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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.


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.

Sovereign Default and Maturity Choice

We develop a quantitative model of sovereign debt maturity choice and the term structure of bond yields in the presence of default risk.

Unauthorized Immigration and Fiscal Competition

Reflecting upon recent enforcement policy activism of US states and countries within the EU towards unauthorized workers, we examine the overlap of centralized (federal) and decentralized (state or regional) enforcement of immigration policies in a spatial context.

Capital Goods Trade and Economic Development

We argue that international trade in capital goods has quantitatively important effects on economic development through two channels: (i) capital formation and (ii) aggregate TFP.

Determinants of Trade Margins: Insights Using State Export Data

We adapt the heterogeneous firm trade models of Helpman, Melitz, and Rubinstein (2008) and Lawless (2010) to analyze extensive and intensive trade margins using state-level exports to foreign nations.

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.

Price Equalization, Trade Flows, and Barriers to Trade

In this paper we show that price equalization does not imply zero barriers to trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade.

Financing Growth: Foreign Aid vs. Foreign Loans

Compared to foreign grants, do concessional loans from foreign governments and/or unsubsidized loans from foreign private banks lead to faster growth in developing nations?

The Quantitative Importance of Openness in Development

This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated?

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.

Export Market Diversification and Productivity Improvements: Theory and Evidence From Argentinean Firms

This paper examines the relationship between trade and investment in technology adoption when firms face demand uncertainty.

Regionalization vs. Globalization

Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles.

Lobbying for a Common External Tariff from Inside and Out

We consider the interactions between domestic lobbying and cross-border lobbying in a Customs Union (CU) in determining the Common External Tariff (CET). There are two types of cross-border lobbying: (i) lobbying from member-nation firms to the governments of other CU countries, and (ii) lobbying by firms from outside to the CU nation governments.

Foreign Firms and the Diffusion of Knowledge

This paper constructs a model to examine the impact of foreign firms on a developing Country’s own accumulation of entrepreneurial knowledge.

What Do We Know about the Relationship between Access to Finance and International Trade?

The recent financial crisis has focused attention on the relationship between access to finance and international trade, triggering a burgeoning segment of the literature evaluating this link empirically.

International Trade, Female Labor, and Entrepreneurship in MENA Countries

Middle Eastern and North African (MENA) countries stand out in international comparisons of de jure obstacles to female employment and entrepreneurship. These obstacles manifest themselves in low rates of female labor participation, entrepreneurship, and ownership.

On the Substitutability between Foreign Aid and International Credit

We examine the effect of relaxing a binding borrowing constraint for a recipient country on theamount of foreign aid it receives.

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).

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.

Price Equalization Does Not Imply Free Trade

In this paper we show that price equalization alone is not sufficient to establish that there are no barriers to international trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade.

Foreign Aid, Illegal Immigration, and Host Country Welfare

This paper analyzes the effect of foreign aid on illegal immigration and host country welfare using a general equilibrium model.

Extensive and Intensive Trade Margins: A State-by-State View

This paper examines a topic of increasing interest, the potential determinants of extensive (i.e., number of firms) and intensive (i.e., average exports per firm) trade margins, using state-level trade to 190 countries. In addition to distance and country size, other factors affecting trade costs and export demand are explored.

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.

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.

Speculation in the Oil Market

The run-up in oil prices since 2004 coincided with growing investment in commodity markets and increased price comovement among different commodities.

Should Easier Access to International Credit Replace Foreign Aid?

We examine the interaction between foreign aid and binding borrowing constraint for a recipient country. We also analyze how these two instruments affect economic growth via non-linear relationships. First of all, we develop a two-country, two-period trade-theoretic model to develop testable hypotheses and then we use dynamic panel analysis to test those hypotheses empirically. Our main findings are that: (i) better access to international credit for a recipient country reduces the amount of foreign aid it receives, and (ii) there is a critical level of international financial transfer, and the marginal effect of foreign aid is larger than that of loans if and only if the transfer (loans or foreign aid) is below this critical level.

Lessons from the Evolution of Foreign Exchange Trading Strategies

The adaptive markets hypothesis posits that trading strategies evolve as traders adapt their behavior to changing circumstances.

Explaining China's Trade Imbalance Puzzle

The current global-imbalance literature (which explains why capital flows from poor to rich countries) is unable to explain China’s foreign asset positions because capital cannot flow out of China under capital controls. Hence, this literature has not succeeded in explaining China’s large and persistent trade imbalances with the United States.

OPEC’s Oil Exporting Strategy and Macroeconomic (In)Stability

Aguiar-Conraria and Wen (2008) argued that dependence on foreign oil raises the likelihood of equilibrium indeterminacy (economic instability) for oil importing countries. We argue that this relation is more subtle.

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