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Federal Reserve Bank of St. Louis working papers are preliminary materials circulated to stimulate discussion and critial comment.

Monetary Policy/Macroeconomics

Optimal Monetary Policy at the Zero Lower Bound

We study optimal monetary policy at the zero lower bound. The macroeconomy we study has considerable income inequality which gives rise to a large private sector credit market.

Fertility Shocks and Equilibrium Marriage-Rate Dynamics

Low sex ratios are often equated with unfavorable marriage prospects for women, but in France after World War I, the marriage probability of single females rose 50%, despite a massive drop in the male/female ratio.

The Making of an Economic Superpower―Unlocking China’s Secret of Rapid Industrialization

The rise of China is no doubt one of the most important events in world economic and geopolitical history since the Industrial Revolution.

Self-Fulfilling Credit Cycles

In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit.

Schools and Stimulus

This paper analyzes the impact of the education funding component of the 2009 American Recovery and Reinvestment Act (the Recovery Act) on public school districts.

Rehypothecation

Rehypothecation refers to the practice of re-using (selling or pledging as collateral) an asset that has already been pledged as collateral for a loan. We develop a dynamic general equilibrium monetary model where an “asset shortage” motivates the rehypothecation of assets.

Scarcity of Safe Assets, Inflation, and the Policy Trap

We construct a model in which all consolidated government debt is used in transactions, with money being more widely acceptable.

Institutions Do Not Rule: Reassessing the Driving Forces of Economic Development

We use cross-country data and instrumental variables widely used in the literature to show that (i) institutions (such as property rights and the rule of law) do not explain industrialization and (ii) agrarian countries and industrial countries have entirely different determinants for income levels.

Equilibrium Sovereign Default with Exchange Rate Depreciation

This study proposes and quantitatively assesses a terms-of-trade penalty for defaulting: defaulters must exchange more of their own goods for imports, which causes an adjustment to the equilibrium exchange rate.

Explaining Educational Attainment across Countries and over Time

Consider the following facts. In 1950, the richest countries attained an average of 8 years of schooling whereas the poorest countries 1.3 years, a large 6-fold difference. By 2005, the difference in schooling declined to 2-fold because schooling increased faster in poor than in rich countries.

Universal Basic Income versus Unemployment Insurance

In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks.

Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations

We develop a model in which innovations in an economy's growth potential are an important driving force of the business cycle.

Reaction Functions in a Small Open Economy: What Role for Non-traded Inflation?

I develop a structural general equilibrium model and estimate it for New Zealand using Bayesian techniques.

A Theory of Targeted Search

We present a theory of targeted search, where people with a finite information processing capacity search for a match.

Sovereign Default and Maturity Choice

This paper presents a new quantitative model of endogenous sovereign default, maturity choice, and the term structure of bond yield spreads.

A Cup Runneth Over: Fiscal Policy Spillovers from the 2009 Recovery Act

In this paper, we study the effects of interregional spillovers from the government spending component of the American Recovery and Reinvestment Act of 2009 (the Recovery Act).

Rural-Urban Migration, Structural Transformation, and Housing Markets in China

This paper explores the role played by structural transformation and the resulting relocation of workers from rural to urban areas in the recent housing boom in China. This development process has fostered an ongoing increase in urban housing demand, which, combined with a relatively inelastic supply due to land and entry restrictions, has raised housing and land prices.

Three Scenarios for Interest Rates in the Transition to Normalcy

This article develops time-series models to represent three alternative, potential monetary policy regimes as monetary policy returns to normal. The first regime is a return to the high and volatile inflation rate of the 1970s.

Central Bank Purchases of Private Assets

A model is constructed in which consumers and banks have incentives to fake the quality of collateral. Conventional monetary easing can exacerbate these problems, in that the mispresentation of collateral becomes more profitable, thus increasing haircuts and interest rate differentials.

Occupational Hazards and Social Disability Insurance

Lifetime occupational exposure accounts for 42% of differences in disability risk across individuals.

The 2009 Recovery Act: Stimulus at the Extensive and Intensive Labor Margins

This paper (i) estimates the local effects of government stimulus spending on labor market outcomes and (ii) shows how these effects can be obtained from a firm's optimal policy in the presence of costs to hiring workers.

The Great Housing Boom of China

This paper provides a theory to explain the paradoxical features of the great housing boom in China —the persistently faster-than-GDP housing price growth, exceptionally high capital returns, and excessive vacancy rates.

Financial Stress Regimes and the Macroeconomy

We identify financial stress regimes using a model that explicitly links financial variables with the macroeconomy.

How Has Empirical Monetary Policy Analysis Changed After the Financial Crisis?

In the wake of the Great Recession, the Federal Reserve lowered the federal funds rate target essentially to zero and resorted to unconventional monetary policy.

Corporate Income Tax, Legal Form of Organization, and Employment

We adopt a dynamic stochastic occupational choice model with heterogeneous agents and evaluate the impact of a potential reduction in the corporate income tax on employment.

Taxing Top Earners: A Human Capital Perspective

We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model.

QE: When and How Should the Fed Exit?

The essence of Quantitative Easing (QE) is to reduce the costs of private borrowing through large-scale purchases of privately issue debts, instead of public debts (Ben Bernanke, 2009).

The Cost of Business Cycles with Heterogeneous Trading Technologies

This paper investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies.

Implications of Heterogeneity in Preferences, Beliefs and Asset Trading Technologies in an Endowment Economy

This paper analyzes and computes the equilibria of economies with large numbers of heterogeneous agents who have different asset trading technologies, preferences and beliefs.

Navigating Constraints: The Evolution of Federal Reserve Monetary Policy, 1935-59

The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s.


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