http://www.bis.org/cbhub/list/series/sid_56/index.rss Research hub papers by series: St Louis Fed Working Papers en http://research.stlouisfed.org/wp/more/2014-050/ St Louis Fed Working Papers by Jeffrey P. Cohen, Cletus C. Coughlin and John M. Clapp Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels 2014-12-13T06:19:59Z We estimate location values for single family houses by local polynomial regressions (LPR), a semi-parametric procedure, using a standard housing price and characteristics dataset. As a logical extension of the LPR method, we interpolate land values for every property in every year and validate the accuracy of the interpolated estimates with an out-of-sample forecasting approach using Denver sales during 2003 through 2010. We also compare the LPR and OLS models out-of-sample and determine that the LPR model is more efficient at predicting location values. In a balanced panel application, we use GMM estimation to examine how the location value estimates are affected by airport infrastructure investments. Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels 2014-12-13T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-050 Full text http://research.stlouisfed.org/wp/2014/2014-050.pdf Cletus C. Coughlin John M. Clapp Jeffrey P. Cohen Jeffrey P. Cohen, Cletus C. Coughlin and John M. Clapp 2014-12 St Louis Fed Working Papers C14 H41 H54 R51 R53 http://research.stlouisfed.org/wp/2014/2014-050.pdf St Louis Fed Working Papers by Jeffrey P. Cohen, Cletus C. Coughlin, and John M. Clapp Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels 2014-12-13T06:19:59Z We estimate location values for single family houses by local polynomial regressions (LPR), a semi-parametric procedure, using a standard housing price and characteristics dataset. As a logical extension of the LPR method, we interpolate land values for every property in every year and validate the accuracy of the interpolated estimates with an out-of-sample forecasting approach using Denver sales during 2003 through 2010. We also compare the LPR and OLS models out-of-sample and determine that the LPR model is more efficient at predicting location values. In a balanced panel application, we use GMM estimation to examine how the location value estimates are affected by airport infrastructure investments. Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels 2014-12-13T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-050 Full text http://research.stlouisfed.org/wp/more/2014-050/ Cletus C. Coughlin John M. Clapp Jeffrey P. Cohen Jeffrey P. Cohen, Cletus C. Coughlin, and John M. Clapp 2014-12 St Louis Fed Working Papers C14 H41 H54 R51 R53 http://research.stlouisfed.org/wp/more/2014-049/ St Louis Fed Working Papers by Sergey V. Popov and David Wiczer Equilibrium Sovereign Default with Exchange Rate Depreciation 2014-11-25T06:19:59Z This study proposes and quantitatively assesses a terms-of-trade penalty for defaulting: defaulters must exchange more of their own goods for imports, which causes an adjustment to the equilibrium exchange rate. This penalty can take the place of an ad hoc fall in output: Facing only this penalty and temporary exclusion from debt markets, countries are willing to maintain borrowing obligations up to a realistic level of debt. The terms-of-trade penalty is consistent with the observed relationship between sovereign default and a country's trade ows and prices.The defaulter's currency depreciates while trade volume falls drastically. We demonstrate that a default episode can imply up to a 30% real depreciation, which matches observed crisis events in developing countries. Equilibrium Sovereign Default with Exchange Rate Depreciation 2014-11-25T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-049 Full text http://research.stlouisfed.org/wp/2014/2014-049.pdf Sergey V. Popov David Wiczer Sergey V. Popov and David Wiczer 2014-11 St Louis Fed Working Papers F11 F17 F34 http://research.stlouisfed.org/wp/more/2014-048/ St Louis Fed Working Papers by Diego Restuccia and Guillaume Vandenbroucke Explaining Educational Attainment across Countries and over Time 2014-11-18T06:19:00Z Consider the following facts. In 1950, the richest countries attained an average of 8 years of schooling whereas the poorest countries 1.3 years, a large 6-fold difference. By 2005, the difference in schooling declined to 2-fold because schooling increased faster in poor