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

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Natural Resources and Global Misallocation

Are production factors allocated efficiently across countries? To differentiate misallocation from factor intensity differences, we construct a new dataset of estimates for the output shares of natural resources for a large panel of countries.

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.

A Racial Inequality Trap

Why has the U.S. black/white earnings gap remained around 40 percent for nearly 40 years? This paper's answer consists of a model of skill accumulation and neighborhood formation featuring a trap: Initial racial inequality and racial preferences induce racial segregation and asymmetric skill accumulation choices that perpetuate racial inequality.

Mortgages and Monetary Policy

Mortgages are long-term loans with nominal payments. Consequently, under incomplete asset markets, monetary policy can affect housing investment and the economy through the cost of new mortgage borrowing and real payments on outstanding debt.

Interest Rate Dynamics, Variable-Rate Loan Contracts, and the Business Cycle

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 forecast booms in GDP, consumption, investment, and employment.

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.

Nominal Exchange Rate Determinacy Under the Threat of Currency Counterfeiting

We study the endogenous choice to accept fiat objects as media of exchange and their implications for nominal exchange rate determination. We consider a two-country environment with two currencies which can be used to settle any transactions.

On the Theoretical Efficacy of Quantitative Easing at the Zero Lower Bound

We construct a monetary economy in which agents face aggregate demand shocks and hetero- generous idiosyncratic preference shocks.

Local Fiscal Multipliers, Negative Spillovers and the Macroeconomy

This paper analyzes the impact of within-state military spending and national military spending on a state's employment.

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.

Interest on Reserves, Interbank Lending, and Monetary Policy

A two-sector general equilibrium banking model is constructed to study the functioning of a floor system of central bank intervention.

Credit Search and Credit Cycles

The supply and demand of credit are not always well aligned and matched, as is reflected in the countercyclical excess reserve-to-deposit ratio and interest spread between the lending rate and the deposit rate.

Multidimensional Skill Mismatch

What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions.

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 Is The Source Of The Intergenerational Correlation In Earnings?

This paper uses a dynastic model of household behavior to estimate and decomposed the correlations in earnings across generations.

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.

Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay

This review essay is intended as a critical review of Humpage (2015), and it expands on the issues raised in that volume.

Local Polynomial Regressions versus OLS for Generating Location Value Estimates: Which is More Efficient in Out-of-Sample Forecasts?

As an alternative to ordinary least squares (OLS), we estimate location values for single family houses using a standard housing price and characteristics dataset by local polynomial regressions (LPR), a semi-parametric procedure.

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."

Banker Preferences, Interbank Connections, and the Enduring Structure of the Federal Reserve System

Established by a three person committee in 1914, the structure of the Federal Reserve System has remained essentially unchanged ever since, despite criticism at the time and over ensuing decades.

Optimal Monetary Policy at the Zero Lower Bound

We study optimal monetary policy at the zero lower bound. The macroeconomy we study has considerable income inequality which gives rise to a large private sector credit market.

Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock

We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations.

The Experience of the RePEc Plagiarism Committee in Economics

RePEc is an open bibliography project driven entirely by volunteers and without a budget.

Fertility Shocks and Equilibrium Marriage-Rate Dynamics

Why did the marriage probability of single females in France after World War 1 rise 50% above its pre-war average, despite a 33% drop in the male/female singles ratio? We conjecture that war-time disruption of the marriage market generated an abnormal abundance of men with relatively high marriage propensities.

The Making of an Economic Superpower―Unlocking China’s Secret of Rapid Industrialization

The rise of China is no doubt one of the most important events in world economic history since the Industrial Revolution. Mainstream economics, especially the institutional theory of development based on a dichotomy of extractive vs. inclusive political institutions, is highly inadequate in explaining China’s rise.


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