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Research Notes–August 2007


Featuring research published in July 2007

Macroeconomics

Understanding the New Keynesian Model When Monetary Policy Switches Regimes
Working Paper 2007-12
Indeterminacy in a passive policy regime may spill over to an active regime to a much larger degree than previously thought. Consequently, the generalized Taylor principle does not hold.

U.S. Tax Policy and Health Insurance Demand: Can a Regressive Policy Improve Welfare?
Working Paper 2007-13
Removing the tax subsidy on health insurance offered by employers would result in a partial collapse of the group insurance market and reductions in insurance and welfare coverage, the authors find.

Taylor Rules with Headline Inflation: A Bad Idea
Working Paper 2007-14
A central bank that considers core inflation in setting interest rates generally performs better than one that considers energy price shocks. Deemphasizing energy price inflation reduces its impact on output and inflation.

Microentrepreneurship and the Business Cycle: Is Self-Employment a Desired Outcome?
Working Paper 2007-15
Using the business cycle to judge the voluntary nature of self-employment in Argentina, the authors show that self-employment is an optimal alternative for individuals with high entrepreneurial skills and is also a refuge for the urban unemployed.

Evidence of Demand Factors in the Determination of the Labor Market Intermittency Penalty
Working Paper 2007-16
The authors find a significant negative correlation between labor market strength and the wage penalty employers impose on workers who leave and reenter the workforce.

Dollar Continued to Decline in June
The average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta declined for the fifth consecutive month in June—down 0.4 percent from May.

Finance

Commercial Lending Distance and Historically Underserved Areas
Working Paper 2007-11a
Using data from the U.S. Small Business Administration, the authors find that the physical distance between small businesses and their bank lenders has been increasing, especially for borrowers located in historically underserved areas.

Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition
Working Paper 2007-17
Using both a theoretical model and empirical estimates, the authors find little relationship between Federal Home Loan Bank advances and the additional provision of mortgage credit.

Financial Market Frictions
Economic Review Q3 2006
Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.

Regional Economics

When More Is Better: Assessing the Southeastern Economy with Lots of Data
Economic Review Q3 2006
The authors estimate a model that provides a single indicator for the southeastern economy, making it easier for policymakers and analysts to assess regional economic conditions and compare them to the broader economy.

Tennessee Rides Boatbuilding Currents
EconSouth Q2 2006
Safe from maritime storms yet connected to the Gulf of Mexico by lakes and rivers, the Knoxville area has become an unlikely but important hub for the boatbuilding industry, producing watercraft from fishing boats to yachts.

From Spotlight to Shadow: Housing’s Luster Fades
EconSouth Q2 2006
New home construction set a torrid pace for years in the Southeast. But the homebuilding industry has cooled considerably, tempering the vitality of industries that had flourished along with it.

Despite Natural Advantages, Southeast Faces Challenges
EconSouth Q2 2006
The growth experienced by the Southeast in recent decades bred new challenges to continued growth.

Montgomery Drives Ahead With Autos
EconSouth Q2 2006
Montgomery’s economy is driving forward due to growth in state and federal government jobs as well as automobile assembly plants and an ambitious plan for downtown revitalization.

“The Last Few Years Have Been Very Good for Building Products”
EconSouth Q2 2006
An interview with Lee Thomas, president and chief executive officer of Rayonier Inc.

International Economics

International Trade: A Larger Piece of the U.S. Economic Pie
EconSouth Q2 2006
Accounting for nearly a third of domestic economic activity, imports and exports have become key ingredients of U.S. prosperity as American firms specialize in goods and services that meet the needs of growing economies worldwide.

Podcasts

The Gulf Coast: Two Years After Katrina (MP3 7:37)
Southeastern Economic Perspectives
An overview of economic conditions along the Louisiana and Mississippi coasts two years after Hurricane Katrina struck.

Credit Channel of Monetary Policy (MP3 4:52)
Research Insights
Atlanta Fed Financial Economist and Associate Policy Adviser Scott Frame discusses the credit channel of monetary policy following a June 2007 conference at the Bank.

Boatbuilding in East Tennessee (MP3 7:58)
EconSouth Now
An interview with Ron Hammontree, executive director of the Tellico Reservoir Development Agency, about the Knoxville, Tenn., area’s emergence as a hub of the boatbuilding industry.

Electronic Payments Set to Grow (MP3 15:00)
Financial Update Focus
An interview with Rich Oliver, executive vice president of the Atlanta Fed, about the ongoing decline of paper checks and the growth of electronic payment transactions.