#1998-013A "Monetary Aggregates and Output"
by Scott Freeman, and Finn E. Kydland
May 1998

This paper offers a general equilibrium model that explains how the observed correlations of money and output fluctuations may come about through endogenously determined fluctuations in the money multiplier. The model is calibrated to meet long run features of the U.S. economy (including monetary features) and then subjected to shocks to the Solow residual following a random process like that observed in U.S. data. More...

#1998-012A "Constructing and Using National and Regional TWEXS: The Case for Chaining"
by Cletus C. Coughlin, and Patricia S. Pollard
September 1998

The breakdown of the Bretton Woods system of fixed exchange rates spurred the development of trade-weighted exchange rates (TWEXs). These indexes measure changes in the average foreign exchange value of a currency over time. The construction of a TWEX index requires numerous decisions. More...

PUBLISHED: Journal of Economic and Social Measurement, 1999, 24(3/4), pp. 279-94

#1998-011A "Conditional Heteroskedasticity in Qualitative Response Models of Time Series:A Gibbs Sampling Approach to the Bank Prime Rate."
by Michael J. Dueker
August 1998

Previous time series applications of qualitative response models have ignored features of the data, such as conditional heteroscedasticity, that are routinely addressed in time-series econometrics of financial data. This article addresses this issue by adding Markov-switching heteroscedasticity to a dynamic ordered probit model of discrete changes in the bank prime lending rate and estimating via the Gibbs sampler. More...

PUBLISHED: Journal of Business and Economic Statistics, October 1999, 17(4), pp. 466-72

#1998-010B "National Monetary Policy by Regional Design: The Evolving Role of the Federal Reserve Banks in Federal Reserve System Policy"
by David C. Wheelock

Revised January 1999

This paper examines the history of Federal Reserve Bank input into Federal Reserve System monetary policymaking. From the Fed's founding in 1914 through the Great Depression, the Reserve Banks held the balance of power. More...

PUBLISHED: J. von Hagen and C. Waller, eds., Regional Aspects of Monetary in Europe, Kluwer Academic Publishers, 2000.

#1998-009A "The Federal Reserve's Operating Procedure, Nonborrowed Reserves, Borrowed Reserves and the Liquidity Effect"
by Daniel L. Thornton
June 1998

Recently, there has been considerable interest in identifying the exogenous policy actions of the Fed and a number of identification methods have been proposed. This paper deals with one of these, namely, using nonborrowed reserves in a recursive structural vector autoregression (VAR). More...

PUBLISHED: Journal of Banking and Finance, September 2001, 25(9), pp. 1717-39

#1998-008C "A Vector Error-Correction Forecasting Model of the U.S. Economy."
by Richard G. Anderson, Dennis Hoffman, and Robert H. Rasche

Revised 2000

Any research or policy analysis in economics must be consistent with the time-series properties of observed macroeconomic data. Numerous previous studies reinforce the need to specify correctly a model's multivariate stochastic structure. More...

PUBLISHED: Journal of Macroeconomics, December 2002, 24(4), pp. 569-98

#1998-007A "Dynamic Shoe-Leather Costs in a Shopping-time Model of Money"
by Michael R. Pakko
May 1998

A general-equilibrium shopping-time model demand is used to obtain estimates of some dynamic costs of inflation under alternative monetary policy rules. After examining the welfare implications of steady-state inflation, dynamic welfare costs are evaluated for inflation-targeting and price-level targeting regimes in a stochastic setting in which agents are uncertain about the underlying inflation trend. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, November/December 1998, 80(6), pp. 37-50

#1998-006A "Seniority-Based Layoffs as an Incentive Device"
by Joseph Ritter, and Lowell J. Taylor
May 1998

This paper provides a simple economic rationale for two elements that often appear-implicitly or explicitly-in firms' personnel policies. When firms reduce their labor input they often ( i ) lay off a few individuals rather than adjust work hours, and ( ii ) make retention decisions on the basis of seniority. More...

#1998-005A "Inflation, Real Interest Tax Wedges, and Capital Formation"
by William G. Dewald
February 1998

Inflation magnifies the distorting effects of taxation when the tax treatment of interest income and expense is not fully indexed to inflation. The distortion involves a real interest tax wedge which is the difference between the real before tax interest rate than influences fully taxed investors and the real after tax interest rate than influences savers More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, January/February 1998, 80(1), pp. 29-36

#1998-004B "Financial Intermediation and Economic Growth in Southern Africa"
by Donald S. Allen, and Leonce Ndikumana


Using various indicators of financial development, this paper investigates the role of financial intermediation in stimulating economic growth for members of the Southern African Development Community (SADC). The results lend some support to the hypothesis that financial development is positively correlated with the growth rate of real per capita GDP. More...