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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

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 [e.g., Kose, Otrok, and Whiteman (2003)] 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.

The Low-Frequency Impact of Daily Monetary Policy Shocks

With rare exception, studies of monetary policy tend to neglect the timing of innovations to monetary policy instruments. Models which take timing seriously are often difficult to compare to standard monetary VARs because each uses different frequencies.

Connectionist-Based Rules Describing the Pass-through of Individual Goods Prices into Trend Inflation in the United States

This paper examines the inflation "pass-through" problem in American monetary policy, defined as the relationship between changes in the growth rates of individual goods and the subsequent economy-wide rate of growth of consumer prices.

A Bayesian Multi-Factor Model of Instability in Prices and Quantities of Risk in U.S. Financial Markets

This paper analyzes the empirical performance of two alternative ways in which multi-factor models with time-varying risk exposures and premia may be estimated. The first method echoes the seminal two-pass approach advocated by Fama and MacBeth (1973).

Technical Analysis in the Foreign Exchange Market

This article introduces the subject of technical analysis in the foreign exchange market, with emphasis on its importance for questions of market efficiency. “Technicians” view their craft, the study of price patterns, as exploiting traders’ psychological regularities.

Decomposing the Gender Wage Gap with Sample Selection Adjustment: Evidence from Colombia

Despite the remarkable improvement of female labor market characteristics, a sizeable gender wage gap exists in Colombia. We employ quantile regression techniques to examine the degree to which current small differences in the distribution of observable characteristics can explain the gender gap.

The Role of Schools in the Production of Achievement

What explains differences in pre-market factors? Three types of inputs are believed to determine the skills agents take to the labor market: ability, family inputs, and school inputs.

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