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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.

Applied Econometrics

An Empirical Investigation of Direct and Iterated Multistep Conditional Forecasts

When constructing unconditional point forecasts, both direct- and iterated-multistep (DMS and IMS) approaches are common.

Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors

We develop uncertainty measures for point forecasts from surveys such as the Survey of Professional Forecasters, Blue Chip, or the Federal Open Market Committee's Summary of Economic Projections.

Debt and Stabilization Policy: Evidence from a Euro Area FAVAR

The Euro-area poses a unique problem in evaluating policy: a currency union with a shared monetary policy and country-specific fiscal policy.

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.

Capital Accumulation and Dynamic Gains from Trade

We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation. We examine transition paths for 93 countries following a permanent, uniform, unanticipated trade liberalization.

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.

Nonlinearities, Smoothing and Countercyclical Monetary Policy

Empirical analysis of the Fed’s monetary policy behavior suggests that the Fed smooths interest rates— that is, the Fed moves the federal funds rate target in several small steps instead of one large step with the same magnitude.

Estimating Border Effects: The Impact of Spatial Aggregation

Trade data are typically reported at the level of regions or countries and are therefore aggregates across space. In this paper, we investigate the sensitivity of standard gravity estimation to spatial aggregation.

Explaining Cross-Cohort Differences in Life Cycle Earnings

College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively.

Specification and Estimation of Bayesian Dynamic Factor Models: A Monte Carlo Analysis with an Application to Global House Price Comovement

We compare methods to measure comovement in business cycle data using multi-level dynamic factor models. To do so, we employ a Monte Carlo procedure to evaluate model performance for different specifications of factor models across three different estimation procedures.

Real-Time Forecasting with a Large, Mixed Frequency, Bayesian VAR

We assess point and density forecasts from a mixed-frequency vector autoregression (VAR) to obtain intra-quarter forecasts of output growth as new information becomes available.

A State-Level Analysis of Okun's Law

Okun's law is an empirical relationship that measures the correlation between the deviation of the unemployment rate from its natural rate and the deviation of output growth from its potential.

Tests of Equal Accuracy for Nested Models with Estimated Factors

In this paper we develop asymptotics for tests of equal predictive ability between nested models when factor-augmented regression models are used to forecast.

The Evolution of Scale Economies in U.S. Banking

Continued consolidation of the U.S. banking industry and general increase in the size of banks has prompted some policymakers to consider policies to discourage banks from getting larger, including explicit caps on bank size.

Estimation of Dynastic Life-Cycle Discrete Choice Models

This paper explores the estimation of a class of life-cycle discrete choice intergenerational models. It proposes a new semiparametric estimator.

What Accounts for the Racial Gap in Time Allocation and Intergenerational Transmission of Human Capital?

This paper analyzes the sources of the racial difference in the intergenerational transmission of human capital by developing and estimating a dynastic model of parental time and monetary inputs in early childhood with endogenous fertility, home hours, labor supply, marriage, and divorce.

Was Sarbanes-Oxley Costly? Evidence from Optimal Contracting on CEO Compensation

This paper investigates the effects of the Sarbanes-Oxley Act (SOX) on CEO compensation, using panel data constructed for the S&P 1500 firms on CEO compensation, financial returns, and reported accounting income.

On the Need for a Replication Journal

There is very little replication of research in economics, particularly compared with other sciences.

FRED-MD: A Monthly Database for Macroeconomic Research

This paper describes a large, monthly frequency, macroeconomic database with the goal of establishing a convenient starting point for empirical analysis that requires "big data."

Metro Business Cycles

We construct monthly economic activity indices for the 50 largest U.S. metropolitan statistical areas (MSAs) beginning in 1990. Each index is derived from a dynamic factor model based on twelve underlying variables capturing various aspects of metro area economic activity.

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

This paper extends the previous literature on geographic (heat waves) and intertemporal (meteor showers) foreign exchange volatility transmission to characterize the role of jumps and cross-rate propagation.

Can Risk Explain the Profitability of Technical Trading in Currency Markets?

Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory.

Wage Dynamics and Labor Market Transitions: A Reassessment through Total Income and “Usual” Wages

We present a simple on-the-job search model in which workers can receive shocks to their employer-specific productivity match.

Tests of Predictive Ability for Vector Autoregressions Used for Conditional Forecasting

Many forecasts are conditional in nature. For example, a number of central banks routinely report forecasts conditional on particular paths of policy instruments.

Financial Stress Regimes and the Macroeconomy

Some financial stress events lead to macroeconomic downturns, while others appear to be isolated to financial markets.

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 (FFR) target essentially to zero and resorted to unconventional monetary policy.

Risk Aversion at the Country Level

In this paper the authors estimate the coefficient of relative risk aversion for 75 countries using data on self-reports of personal well-being from the Gallup World Poll.

How Persistent Are Unconventional Monetary Policy Effects?

Event studies show that the Federal Reserve’s announcements of forward guidance and large-scale asset purchases had large and desired effects on asset prices but these studies do not tell us how long such effects last.

Parenthood and Productivity of Highly Skilled Labor: Evidence from the Groves of Academe

We examine the effect of pregnancy and parenthood on the research productivity of academic economists.


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