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Working Papers

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

Recent Working Papers

Financial Frictions and Export Dynamics in Large Devaluations

We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms, where firms face financing constraints and debt can be denominated in foreign units.

Estimation of the discontinuous leverage effect: Evidence from the NASDAQ order book

An extensive empirical literature documents a generally negative correlation, named the “leverage effect,” between asset returns and changes of volatility.

Systematic Cojumps, Market Component Portfolios and Scheduled Macroeconomic Announcements

This study provides evidence of common bivariate jumps (i.e., systematic cojumps) between the market index and style-sorted portfolios.

Low Real Interest Rates and the Zero Lower Bound

How do low real interest rates constrain monetary policy? Is the zero lower bound optimal if the real interest rate is sufficiently low? What is the role of forward guidance?

Bank Panics and Scale Economies

A bank panic is an expectation-driven redemption event that results in a self-fulfilling prophecy of losses on demand deposits.

Liquidity Premiums on Government Debt and the Fiscal Theory of the Price Level

We construct a dynamic general equilibrium model where agents use nominal government bonds as collateral in secured lending arrangements.

Sticky Wages, Monetary Policy and Fiscal Policy Multipliers

This paper demonstrates how adding nominal wage rigidity to a standard sticky price model can create a mechanism by which increases in government spending cause increases in consumption. The increase in output arising from government purchases puts upward pressure on the price level.

Capital Goods Trade, Relative Prices, and Economic Development

International trade in capital goods has quantitatively important effects on economic development through capital formation and aggregate TFP.

Capital Accumulation and Dynamic Gains from Trade

We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation.

International Trade and Intertemporal Substitution

This paper studies the role of international trade delivery lags and variation in the intertemporal marginal rate of substitution in accounting for puzzling features of cyclical fluctuations of international trade volumes.

Aiyagari Meets Ramsey: Optimal Capital Taxation with Incomplete Markets

What is the prescription of Ramsey capital taxes for Aiyagari’s (1994) incomplete-markets economy in the steady state? Departing from the endogenous setting in Aiyagari (1995), this paper answers the question by considering an exogenous stream of government purchases as in the canonical Ramsey problem.

The Effects of Terror on International Air Passenger Transport: An Empirical Investigation

This paper presents a theoretical model (adapted from the structural gravity model by Anderson and van Wincoop, 2003) to capture the effects of terrorism on air passenger traffic between nations affected by terrorism.

Chinese Foreign Exchange Reserves, Policy Choices and the U.S. Economy

China is both a major trading partner of the United States and the largest official holder of U.S. assets in the world.

The Inverted Leading Indicator Property and Redistribution Effect of the Interest Rate

The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment.

Family Economics Writ Large

Powerful currents have reshaped the structure of families over the last century.

Training and Search on the Job

The paper studies human capital accumulation over workers’ careers in an on the job search setting with heterogenous firms.

The Aggregate Implications of Size Dependent Distortions

This paper examines the aggregate implications of size-dependent distortions. These regulations misallocate labor across firms and hence reduce aggregate productivity.

Markets, Externalities, and the Dynamic Gains of Openness

Infl‡ows of foreign knowledge are the key for developing countries to catch up with the world technology frontier.

Of Cities and Slums

The emergence of slums is a common feature in a country's path towards urbanization, structural transformation and development.

A Survey of the Empirical Literature on U.S. Unconventional Monetary Policy

This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies.

Openness and the Optimal Taxation of Foreign Know-How

Developing countries frequently offer tax incentives and even subsidize the entry and operation of foreign firms. I examine the optimality of such policies in an economy where growth is driven by entrepreneurial know-how, a skill that is continuously updated on the basis of the productive ideas implemented in the country.

The Value of Constraints on Discretionary Government Policy

This paper investigates how institutional constraints discipline the behavior of discretionary governments subject to an expenditure bias.

Vocational Considerations and Trends in Social Security Disability

Along with health, Social Security Disability Insurance (SSDI) evaluates work-limiting disability by considering vocational factors including age, education, and past work experience. As the number of SSDI applicants and awards has increased, these vocational criteria are increasingly important to acceptances and denials.

Nominal rigidities in debt and product markets

Standard models used for monetary policy analysis rely on sticky prices. Recently, the literature started to explore also nominal debt contracts.

The Visible Hand: The Role of Government in China’s Long-Awaited Industrial Revolution

China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, political economic framework that explains the fundamental mechanisms behind China’s rapid industrialization.

Near-Money Premiums, Monetary Policy, and the Integration of Money Markets:Lessons from Deregulation

The 1960s and 1970s witnessed rapid growth in the markets for new money market instruments, such as negotiable certificates of deposit (CDs) and Eurodollar deposits, as banks and investors sought ways around various regulations affecting funding markets.

Persistence of Shocks and the Reallocation of Labor

This paper proposes a theoretical and quantitative analysis of the reallocation of labor across firms in response to idiosyncratic shocks of different persistence. Creating and destroying jobs is costly and workers are paid a share of the value of the marginal worker.

Effects of Credit Supply on Unemployment and Inequality

The Great Recession, which was preceded by the financial crisis, resulted in higher unemployment and inequality.

Did the Founding of the Federal Reserve Affect the Vulnerability of the Interbank System to Systemic Risk?

As a result of legal restrictions on branch banking, an extensive interbank system developed in the United States during the 19th century to facilitate interregional payments and flows of liquidity and credit. Vast sums moved through the interbank system to meet seasonal and other demands, but the system also transmitted shocks during banking panics.

Offshoring in Developing Countries: Labor Market Outcomes, Welfare, and Policy

Does a reduction in offshoring cost benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results.


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