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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.

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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.

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.

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.

The Trade Comovement Puzzle and the Margins of International Trade

Countries that trade more with each other tend to have more correlated business cycles. Yet, traditional international business cycle models predict a much weaker link between trade and business cycle comovement.

Innovation, Diffusion, and Trade: Theory and Measurement

I develop a multicountry-model in which economic growth is driven mainly by domestic innovation and the adoption of foreign technologies embodied in traded intermediate goods.

The Gravity of Experience

In this paper, we establish the importance of experience in international trade for reducing trade costs and facilitating bilateral trade.

Student Loans and Repayment: Theory, Evidence and Policy

Rising costs of and returns to college have led to sizeable increases in the demand for student loans in many countries. In the U.S., student loan default rates have also risen for recent cohorts as labor market uncertainty and debt levels have increased.

Education Policies and Structural Transformation

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

Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007

Since 1950, the economies of East Asia grew rapidly but received little international capital, while Latin America received considerable international capital even as their economies stagnated.

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.

Interjurisdictional Competition and Location Decisions of Firms

We examine the welfare properties of alternative regimes of interjurisdictional competition for heterogenous mobile firms.

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).

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

It is a robust finding that technical trading rules applied to foreign exchange markets have earned substantial excess returns over long periods of time. However, the approach to risk adjustment has typically been rather cursory, and has tended to focus on the CAPM.

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.

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.

Illegal Immigration and Fiscal Competition

Reflecting recent enforcement policy activism of US states, this paper examines federal- state overlap of illegal immigration policy in a spatial context.

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

This paper studies the effects of interregional spillovers from the government spending component of the American Recovery and Reinvestment Act of 2009 (the Recovery Act). Using cross-county Census Journey to Work commuting data, we cluster U.S. counties into local labor markets, each of which we further partition into two subregions.

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

This paper explores the contribution of the structural transformation and urbanization process in the housing market in China. City migration ‡flows combined with an inelastic land supply, due to entry restrictions, has raised house 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.

Evaluating Conditional Forecasts from Vector Autoregressions

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

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 studies the effect of government stimulus spending on a novel aspect of the labor market: the differential impact of spending on the total wage bill versus employment. We analyze the 2009 Recovery Act via instrumental variables using a new instrument, the spending done by federal agencies that were not instructed to target funds towards harder hit regions.

The Great Housing Boom of China

China’s housing prices have been growing nearly twice as fast as national income in the past decade despite (i) a phenomenal rate of return to capital and (ii) an alarmingly high vacancy rate.

Preventing Bank Runs

Diamond and Dybvig (1983) is commonly understood as providing a formal rationale for the existence of bank-run equilibria.

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 (FFR) target essentially to zero and resorted to unconventional monetary policy. With the nominal FFR constrained by the zero lower bound (ZLB) for an extended period, empirical monetary models cannot be estimated as usual.

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.


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