Working Papers
Federal Reserve Bank of St. Louis working papers are preliminary materials circulated to stimulate discussion and critical comment.
Recent Working Papers
Monetary Policy, the Tax Code, and the Real Effects of Energy Shocks
This paper develops a monetary model with taxes to account for the apparently asymmetric and time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data.
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
Making the central bank more independent from political pressures lowers inflation and increases the primary deficit, persistently. In the long-run, however, fiscal considerations are paramount and inflation comes back up to accommodate the higher financial burden of accumulated public debt.
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.
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).
Federal Reserve Forecasts: Asymmetry and State-Dependence
We jointly test the rationality of the Federal Reserve’s Greenbook forecasts of infiation, unemployment, and output growth using a multivariate nonseparable asymmetric loss function.
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.
Modeling Monetary Economies: an Equivalence Result
This paper offers a methodological contribution to monetary theory. First, it presents a model economy with cash-in-advance constraints, following the work of Lucas in the early 80’s; then, it specializes the model to preferences and shocks assumed in the Lagos and Wright (2005) framework.
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.
Global Dynamics at the Zero Lower Bound
This article presents global solutions to standard New Keynesian models to show how economic dynamics change when the nominal interest rate is constrained at its zero lower bound (ZLB).
Reconstructing the Great Recession
This paper evaluates the role of the construction sector in accounting for the performance of the U.S. economy in the last decade.
How Did the Financial Crisis Alter the Correlations of U.S. Yield Spreads?
We investigate the pairwise correlations of 11 U.S. fixed income yield spreads over a sample that includes the Great Financial Crisis of 2007-2009.
A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle.
Financial Development and Long-Run Volatility Trends
Countries with more developed financial markets (as measured by the private debt- to-GDP ratio) tend to have significantly lower aggregate volatility.
Regionalization vs. Globalization
Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles.
Too Big to Cheat: Efficiency and Investment in Partnerships
This paper studies the efficient arrangement among several agents that are subject to idiosyncratic, privately observed taste shocks affecting their marginal utility of current consumption.
How Effective Is Central Bank Forward Guidance?
This paper investigates the effectiveness of forward guidance for the central banks of four countries: New Zealand, Norway, Sweden, and the United States.
This paper provides a general framework for the quantitative analysis of stochastic dynamic models. We review convergence properties of some numerical algorithms and available methods to bound approximation errors.
Lobbying for a Common External Tariff from Inside and Out
We consider the interactions between domestic lobbying and two types of cross-border lobbying in a Customs Union (CU). The two types of cross-border lobbying are (i) lobbying from firms in one CU country to the governments of other CU countries, and (ii) that from firms outside the CU.
Multi-Step Ahead Forecasting of Vector Time Series
This paper develops the theory of multi-step ahead forecasting for vector time series that exhibit temporal nonstationarity and co-integration.
What Inventories Tell Us about Aggregate Fluctuations -- A Tractable Approach to (S,s) Policies
We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking inventories into account can significantly improve the empirical fit of DSGE models in matching the standard business-cycle moments (in addition to explaining inventory fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output fluctuations, in contrast to the findings of the recent general-equilibrium inventory literature; and (iii) aggregate demand shocks become more important than technol- ogy shocks in explaining the business cycle once inventories are incorporated into the model.
Understanding the Distributional Impact of Long-Run Inflation
The impact of fully anticipated inflation is systematically studied in heterogeneous agent economies with an endogenous labor supply and portfolio choices.
Informal Unemployment Insurance and Labor Market Dynamics
How do job losers use default -- a phenomenon 6x more prevalent than bankruptcy --as a type of “informal" unemployment insurance, and more importantly, what are the social costs and benefits of this behavior?
The Lender of Last Resort: Lessons from the Fed’s First 100 Years
We review the responses of the Federal Reserve to financial crises over the past 100 years. The authors of the Federal Reserve Act in 1913 created an institution that they hoped would prevent banking panics from occurring.
Foreign Firms and the Diffusion of Knowledge
This paper constructs a model to examine the impact of foreign firms on a developing Country’s own accumulation of entrepreneurial knowledge.
What Do We Know about the Relationship between Access to Finance and International Trade?
The recent financial crisis has focused attention on the relationship between access to finance and international trade, triggering a burgeoning segment of the literature evaluating this link empirically.
International Trade, Female Labor, and Entrepreneurship in MENA Countries
Middle Eastern and North African (MENA) countries stand out in international comparisons of de jure obstacles to female employment and entrepreneurship. These obstacles manifest themselves in low rates of female labor participation, entrepreneurship, and ownership.
