#1997-013A "The Efficiency of Residential Mortgage Guarantee Insurance Markets"
by Donald S. Allen, and Thomas S. Chan


Mortgage Guarantee Insurance (MGI) provides protection to lenders against default by borrowers who have less than 20 percent equity interest in the mortgaged property. The existence of this form of insurance helps to stimulate home ownership by allowing consumers with less than twenty percent down payment access to credit markets. More...

#1997-012B "How Costly is Sustained Low Inflation for the US Economy?"
by James Bullard, and Steven H. Russell

Revised March 1998

We study the welfare cost of inflation in a general equilibrium life cycle model with growth, costly financial intermediation, and taxes on nominal quantities. We find a stationary equilibrium of the model matches a wide variety of facts about the postwar U.S. economy. More...

#1997-011A "Monetary Policy in the Great Depression and Beyond: The Sources of the Fed's Inflation Bias"
by David C. Wheelock
April 1997

The deflationary outcome of monetary policy during the Great Depression had two fundamental causes: 1) the Federal Reserve's use of flawed operating guides, and 2) a decision to make preservation of the gold standard the overriding objective of policy. More...

PUBLISHED: The Economics of the Great Depression. Mark Wheeler, (ed.) The Upjohn Institute, 1998

#1997-010D "Predictability in International Asset Returns: A Reexamination"
by Christopher J. Neely, and Paul A. Weller

Revised February 1999

This paper argues that inferring long-horizon asset-return predictability from the properties of vector autoregressive (VAR) models on relatively short spans of data is potentially unreliable. We illustrate the problems that can arise by re-examining the findings of Bekaert and Hodrick (1992), who detected evidence of in-sample predictability in international equity and foreign exchange markets using VAR methodology for a variety of countries over the period 1981-1989. More...

PUBLISHED: Journal of Financial and Quantitative Analysis, December 2000, 35-(4), pp. 601-20

#1997-009A "Conflict of Interest between Borrowers and Lenders in Credit Cooperatives: The Case of German Co-operative Banks"
by William R. Emmons, and Willi Mueller
March 1997

Over the last few decades, the co-operative banking sector in Germany has steadily increased its market share at the expense of other types of banks. This outcome is surprising from the standpoint of traditional economic thinking about co-operatives, which suggests that they are most appropriate for "backward" economies. More...

#1997-008A "STLS/US-VECM 6.1: A Vector Error-Correction Forecasting Model of the US Economy"
by Dennis Hoffman, and Robert H. Rasche
January 1997

Any research or policy analysis exercise in economics must be consistent with the time-series properties of observed macroeconomic data. This paper discusses in detail the specification of a six-variable vector error-correction forecasting model. We test for cointegration among those variables: the CPI, the implicit price deflator for GDP, real money balances (M1), the federal funds rate, the yield on long-term (10-year) government bonds, and real GDP. More...

#1997-007B "The Cyclical Relationship between Output and Prices: An Analysis in the Frequency Domain"
by Michael R. Pakko
August 1997

Recent research showing a negative correlation between output and prices has brought into question the conventional wisdom that prices are procyclical. However, this finding has been shown to be sensitive to the sample period considered. More...

PUBLISHED: Journal of Money, Credit, and Banking, August 2000, 32(2,part1), pp. 155-67

#1997-006A "Economic Models of Employee Motivation"
by Joseph Ritter, and Lowell J. Taylor
February 1997

Workers, being human beings, present employers with a range of tricky problems. Humans, unlike filing cabinets, can be crooked, subversive, surly, or indolent, even if they are paid on time. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, September/October 1997, 79(5)

#1997-005B "Valuable Jobs and Uncertainty"
by Joseph Ritter, and Lowell J. Taylor

Revised April 1998

Little attention has been given to the link between variation in a firm's circumstances and the resolution of agency problems that pervade the relationship between a firm and its employees. More...

#1997-004A "Do Bank Loan Rates Exhibit a Countercyclical Mark-up?"
by Michael J. Dueker, and Daniel L. Thornton
February 1997

Based on a switching-cost model, we examine empirically the hypotheses that bank loan mark-ups are countercycical and asymmetric in their responsiveness to recessionaly and expansionary impulses. The first econometric model treats changes in the mark-up as a continuous variable. The second treats them as an ordered categorical variable due to the discrete nature of prime rate changes. More...