#2000-032C "The Dynamic Relationship Between the Federal Funds Rate and the Treasury Bill Rate: An Empirical Investigation"
by Lucio Sarno, and Daniel L. Thornton
November 2000
Revised March 2002

This article examines the dynamic relationship between two key US money market interest rates - the federal funds rate and the 3-month Treasury bill rate. Using daily data over the period from 1974 to 1999, we find a long-run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting. More...

PUBLISHED: Journal of Banking and Finance, June 2003, 27(6), pp. 1079-1110

#2000-031C "Limited Stock Market Participation and Asset Prices in a Dynamic Economy"
by Hui Guo
November 2000
Revised August 2003

We present a consumption-based model that explains the equity premium puzzle through two channels. First, because of borrowing constraints, the shareholder cannot completely diversify his income risk and requires a sizable risk premium on stocks. Second, because of limited stock market participation, the precautionary saving demand lowers the risk-free rate but not stock return and generates a substantial liquidity premium. More...

PUBLISHED: Journal of Financial and Quantitative Analysis, September 2004, 39(3), pp. 495-516

#2000-030C "Determinacy, Learnability, and Monetary Policy Inertia"
by James B. Bullard, and Kaushik Mitra
November 2000
Revised October 2005

We show how monetary policy inertia can help alleviate problems of indeterminacy and non-existence of stationary equilibrium observed for some commonly-studied monetary policy rules. We also find that inertia promotes learnability of equilibrium. The context is a simple, forward-looking model of the macroeconomy widely used in the rapidly expanding literature in this area. More...

PUBLISHED: Journal of Money, Credit, and Banking, August 2007, 39(5), pp. 1177-212

#2000-029B "NAFTA and the Changing Pattern of State Exports"
by Cletus C. Coughlin, and Howard J. Wall
October 2000
Revised February 2002

The trade liberalization associated with NAFTA has affected the pattern of state exports by altering the origin as well as the destination of merchandise exports. We find that NAFTA has increased US merchandise exports to Mexico and Canada by just over 15 percent, and has increased total US merchandise exports by nearly 8 percent. More...

PUBLISHED: Papers in Regional Science, November 2003, 82(4), pp. 427-50

#2000-028A "The Practice of Central Bank Intervention: Looking Under the Hood"
by Christopher J. Neely
October 2000

This article first reviews methods of foreign exchange intervention and then presents evidence?focusing on survey results?on the mechanics of such intervention. Types of intervention, instruments, timing, amounts, motivation, secrecy and perceptions of efficacy are discussed. More...

PUBLISHED: Central Banking, November 2000. Reprinted Federal Reserve Bank of St. Louis Review, 83(3), May/June 2001, pp. 1-10.

#2000-027C "The Value of Inside and Outside Money"
by James B. Bullard, and Bruce D. Smith
October 2000
Revised September 2001

We study dynamic economies in which agents may have incentives to hold both privately-issued (a.k.a. inside) and publicly-issued (a.k.a. outside) circulating liabilities as part of an equilibrium. Our analysis emphasizes spatial separation and limited communication as frictions that motivate monetary exchange. More...

PUBLISHED: Journal of Monetary Economics, March 2003, 50(2), pp. 389-417

#2000-026A "Forecasting Inflation and Growth: Do Private Forecasts Match Those of Policymakers?"
by William T. Gavin, and Rachel J. Mandal
September 2000

FOMC projections are important because they provide information for evaluating current monetary policy intentions and because they indicate what FOMC members think will be the likely consequence of their policies. Results here show that the Blue Chip consensus forecasts are a good proxy for the FOMC views. More...

PUBLISHED: Business Economics, January 2001, 36(1), pp. 13-20

#2000-025B "Class Struggle Inside the Firm: A Study of German Codetermination"
by Gary Gorton, and Frank A. Schmid
September 2000
Revised April 2002

Under the German corporate governance system of "codetermination," employees are legally allocated some control rights over corporate assets, in the form of board seats. We empirically investigate the implications of equal board representation compared with one-third employee representation and find a 26% stock market discount on firms with equal representation. More...

FORTHCOMING: Under Title

#2000-024A "Gravity Model Specification and the Effects of the Canada-U.S. Border"
by Howard J. Wall
September 2000

There is a well-established literature finding that the Canada-U.S. border has a large dampening effect on trade, is asymmetric, and differs across provinces. In this paper, I demonstrate that the standard gravity model used to obtain these results provides biased estimates of the volume of trade More...

#2000-023A "Retail Sweep Programs and Bank Reserves, 1994--1999"
by Richard G. Anderson, and Robert H. Rasche
August 2000

Since January 1994, the Federal Reserve Board has permitted depository institutions in the United States to implement so-called retail sweep programs. The essence of these programs is computer software that dynamically reclassifies customer deposits between transaction accounts, which are subject to statutory reserve requirement ratios as high as 10 percent, and money market deposit accounts, which have a zero ratio. More...

PUBLISHED: Federal Reserve Bank of St. Louis Review, January/February 2001, 83(1), pp. 51-72