than in rich countries. What explains educational attainment differences across countries and their evolution over time? We consider an otherwise standard model of schooling featuring non- homothetic preferences and a labor supply margin to assess the quantitative contribution of productivity and life expectancy in explaining educational attainment. A calibrated version of the model accounts for 90 percent of the difference in schooling levels in 1950 between rich and poor countries and 71 percent of the faster increase in schooling over time in poor relative to rich countries. These results suggest an alternative view of the determinants of low education in developing countries that is based on low productivity. Explaining Educational Attainment across Countries and over Time 2014-11-18T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-048 Full text http://research.stlouisfed.org/wp/2014/2014-048.pdf Diego Restuccia Guillaume Vandenbroucke Diego Restuccia and Guillaume Vandenbroucke 2014-11 St Louis Fed Working Papers E24 J22 J24 O1 O4 http://research.stlouisfed.org/wp/more/2014-047/ St Louis Fed Working Papers by Alice Fabre, Stéphane Pallage, and Christian Zimmermann Universal Basic Income versus Unemployment Insurance 2014-11-15T06:19:00Z 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. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a dynamic equilibrium model with savings calibrated to the United States for 1990 and 2011, and provide results that show that UI beats UBI for insurance purposes because it is better targeted towards those in need. Universal Basic Income versus Unemployment Insurance 2014-11-15T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-047 Full text http://research.stlouisfed.org/wp/2014/2014-047.pdf Stéphane Pallage Alice Fabre Christian Zimmermann Alice Fabre, Stéphane Pallage, and Christian Zimmermann 2014-11 St Louis Fed Working Papers D7 E24 J65 http://research.stlouisfed.org/wp/more/2014-046/ St Louis Fed Working Papers by Maria A. Arias, Charles S. Gascon and David E. Rapach Metro Business Cycles 2014-11-14T06:19:00Z We construct monthly economic-activity indices for 51 U.S. metropolitan statistical areas for 1990 to 2014. Each index is computed via a dynamic factor model that includes 14 variables measuring various aspects of economic activity in a metro area. We estimate the dynamic factor model using the recently developed maximum-likelihood approach of Bańbura and Modugno (2014), which allows for arbitrary patterns of missing data and enables us to accommodate mixed-frequency data and differences in data-publication lags. Our indices highlight important similarities and differences in business cycles across metro areas. During the national recessions of the early 1990s and early 2000s, a number of metro areas experience sizable recessions, while other areas escape recessions altogether during one or both of these periods. In contrast, all metro areas suffer severe recessions around the time of the recent Great Recession. Nevertheless, there are significant differences in the length and depth of recent recessions across metro areas, and we find that these differences are strongly related to local housing-market conditions. We also estimate each metro area's "beta"-its sensitivity to national economic activity-and relate the betas to metro characteristics. Metro Business Cycles 2014-11-14T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-046 Full text http://research.stlouisfed.org/wp/2014/2014-046.pdf Charles S. Gascon David E. Rapach Maria A. Arias Maria A. Arias, Charles S. Gascon, David E. Rapach 2014-11 St Louis Fed Working Papers C38 E32 R11 R31 http://research.stlouisfed.org/wp/more/2014-040/ St Louis Fed Working Papers by Lance J Lochner and Alexander Monge-Naranjo Student Loans and Repayment: Theory, Evidence and Policy 2014-11-04T06:19:00Z In this paper we explore alternative models for insurance and incentives problems and assess them in terms of the implied behavior for human capital investment, consumption and default. We consider models with exogenously specified market incompleteness as well as models in which imperfect insurance arises endogenously from incentive problems. We derived sharp predictions from stylized versions of standard models in the literature. However, we go also beyond existing literature by considering hybrid models, in which combinations of two or three