#2003-035A "State Government Finances: World War II to the Current Crisis"
by Thomas A. Garrett, and Gary A. Wagner
November 2003

This article will explore the extent, causes, and proposed solutions of the current fiscal crisis from a historical perspective of state finance. Although the current fiscal crisis is severe, it becomes more difficult to assess unless one has a more complete understanding of the historical changes that have occurred in state revenue streams. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, March/April 2004, 86(2), pp. 9-26

#2003-034A "The Federal Reserve Responds to Crises: September 11th Was Not the First"
by Christopher J. Neely
October 2003

A primary purpose of the Federal Reserve Act of 1913 was to prevent banking panics by establishing the Federal Reserve System to function as a lender of last resort. Other types of financial crisis require similar response, however, and the Federal Reserve has repeatedly used its capacity to generate liquidity to insulate the economy from crises in financial markets. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, March/April 2004, 86(2), pp. 27-42

#2003-033A "Testing the Expectations Hypothesis: Some New Evidence for Japan"
by Daniel L. Thornton
October 2003

The deregulation of the Japanese financial markets and the adoption of an interest rate policy instrument by the Bank of Japan prompted a number of empirical investigations of the expectation hypothesis (EH) of the term structures of interest rates in Japan. This paper is a continuation of this research. More...

PUBLISHED: Monetary and Economic Studies, May 2004, 22(2), pp. 45-69

#2003-032A "The Efficient Market Hypothesis and Identification in Structural VARs"
by Lucio Sarno, and Daniel L. Thornton
October 2003

Structural vector autoregression (SVAR) models are commonly used to investigate the effect of structural shocks on economic variables. The identifying restrictions imposed in many of these exercises have been criticized in the literature. This paper extends this literature by showing that if the SVAR includes one or more variables that are efficient in the strong form of the efficient market hypothesis, the identifying restrictions frequently imposed in SVARs cannot be satisfied. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, January/February 2004, 86(1), pp. 49-60

#2003-031A "Conjectural Guarantees Loom Large: Evidence From The Stock Returns Of Fannie Mae And Freddie Mac"
by Frank A. Schmid
October 2003

Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs) with publicly traded equity. Although these companies hold government issued charters, their securities are not legally backed by the full faith and credit of the United States government. More...

#2003-030A "U. S. Regional Business Cycles and the Natural Rate of Unemployment"
by Howard J. Wall, and Gylfi Zoega
October 2003

Estimates of the natural rate of unemployment are important in many macroeconomic models used by economists and policy advisors. This paper shows how such estimates might benefit from closer attention to regional developments. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, January/February 2004, 86(1), pp. 23-31

#2003-029C "Size Matters: Asymmetric Exchange Rate Pass-Through At The Industry Level"
by Patricia S. Pollard, and Cletus C. Coughlin
September 2003
Revised July 2004

Changes in costs faced by firms have direct implications for their price-cost margins. Knowing how prices respond to such cost changes is crucial for understanding how individual markets function and, in turn, for understanding the macroeconomy. More...

#2003-028B "Idiosyncratic Volatility, Stock Market Volatility, and Expected Stock Returns"
by Hui Guo, and Robert Savickas
September 2003
Revised July 2005

We find that the value-weighted idiosyncratic stock volatility and aggregate stock market volatility jointly exhibit strong predictive power for excess stock market returns. The stock market risk-return relation is found to be positive, as stipulated by the CAPM; however, idiosyncratic volatility is negatively related to future stock market returns. More...

PUBLISHED: Journal of Business and Economic Statistics, January 2006, 24(1), pp. 43-56

#2003-027B "Inflation Targeting: Why It Works and How To Make It Work Better"
by William T. Gavin
September 2003
Revised September 2003

Inflation targeting has worked so well because it leads policymakers to debate, decide on, and communicate the inflation objective. In practice, this process has led the public to believe that the central bank has a long-term inflation objective. More...

PUBLISHED: Business Economics, April 2004, 39(2), pp. 30-37

#2003-026A "Retail Deposit Sweep Programs: Issues for Measurement, Modeling and Analysis"
by Richard G. Anderson
September 2003

Since January 1994, many banks in the United States have initiated retail-deposit sweep programs which reduce statutory reserve requirements by re-labeling transaction deposits as money market deposit accounts. As a result, approximately half of aggregate transaction deposits are now excluded from M1. More...