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

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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.

Financing Growth: Foreign Aid vs. Foreign Loans

Compared to foreign grants, do concessional loans from foreign governments and/or unsubsidized loans from foreign private banks lead to faster growth in developing nations?

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 Expected Inflation Channel of Government Spending in the Postwar U.S.

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?

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.

Does commonality in illiquidity matter to investors?

This paper investigates whether investors are compensated for taking on commonality risk in equity portfolios.

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.

Intergenerational Policy and the Measurement of Tax Incidence

Policymakers often use measures of tax incidence (generational accounts) as criteria for policy selection. We use a quantitative model of optimal intergenerational policy to evaluate the ability of the tax incidence metric to capture the identity of recipients and contributors and the magnitudes transferred.

Export Market Diversification and Productivity Improvements: Theory and Evidence From Argentinean Firms

This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty.

Can Self-Help Groups Really Be Self-Help?

This paper examines a cost-reducing innovation to the delivery of Self-Help Group” microfinance services.

Is Government Spending a Free Lunch? -- Evidence from China

Most empirical studies based on U.S. data suggest that the fiscal multiplier is less than 1 (e.g., Barro and Redlick, 2011). However, Keynes argued that the multiplier would be the largest when markets have failed to the greatest extent in coordinating economic activities (such as during the Great Depression with rampant unemployment and low capacity utilization).

Uncertainty and Sentiment-Driven Equilibria

We construct a model to capture the Keynesian idea that production and employment decisions are based on expectations of aggregate demand driven by sentiments and that realized demand follows from the production and employment decisions of firms.

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.

Two Monetary Models with Alternating Markets

We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money—reduced-form vs. explicit role—neither induces fundamental theoretical nor quantitative differences in results.

The Effect of Underreporting on LIBOR Rates

On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined.

The Zero Lower Bound, the Dual Mandate, and Unconventional Dynamics

This article examines monetary policy when it is constrained by the zero lower bound (ZLB) on the nominal interest rate.


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