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Research Notes–January 2006


Featuring research published in December 2005

Macroeconomics

Macroeconomic Models with Heterogeneous Agents and Housing
Economic Review Q4 2005
This article reports progress on economists’ attempts to incorporate the important housing sector into models that capture the economic and demographic diversity among households.

Monetary Policy Analysis with Potentially Misspecified Models
Working Paper 2005-26
The authors propose a method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models. They find that many prescriptions derived from the DSGE model are robust to model misspecification.

Markov-Switching Structural Vector Autoregressions: Theory and Application
Working Paper 2005-27
The authors use four identification schemes to study monetary policy in the euro area. They find low volatility of shocks to output, prices, and interest rates since 1993.

Dollar Appreciated Slightly in November
In November the average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta rose 0.8 percent.

Finance

Bank Crisis Resolution and Foreign-Owned Banks
Economic Review Q4 2005
The authors propose four principles for resolving insolvent institutions efficiently as well as policies to mitigate the problems inherent in applying these principles to foreign-owned banks.

How Should Banks Account for Loan Losses?
Economic Review Q4 2005
An ongoing debate centers on how banks account for default risk on loans. This article reviews the generally accepted accounting principles currently used as well as the economic-value accounting being discussed as a substitute.

SBA Guaranteed Lending and Local Economic Growth
Working Paper 2005-28
Using data from the Small Business Administration’s (SBA) loan-guarantee program, the authors find that SBA lending in a local market positively influences that market’s future per capita income growth.

The Price of Corporate Social Responsibility: The Case of Black Economic Empowerment Transactions in South Africa
Working Paper 2005-29
South Africa’s black economic empowerment (BEE) transactions encourage corporate social activism. The authors determine that, on average, corporations participating in BEE transactions show larger stock returns than before their participation.

Debt, Hedging, and Human Capital
Working Paper 2005-30
Corporate value is shifting from physical capital to human capital. Hedging can increase a company’s value by reducing the risk that talented staff members will leave during periods of financial distress.