incentives problems are present. We find that all standard models (with only one incentive problem) produce counterfactual implications for either investment and/or for the behavior of default and consumption. Our preferred models because of their implied credit terms (interest rates), investments and default are (1) limited commitment with exogenously non-contingent repayments and (2) moral hazard combined with costly state verification. Student Loans and Repayment: Theory, Evidence and Policy 2014-11-04T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-040 Full text http://research.stlouisfed.org/wp/2014/2014-040.pdf Alexander Monge-Naranjo Lance J Lochner Lance J Lochner and Alexander Monge-Naranjo 2014-11 St Louis Fed Working Papers H81 I22 I28 http://research.stlouisfed.org/wp/more/2014-038/ St Louis Fed Working Papers by Lee Ohanian, Paulina Restrepo-Echavarria, and Mark L. J. Wright Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007 2014-11-03T06:17:59Z Theory predicts that capital should flow to countries where economic growth and the return to capital is highest. However, in the post-World War II period, per-capita GDP grew almost three times faster in East Asia than in Latin America, yet capital flowed in greater quantities into Latin America. In this paper we propose a 3-country 2-sector growth model, augmented by "wedges" to quantify and evaluate the importance of international capital market imperfections versus domestic imperfections in explaining this anomalous behavior of capital flows. We find that during the 1950's capital controls where important, but domestic conditions dominate. And contrary to what has been thought, after 1960 capital controls in Asia encouraged borrowing. Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007 2014-11-03T06:17:59Z Abstract http://research.stlouisfed.org/wp/more/2014-038 Full text http://research.stlouisfed.org/wp/2014/2014-038.pdf Paulina Restrepo-Echavarria Mark L. J. Wright Lee Ohanian Lee Ohanian, Paulina Restrepo-Echavarria, and Mark L. J. Wright 2014-10 St Louis Fed Working Papers http://research.stlouisfed.org/wp/more/2014-036/ St Louis Fed Working Papers by Rubén Hernández-Murillo Interjurisdictional Competition and Location Decisions of Firms 2014-11-01T06:19:00Z We examine the welfare properties of alternative regimes of interjurisdictional competition for heterogenous mobile firms. Firms differ not only in terms of the degree of mobility across jurisdictions but also in terms of productivity. Alternative taxation regimes represent restraints on the discretionary powers of taxation of local governments. We find that average welfare is higher under discretionary and more efficient taxation regimes (in the sense of minimizing deadweight losses from distortionary taxation) when firms are highly mobile. In this situation, further limiting competition by imposing a system of non-discretionary instruments can reduce average welfare by reducing the efficiency of the local governments at raising and allocating public funds. When firms face high moving costs, on the other hand, switching to a non-discretionary and less efficient taxation regime may increase welfare by preventing local governments from engaging in excessive redistribution of resources. Interjurisdictional Competition and Location Decisions of Firms 2014-11-01T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-036 Full text http://research.stlouisfed.org/wp/2014/2014-036.pdf Rubén Hernández-Murillo Rubén Hernández-Murillo 2014-10 St Louis Fed Working Papers C72 H21 H32 H73 http://research.stlouisfed.org/wp/more/2014-034/ St Louis Fed Working Papers by Jérôme Lahaye and Christopher J. Neely The role of jumps in volatility spillovers in foreign exchange markets: meteor shower and heat waves revisited 2014-10-31T17:34:00Z 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). We show that recently developed estimators have very different implications for the impact of jumps on exchange rate volatility transmission. Specifically, isolated and successive jumps have opposite predictions for future volatility. Although the realized volatility literature finds that heat wave effects prevail for volatility transmission, we find evidence of both meteor shower and heat wave transmission of integrated volatility; in contrast, that jumps operate mainly in a meteor shower fashion. We also demonstrate the EUR/USD volatility