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Working Paper Archives

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

Mathematical and Quantitative Methods

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.

Education Policies and Structural Transformation

This article studies the impact of education and fertility in structural transformation and growth.

Endogenous Borrowing Constraints and Stagnation in Latin America

Latin America has had striking changes in economic performance over time. Following the recession and debt crises of the early 1980’s, consumption declined for about ten years and consumption per-capita in the year 2004 was roughly the same as it was in 1980.

A Theory of Targeted Search

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

The Role of Jumps in Volatility Spillovers in Foreign Exchange Markets: Meteor Shower and Heat Waves Revisited

We investigate the role of jumps in transmitting volatility between foreign exchange markets (Engle, Ito, and Lin, 1990; Melvin and Peiers Melvin, 2003; Cai, Howorka, and Wongswan, 2008).

Sovereign Default and the Choice of Maturity

Sovereigns borrow from international markets at a duration that typically exceeds one year and with positive term spreads.

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.

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.

Implications of Heterogeneity in Preferences, Beliefs and Asset Trading Technologies for the Macroeconomy

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

The Limitations of Forward Guidance

This paper examines the economic effects of Odyssean forward guidance—a promise by the central bank to keep future policy rates lower than its policy rule suggests.

The Analytics of Technology News Shocks

This paper constructs several models in which, unlike the standard neoclassical growth model, positive news about future technology generates an increase in current consumption, hours and investment.

Which continuous-time model is most appropriate for exchange rates?

This paper determines the most appropriate ways to model diffusion and jump features of exchange rates. Simulations show that intraday periodicity in volatility prevents conventional tests from accurately identifying the frequency and location of jumps.

Monetary Policy, the Tax Code, and the Real Effects of Energy Shocks

This paper develops a monetary model with taxes to account for the time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data.

Too Big to Cheat: Efficiency and Investment in Partnerships

Many economic activities are organized as partnerships. These ventures are formed with capital contributions by partnership members who obtain a share of ownership in exchange.

Analysis of Numerical Errors

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.

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.

Bankruptcy and Delinquency in a Model of Unsecured Debt

The two channels of default on unsecured consumer debt are (i) bankruptcy, which legally grants partial or complete removal of unsecured debt under certain circumstances, and (ii) delinquency, which is informal default via nonpayment.

Why Doesn’t Technology Flow from Rich to Poor Countries?

What determines the technology that a country adopts? While there could be many factors, the efficiency of the country’s financial system may play a significant role.

Consistent Testing for Structural Change at the Ends of the Sample

In this paper we provide analytical and Monte Carlo evidence that Chow and Predictive tests can be consistent against alternatives that allow structural change to occur at either end of the sample.

Unemployment Insurance Fraud and Optimal Monitoring

An important incentive problem for the design of unemployment insurance is the fraudulent collection of unemployment benefits by workers who are gainfully employed.


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