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Research Notes–February 2005

Featuring research published in January 2005


Rebalancing the Economy for Long-Term Growth
January 10, 2005
Jack Guynn, president and chief executive officer of the Federal Reserve Bank of Atlanta, provides his economic outlook and thoughts on long-term growth to the Rotary Club of Atlanta.


Promising Picture for U.S. Economy
EconSouth Q4 2004
The outlook for the U.S. economy in 2005 is promising. Low overall inflation and continued improvement in the job market will provide the base for solid economic growth.

The Economics of Oil Prices
EconSouth Q4 2004
The oil market is affected by a number of different forces, including supply and demand. Increasing demand without a comparable increase in supply invariably results in higher prices, such as those the world is experiencing now for oil.

On the Solution of the Growth Model with Investment-Specific Technological Change
Working Paper 2004-39
Exploring the role of investment-specific technological change in the business cycle, the authors determine that, if capital is allowed to fully depreciate, a growth model has a closed-form solution.

Policy Predictions If the Model Doesn’t Fit
Working Paper 2004-38
The authors use a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium models and apply it to a simple New Keynesian DSGE model.

On the Fit and Forecasting Performance of New Keynesian Models
Working Paper 2004-37
The authors develop new tools for the evaluation of dynamic stochastic general equilibrium models, applying the tools to a large-scale New Keynesian DSGE model with price and wage stickiness and capital accumulation.

Dollar Declines Slightly in December
In December the average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta declined 0.9 percent to its lowest level since January 1997.


Investment Opportunity Set, Product Mix, and the Relationship between Bank CEO Compensation and Risk Taking
Working Paper 2004-36
The authors find a strong positive correlation between the percentage of CEO total compensation that is equity-based and the percentage of noninterest revenue that the bank generates from nontraditional sources.

The “Risk-Adjusted” Price-Concentration Relationship in Banking
Working Paper 2004-35
Using bank-specific risk variables, the authors suggest that it is time to challenge the well-established assumption that higher market concentration necessarily leads to anticompetitive deposit pricing behavior by commercial banks.

Regional Economics

In the Southeast, Storm Clouds Recede
EconSouth Q4 2004
The Southeast’s economy in 2005 will be led primarily by developments in the national economy but with some distinct regional variations.

Southeast’s Economy on Stable Course
EconSouth Q4 2004
A state-by-state survey of Southeastern states’ economies indicates that the region faces some economic challenges in 2005, but the year overall holds numerous opportunities for growth in areas as varied as tourism and manufacturing.

Hurricanes Raise Questions About Florida’s Outlook
EconSouth Q4 2004
Prior to 2004, it had been 40 years since Florida experienced four hurricanes in one season. While the state’s rebuilding efforts continue and some of the economic damage lingers, the state’s economy is poised for growth.

Hurricane Recovery Will Boost Spending in 2005: An Interview with Kenneth O. Burris Jr. of the Federal Emergency Management Agency
EconSouth Q4 2004
The 2004 hurricane season will be remembered for a long time in Florida and other affected states. By the end of the year, much of the wreckage had been cleared although recovery efforts will extend into 2005 and beyond as the rebuilding of private property and public infrastructure continues.

International Economics

International Outlook Remains Positive
EconSouth Q4 2004
The 2005 economic outlook for the United States’ trading partners is generally positive. Analysts’ estimates suggest that foreign economic growth in the coming year should average between 3 percent and 3.5 percent, down slightly from the 4 percent estimated for 2004.