and jump shocks spillover to the USD/JPY but the reverse transmission is much weaker. The role of jumps in volatility spillovers in foreign exchange markets: meteor shower and heat waves revisited 2014-10-31T17:34:00Z Abstract http://research.stlouisfed.org/wp/more/2014-034 Full text http://research.stlouisfed.org/wp/2014/2014-034.pdf Christopher J. Neely Jérôme Lahaye Jérôme Lahaye and Christopher J. Neely 2014-10 St Louis Fed Working Papers C13 C14 C32 C58 F31 F37 F65 G15 http://research.stlouisfed.org/wp/more/2014-031/ St Louis Fed Working Papers by Juan M. Sánchez, Horacio Sapriza, and Emircan Yurdagul Sovereign Default and the Choice of Maturity 2014-10-29T06:19:59Z Sovereigns borrow from international markets at a duration that typically exceeds one year and with positive term spreads. Debt duration and term spreads vary over the business cycle, with periods of increased credit market stress associated to shorter duration and lower term spreads. In addition, when countries experience sovereign debt crises, most debt restructurings involve extending the maturity of old instruments. This paper presents a new quantitative model of sovereign debt maturity choice. If the standard model (Arellano, 2008; Aguiar and Gopinath, 2006) is extended to incorporate long-duration bonds along the lines of Chatterjee and Eyigungor (2012) and Hatchondo and Martinez (2009), countries would prefer, if given the choice, one period bonds. Debt dilution is the key for this result. Instead of ignoring debt dilution, this papers asks what features of financial markets can help understand the data. The presence of sudden stops and distressed debt reschedulings go a long way in reconciling the model with the data. Our framework can also explain the movements in the term structure of sovereign bond yields over the business cycle, including the non-monotonic yield curve observed during some debt restructurings, such as the hump- shaped curve of Greece in 2011. Sovereign Default and the Choice of Maturity 2014-10-29T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-031 Full text http://research.stlouisfed.org/wp/2014/2014-031.pdf Horacio Sapriza Juan M. Sanchez Emircan Yurdagul Juan M. Sánchez, Horacio Sapriza, and Emircan Yurdagul 2014-10 St Louis Fed Working Papers F34 F41 G15 http://research.stlouisfed.org/wp/2014/2014-029.pdf St Louis Fed Working Papers by William Dupor and Peter B. McCrory Fiscal Policy Spillovers: Points of Employment to Places of Residence 2014-10-24T06:19:00Z In this paper, we study 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. We then compare differential labor market outcomes and Recovery Act spending at the regional and subregional levels using instrumental variables. Among pairs of subregions, we find evidence of fiscal policy spillovers. For example, $1 of Recovery Act spending in a large subregion increases its own wage bill by $0.79 and increases the wage bill in its neighboring subregion by $0.59. We find similar spillover effects when we replace the wage bill with employment as our measure of economic activity. Next, we build a dynamic equilibrium trade model with interregional commuting capable of propagating these spillovers across regions. Fiscal Policy Spillovers: Points of Employment to Places of Residence 2014-10-24T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-029 Full text http://research.stlouisfed.org/wp/2014/2014-029.pdf Peter B. McCrory William Dupor William Dupor and Peter B. McCrory 2014-10 St Louis Fed Working Papers E52 E62 http://research.stlouisfed.org/wp/more/2014-029/ St Louis Fed Working Papers by William Dupor and Peter B. McCrory Fiscal Policy Spillovers: Points of Employment to Places of Residence 2014-10-24T06:19:00Z In this paper, we study 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. We then compare differential labor market outcomes and Recovery Act spending at the regional and subregional levels using instrumental variables. Among pairs of subregions, we find evidence of fiscal policy spillovers. For example, $1 of Recovery Act spending in a large subregion increases its own wage bill by $0.79 and increases the wage bill in its neighboring subregion by $0.59. We find similar spillover effects when we replace the wage bill with employment as our measure of economic activity. Next, we build a dynamic equilibrium trade model with interregional commuting capable of propagating