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Research Notes–November 2006

Featuring research published in October 2006


Crude Substitution: The Cyclical Dynamics of Oil Prices and the College Premium
Working Paper 2006-14
As oil prices increase, the demand for workers without a college education increases relative to the demand for college-educated labor, thus benefiting unskilled workers.

Forming Priors for DSGE Models (and How It Affects the Assessment of Nominal Rigidities)
Working Paper 2006-16
The authors provide a method of deriving priors for the parameters of dynamic stochastic general equilibrium models from beliefs about the moments of the endogenous variables and use it to investigate the importance of nominal rigidities.

Dollar Appreciates in September
The average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta rose 0.4 percent in September from the previous month.


Home Country versus Cross-Border Negative Externalities in Large Banking Organization Failures and How to Avoid Them
Working Paper 2006-18
Examining the costs of a large bank failure, the author considers whether these costs are larger for a cross-border bank. Among his recommendations are prompt closure of the failed institution and reformed bankruptcy statutes.

International Economics

Cross-Border Banking: Challenges for Deposit Insurance and Financial Stability in the European Union
Working Paper 2006-15
Examining regulatory structures for resolving failed banking institutions, the authors consider banks in the European Union. They propose four principles to ensure the efficient resolution of bank failures with minimum credit and liquidity losses.

Business Cycles and Monetary Regimes in Emerging Economies: A Role for a Monopolistic Banking Sector
Working Paper 2006-17
In emerging economies, monopoly power in banking causes volatility in investment and other real variables, the author finds. He demonstrates that protecting retail niches from competition generates countercyclical bank markups.