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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

Countercyclical Policy and the Speed of Recovery After Recessions

We consider the effect of some policies intended to shorten recessions and accelerate recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which gives us a cross-section of both state- and national-level policies.

Understanding the Accumulation of Bank and Thrift Reserves during the U.S. Financial Crisis

The level of aggregate excess reserves held by U.S. depository institutions increased significantly at the peak of the 2007-09 financial crisis.

Which continuous-time model is most appropriate for exchange rates?

This paper evaluates the most appropriate ways to model diffusion and jump features of high-frequency exchange rates in the presence of intraday periodicity in volatility. We show that periodic volatility distorts the size and power of conventional tests of Brownian motion, jumps and (in)finite activity.

Conflict, Evolution, Hegemony, and the Power of the State

In a model of evolution driven by conflict between societies more powerful states have an advantage. When the influence of outsiders is small we show that this results in a tendency to hegemony.

Frictionless Technology Diffusion: The Case of Tractors

Many new technologies display long adoption lags, and this is often interpreted as evidence of frictions inconsistent with the standard neoclassical model.

Clustered Housing Cycles

Using a panel of U.S. city-level building permits data, we estimate a Markov-switching model of housing cycles that allows cities to systematically deviate from the national housing cycle.

Nonlinear Relationship between Permanent and Transitory Components of Monetary Aggregates and the Economy

This paper uses several methods to study the interrelationship among Divisia monetary aggregates, prices, and income, allowing for nonstationary, nonlinearities, asymmetries, and time-varying relationships among the series.

Evaluating the Accuracy of Forecasts from Vector Autoregressions

This paper surveys recent developments in the evaluation of point and density forecasts in the context of forecasts made by Vector Autoregressions.

How Did the Financial Crisis Alter the Correlations of U.S. Yield Spreads?

We investigate the pairwise correlations of 11 U.S. fixed income yield spreads over a sample that includes the Great Financial Crisis of 2007-2009.

Multi-Step Ahead Forecasting of Vector Time Series

This paper develops the theory of multi-step ahead forecasting for vector time series that exhibit temporal nonstationarity and co-integration.

Cognitive skills gaps in India: can (late) nutrition ameliorate them?

Using unique data from very young children in India, we estimate a value-added model of cognition.

Asymptotic Inference for Performance Fees and the Predictability of Asset Returns

In this paper we provide analytical, simulation, and empirical evidence on a test of equal economic value from competing predictive models of asset returns.

Conflict and the Evolution of Societies

The Malthusian theory of evolution disregards a pervasive fact about human societies: they expand through conflict. When this is taken account of the long-run favors not a large population at the level of subsistence, nor yet institutions that maximize welfare or per capita output, but rather institutions that maximize free resources.

Comment on "Taylor Rule Exchange Rate Forecasting During the Financial Crisis"

In this note we discuss the paper on exchange rate forecasting by Molodtsova and Papell (2012).

Consistent Testing for Structural Change at the Ends of the Sample

In this paper we provide analytical and Monte Carlo evidence that Chow and Predictive tests can be consistent against alternatives that allow structural change to occur at either end of the sample.

International Channels of the Fed’s Unconventional Monetary Policy

Previous research has established that the Federal Reserve’s large scale asset purchases (LSAPs) significantly influenced international bond yields.

An Endogenously Clustered Factor Approach to International Business Cycles

Factor models have become useful tools for studying international business cycles. Block factor models can be especially useful as the zero restrictions on the loadings of some factors may provide some economic interpretation of the factors.

Forecasting National Recessions Using State Level Data

A large literature studies the information contained in national-level economic indicators, such as financial and aggregate economic activity variables, for forecasting and nowcasting U.S. business cycle phases (expansions and recessions.)

Econometric Modeling of Exchange Rate Volatility and Jumps

This chapter reviews the rapid advances in foreign exchange volatility modeling made in the last three decades.

Did Affordable Housing Legislation Contribute to the Subprime Securities Boom?

We use a regression discontinuity approach and present new institutional evidence to investigate whether affordable housing policies influenced the market for securitized subprime mortgages.

What do happiness and health satisfaction data tell us about relative risk aversion?

In this paper we provide estimates of the coefficient of relative risk aversion using information on self-reports of subjective personal well-being from multiple datasets.

The (Non-)Resiliency of Foreign Direct Investment in the United States during the 2007-2009 Financial Crisis

We study the contraction of foreign direct investment (FDI) flows in the United States during the recent financial crisis and show their unusual non-resiliency, which depends in part on the global nature of the economic recession, but also on the increases in the cost of financing FDI in the economies in which the flows originate.

The Effect of Neighborhood Spillovers on Mortgage Selection

In this paper we analyze how spillovers in mortgage adoption affect mortgage product choice across neighborhoods and across borrowers of different racial or ethnic groups.

Capital Flows and Japanese Asset Volatility

Characterizing asset price volatility is an important goal for financial economists. The literature has shown that variables that proxy for the information arrival process can help explain and/or forecast volatility.

Differences in Subprime Loan Pricing Across Races and Neighborhoods

We investigate whether race and ethnicity influenced subprime loan pricing during 2005, the peak of the subprime mortgage expansion

Advances in Forecast Evaluation

This paper surveys recent developments in the evaluation of point forecasts. Taking West’s (2006) survey as a starting point, we briefly cover the state of the litera- ture as of the time of West’s writing.

Tests of Equal Forecast Accuracy for Overlapping Models

This paper examines the asymptotic and finite-sample properties of tests of equal forecast accuracy when the models being compared are overlapping in the sense of Vuong (1989).

Out-of-School Suspensions and Parental Involvement in Children’s Education

Do parents alter their investment in their child’s human capital in response to changes in school inputs? If they do, then ignoring this effect will bias the estimates of school and parental inputs in educational production functions.

Where is an Oil Shock?

Much of the literature examining the effects of oil shocks asks the question ―What is an oil shock? and has concluded that oil-price increases are asymmetric in their effects on the US economy. That is, sharp increases in oil prices affect economic activity adversely, but sharp decreases in oil prices have no effect.

Inflation in the G7: Mind the Gap(s)?

We investigate the importance of trend inflation and the real-activity gap for explaining observed inflation variation in G7 countries since 1960. Our results are based on a bivariate unobserved-components model of inflation and unemployment in which inflation is decomposed into a stochastic trend and transitory component.


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