these spillovers across regions. Fiscal Policy Spillovers: Points of Employment to Places of Residence 2014-10-24T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-029 Full text http://research.stlouisfed.org/wp/2014/2014-029.pdf William Dupor Peter B. McCrory William Dupor and Peter B. McCrory 2014-10 St Louis Fed Working Papers E52 E62 http://research.stlouisfed.org/wp/more/2014-028/ St Louis Fed Working Papers by Carlos Garriga, Yang Tang, and Ping Wang Rural-Urban Migration, Structural Transformation, and Housing Markets in China 2014-10-10T06:19:00Z This paper explores the role played by structural transformation and the resulting relocation of workers from rural to urban areas in the recent housing boom in China. This development process has fostered an ongoing increase in urban housing demand, which, combined with a relatively inelastic supply due to land and entry restrictions, has raised housing and land prices. We examine the issue using a multi-sector dynamic general-equilibrium model with endogenous rural-urban migration and endogenous housing demand and supply. Our quantitative results suggest that the development process accounts for two-thirds of housing and land price movements across all urban areas. This mechanism is ampli-ed in an extension calibrated to the two largest cities indicating that market fundamentals remain a key driver of housing and land prices. Rural-Urban Migration, Structural Transformation, and Housing Markets in China 2014-10-10T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-028 Full text http://research.stlouisfed.org/wp/2014/2014-028.pdf Ping Wang Yang Tang Carlos Garriga Carlos Garriga, Yang Tang, and Ping Wang 2014-10 St Louis Fed Working Papers D90 E20 O41 R23 R31 http://research.stlouisfed.org/wp/more/2014-027/ St Louis Fed Working Papers by Diana A. Cooke and William T. Gavin Three Scenarios for Interest Rates in the Transition to Normalcy 2014-10-07T06:19:59Z 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. Three Scenarios for Interest Rates in the Transition to Normalcy 2014-10-07T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-027 Full text http://research.stlouisfed.org/wp/2014/2014-027.pdf William T. Gavin Diana A. Cooke Diana A. Cooke and William T. Gavin 2014-10 St Louis Fed Working Papers E43 E47 E52 E58 E65 http://research.stlouisfed.org/wp/more/2014-024/ St Louis Fed Working Papers by Amanda Michaud and David Wiczer Occupational Hazards and Social Disability Insurance 2014-08-27T06:19:59Z Lifetime occupational exposure accounts for 42% of differences in disability risk across individuals. Incorporating this feature into a general equilibrium model, we study how social disability insurance (SDI) affects welfare through (i) the classic channel of risk-sharing and (ii) a new channel of occupational reallocation. Both channels can increase welfare, but at the optimal SDI they are at odds. Welfare gains from additional risk-sharing are reduced by overly incentivizing workers to choose risky occupations. In a calibrated economy resembling the United States, SDI increases welfare by 2.6% (consumption) relative to actuarially fair insurance. The current US system captures 92% of these gains. Occupational Hazards and Social Disability Insurance 2014-08-27T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-024 Full text http://research.stlouisfed.org/wp/2014/2014-024.pdf Amanda Michaud David Wiczer Amanda Michaud and David Wiczer 2014-08 St Louis Fed Working Papers E62 I13 http://research.stlouisfed.org/wp/more/2014-023/ St Louis Fed Working Papers by William Dupor and M. Saif Mehkari The 2009 Recovery Act: Stimulus at the Extensive and Intensive Labor Margins 2014-08-19T06:19:59Z This paper (i) estimates the local effects of government stimulus spending on labor market outcomes and (ii) shows how these effects can be obtained from a firm's optimal policy in the presence of costs to hiring workers. We analyze the American Recovery and Reinvestment Act of 2009 (Recovery Act) using instrumental variables at the county-level. We find that $1 million of government spending increased employment locally by 5.5 persons and also increased wage payments to existing workers by $178,000. Next, we build a model in which a firm meets new government demand with a combination of new hiring and increasing the number of hours for existing workers. Faced with hiring costs and an overtime