reserve’s large-scale asset purchases (LSAP) and their macroeconomic effects.

Talent, Labor Quality, and Economic Development

We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP).

The 2009 Recovery Act and the Expected Inflation Channel of Government Spending

There exist sticky price models in which the output response to a government spending change can be large if the central bank is nonresponsive to inflation.

The Quantitative Importance of Openness in Development

This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated?

Monetary Policy, the Tax Code, and the Real Effects of Energy Shocks

This paper develops a monetary model with taxes to account for the time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data.

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.

Debt, Inflation and Central Bank Independence

Consider aligning the central bank's objectives closer to the preferences of society and away from those of a non-benevolent government.

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