An occasional publication of economic research and commentary that centers on a regional or national issue, often with emphasis on the Eighth Federal Reserve District. Written for a generally informed readership.
NOVEMBER 2007 Vol. 3, No. 2
The Third Annual Conference of the Business & Economics Research Group (BERG)
Forecasting Real Housing Price Growth in the Eighth District States
The authors consider forecasting real housing price growth for the individual states of the Federal
Reserve’s Eighth District. They first analyze the forecasting ability of a large number of potential
predictors of state real housing price growth using an autoregressive distributed lag (ARDL) model
framework. A number of variables, including the state housing price-to-income ratio, state unemployment
rate, and national inflation rate, appear to provide information that is useful for forecasting
real housing price growth in many Eighth District states. Given that it is typically difficult to
determine a priori the particular variable or small set of variables that are the most relevant for
forecasting real housing price growth for a given state and time period, the authors also consider
various methods for combining the individual ARDL model forecasts. They find that combination
forecasts are quite helpful in generating accurate forecasts of real housing price growth in the
individual Eighth District states.
Educational Attainment and Recovery from Recessions Across Metropolitan Areas
Metropolitan area business cycles vary considerably in both magnitude and duration. Some metro
areas recover rapidly from downtowns, some take longer, and some never recover. Because recent
recessions have involved employment changes at the North American Industrial Classification
System (NAICS) supersector level that were both cyclical and structural, part of a metro area’s
recovery from a recession may include the process of workers adapting to new jobs in other
industries. If worker adaptation is part of the recovery process, then metro areas with higher educational
levels might be able to recover more quickly from recessions. This hypothesis is tested
with multiple regression models of the 1990 and 2001 recessions. There is a significant and negative
link between college attainment and the time it took for metropolitan areas to recover from
the 2001 recession, but not from the 1990 recession.
Transferable Tax Credits in Missouri: An Analytical Review
In 2005, Missouri had 53 legally authorized tax credit programs. In this paper, the authors assemble
basic information on all of these programs and further analyze the six largest (by tax credits issued)
that include freely transferable credits. Their analysis focuses on the institutional features of these
programs, the kinds of market failures or disparities they may address, and whether the design of
each program is consistent with its economic rationale. The authors also consider whether the
evaluation of each program by the state is consistent with its economic rationale. They conclude
with a brief discussion of the transactions prices for the credits on which they have data and
whether making the tax credits refundable as well as transferable could reduce the transactions
costs associated with these programs.
How Well Are the States of the Eighth Federal Reserve District Prepared for the Next Recession?
Economic downturns often force state policymakers to enact sizable tax increases or spending cuts
to close budget shortfalls. In this paper the authors make use of a Markov-switching regression
model to empirically describe the expansions and contractions in the states of the Eighth Federal
Reserve District. They use the estimated parameters from the switching regressions to form probability
distributions of the revenue shortfalls states are likely to encounter in future slowdowns.
This allows them to estimate the probability that each state’s projected fiscal-year-end balances
will be sufficient to offset the fiscal stress from a recession.
The Economic Impact of Broadband Deployment in Kentucky
Significant resources are being invested by government and the private sector in broadband
infrastructure to increase broadband deployment and use. With a unique dataset of broadband
availability (sorted by county), the authors assess whether broadband infrastructure has affected
the industrial competitiveness of Kentucky counties. Their results suggest that broadband availability
increases employment growth in some industries but not others.
OCTOBER 2007 Vol. 3, No. 1
Medicaid Financing: Challenges for Missouri and the Nation
Medicaid—The Need for Reform
Recent administration proposals to address the rising cost of Medicaid will do little to contain costs or truly reform the program. The primary issues are the large differences among state Medicaid programs in coverage and benefits and the programs high and rising costs. In this paper, we describe and develop several options for Medicaid reform that would expand coverage, provide fiscal relief to states, shift responsibility for some or all of the cost of dual eligibles to the federal government, and eliminate or restructure the disproportionate share programs. A number of other issues are addressed, including Medicaid cost containment and the federal matching rate structure.
Mandatory and Affordable Health Insurance
This paper asserts that America’s health care system is broken and cannot be repaired with timid half-measures. It suggests that we need both universal coverage and a more efficient delivery system and that these are not competing objectives: Each is necessary to make the other possible. It further states that if we do not make health care more affordable and our delivery system more efficient and sustainable, a majority of Americans will be uninsured in short order. And the persistence of millions of uninsured impairs the efficiency we need to make health care and insurance affordable for all. Thus, contrary to conventional wisdom, this paper asserts that both universal coverage and delivery system reform must be pursued simultaneously.