premium, the firm responds by increasing hours along both margins. Our analysis also provides insight into how government spending policy should be structured to lower the cost of generating new jobs. Finally, we catalog survey evidence from Recovery Act fund recipients that reinforces the importance of the intensive labor margin. The 2009 Recovery Act: Stimulus at the Extensive and Intensive Labor Margins 2014-08-19T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-023 Full text http://research.stlouisfed.org/wp/more/2014-023/ William Dupor M. Saif Mehkari William Dupor and M. Saif Mehkari 2014-08 St Louis Fed Working Papers D21 D24 E52 E62 http://research.stlouisfed.org/wp/2014/2014-021.pdf St Louis Fed Working Papers by David Andolfatto, Ed Nosal, and Bruno Sultanum Preventing Bank Runs 2014-08-01T06:19:00Z Diamond and Dybvig (1983) is commonly understood as providing a formal rationale for the existence of bank-run equilibria. It has never been clear, however, whether bank-run equilibria in this framework are a natural byproduct of the economic environment or an artifact of suboptimal contractual arrangements. In the class of direct mechanisms, Peck and Shell (2003) demonstrate that bank-run equilibria can exist under an optimal contractual arrangement. The difficulty of preventing runs within this class of mechanism is that banks cannot identify whether withdrawals are being driven by psychology or by fundamentals. Our solution to this problem is an indirect mechanism with the following two properties. First, it provides depositors an incentive to communicate whether they believe a run is on or not. Second, the mechanism threatens a suspension of convertibility conditional on what is revealed in these communications. Together, these two properties can eliminate the prospect of bank-run equilibria in the Diamond-Dybvig environment. Preventing Bank Runs 2014-08-01T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-021 Full text http://research.stlouisfed.org/wp/2014/2014-021.pdf David Andolfatto Bruno Sultanum Ed Nosal David Andolfatto, Ed Nosal, and Bruno Sultanum 2014-07 St Louis Fed Working Papers D82 E58 G21 http://research.stlouisfed.org/wp/more/2014-020/ St Louis Fed Working Papers by Ana B. Galvão and Michael T. Owyang Financial Stress Regimes and the Macroeconomy 2014-07-31T06:21:00Z We identify financial stress regimes using a model that explicitly links financial variables with the macroeconomy. The financial stress regimes are identified using a large unbalanced panel of financial variables with an embedded method for variable selection and, empirically, are strongly correlated with NBER recessions. The empirical results on the selection of financial variables support the use of credit spreads to identify asymmetries in the responses of economic activity and prices to financial shocks. We use a novel factor-augmented vector autoregressive model with smooth regime changes (FASTVAR). The unobserved financial factor is jointly estimated with the parameters of a logistic function that describes the probabilities of the financial stress regime over time. Financial Stress Regimes and the Macroeconomy 2014-07-31T06:21:00Z Abstract http://research.stlouisfed.org/wp/more/2014-020 Full text http://research.stlouisfed.org/wp/more/2014-020/ Michael T. Owyang Ana B. Galvão Ana B. Galvão and Michael T. Owyang 2014-07 St Louis Fed Working Papers http://research.stlouisfed.org/wp/2014/2014-018.pdf St Louis Fed Working Papers by Daphne Chen, Shi Qi, and Don Schlagenhauf Corporate Income Tax, Legal Form of Organization, and Employment 2014-07-26T06:19:00Z 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. We show that a reduction in corporate income tax leads to moderate job creation. In the extreme case, the elimination of the corporate income tax would reduce the non-employed population by 5.4 percent. In the model, a reduction in the corporate income tax creates jobs through two channels, one from new entry firms and one from existing firms changing their form of legal organization. In particular, the latter accounts for 85.7 percent of the new jobs created. Corporate Income Tax, Legal Form of Organization, and Employment 2014-07-26T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-018 Full text http://research.stlouisfed.org/wp/2014/2014-018.pdf Shi Qi Daphne Chen Don Schlagenhauf Daphne Chen, Shi Qi, Don Schlagenhauf 2014-07 St Louis Fed Working Papers http://research.stlouisfed.org/wp/more/2014-015/ St Louis Fed Working Papers by YiLi Chien The Cost of Business Cycles with Heterogeneous Trading Technologies 2014-07-17T12:35:59Z This paper investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in equilibrium, while this source of inequality vanishes in an economy without business cycles. Put simply, the heterogeneity in trading technologies amplifies the effect of aggregate output fluctuation on consumption inequality. The welfare cost of business cycles is, therefore, larger in such an economy. In the benchmark economy with a reasonable low risk aversion rate, the business cycle costs 6.49% per period consumption for an average household when I calibrate this model to match the risk premium. The Cost of Business Cycles with Heterogeneous Trading Technologies 2014-07-17T12:35:59Z Abstract http://research.stlouisfed.org/wp/more/2014-015 Full text http://research.stlouisfed.org/wp/2014/2014-015.pdf YiLi Chien YiLi Chien 2014-07 St Louis Fed Working Papers http://research.stlouisfed.org/wp/more/2014-013/ St Louis Fed Working Papers by Mark A. Carlson and David C. Wheelock Navigating Constraints: The Evolution of Federal Reserve Monetary Policy, 1935-59 2014-06-11T06:19:00Z The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of policy in the 1950s. Navigating Constraints: The Evolution of Federal Reserve Monetary Policy, 1935-59 2014-06-11T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-013 Full text http://research.stlouisfed.org/wp/2014/2014-013.pdf Mark A. Carlson David C. Wheelock Mark A. Carlson and David C. Wheelock 2014-06 St Louis Fed Working Papers E52 E58 N12 http://research.stlouisfed.org/wp/more/2014-012/ St Louis Fed Working Papers by Piyusha Mutreja, B. Ravikumar, and Michael J. Sposi Capital Goods Trade and Economic Development 2014-05-17T06:19:00Z Almost 80 percent of capital goods production in the world is concentrated in 10 countries. Poor countries import most of their capital goods. Capital Goods Trade and Economic Development 2014-05-17T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-012 Full text http://research.stlouisfed.org/wp/more/2014-012/ B. Ravikumar Michael J. Sposi Piyusha Mutreja Piyusha Mutreja, B. Ravikumar, and Michael J. Sposi 2014-05 St Louis Fed Working Papers E22 F11 O11 O4 http://research.stlouisfed.org/wp/more/2014-011/ St Louis Fed Working Papers by Florencia Lopez Boo and Maria E. Canon Reversal of Gender Gaps in Child Development: Evidence from Young Children in India 2014-04-22T06:19:59Z This paper provides unique evidence of a reversal of gender gaps in cognitive development in early childhood. We find steep caste and gender gradients and few substantive changes once children enter school. The gender gap, ho This paper provides unique evidence of a reversal of gender gaps in cognitive development in early childhood. wever, reverses its sign for the upper caste, with girls performing better than boys at age 5 but thereafter following the general pattern in India of boys performing better. Reversal of Gender Gaps in Child Development: Evidence from Young Children in India 2014-04-22T06:19:59Z Abstract http://research.stlouisfed.org/wp/more/2014-011 Full text http://research.stlouisfed.org/wp/2014/2014-011.pdf Maria E. Canon Florencia Lopez Boo Florencia Lopez Boo and Maria E. Canon 2014-04 St Louis Fed Working Papers I2 J1 J7 http://research.stlouisfed.org/wp/more/2014-010/ St Louis Fed Working Papers by Francesca Carapella and Stephen Williamson Credit Markets, Limited Commitment, and Government Debt 2014-03-28T06:19:00Z A dynamic model with credit under limited commitment is constructed, in which limited memory can weaken the effects of punishment for default. This creates an endogenous role for government debt in credit markets, and the economy can be non-Ricardian. Default can occur in equilibrium, and government debt essentially plays a role as collateral and thus improves borrowers' incentives. The provision of government debt acts to discourage default, whether default occurs in equilibrium or not. Credit Markets, Limited Commitment, and Government Debt 2014-03-28T06:19:00Z Abstract http://research.stlouisfed.org/wp/more/2014-010 Full text http://research.stlouisfed.org/wp/2014/2014-010.pdf Stephen Williamson Francesca Carapella Francesca Carapella and Stephen Williamson 2014-03 St Louis Fed Working Papers