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Atlanta Fed Working Papers

The Research Department of the Federal Reserve Bank of Atlanta publishes a working paper series to convey the research of staff economists and visiting scholars and stimulate professional discussion and exploration of economic and financial subjects.


Housing Wealth and Wage Bargaining
Chris Cunningham and Robert R. Reed
Working Paper 2012-20
December 2012
Examining the relationship between housing equity and wage earnings and using data from the American Housing Survey, the authors show that workers with underwater mortgages who fear default will settle for lower wages.

Home Production Technology and Time Allocation: Empirics, Theory, and Implications
Lei Fang and Guozhong Zhu
Working Paper 2012-19
December 2012
Using a model of time allocation that emphasizes the role of home production technology, the authors study the effects of proportional tax and lump-sum transfer on time allocation and labor supply.

Analytical Solution for the Constrained Hansen-Jagannathan Distance under Multivariate Ellipticity
Nikolay Gospodinov, Raymond Kan, and Cesare Robotti
Working Paper 2012-18 (November)
Building on the seminal work of Hansen and Jagannathan (1997), the authors analyze the benefits and costs of using the HJ-distance with a no-arbitrage constraint to rank asset pricing models.

Robust Inference in Linear Asset Pricing Models
Nikolay Gospodinov, Raymond Kan, and Cesare Robotti
Working Paper 2012-17 (November)
Using a novel model selection procedure that is robust to fixed misspecification and weak identification, the authors find that only the market factor and the book-to-market factor of Fama and French (1993) are important in explaining the cross-sectional differences in U.S. equity returns.

Wages and Unemployment across Business Cycles: A High-Frequency Investigation
Lei Fang and Pedro Silos
Working Paper 2012-16 (October)
Investigating the change in wages associated with a spell of unemployment, the authors find that the degree of wage rigidity varies across recessions; wage changes pre- and post-unemployment are sometimes procyclical and sometimes countercyclical.

Comparative Advantage and Risk Premia in Labor Markets
German Cubas and Pedro Silos
Working Paper 2012-15 (October)
Examining the association between earnings risk and the level of earnings across 21 industries, the authors find that the positive association between permanent risk and earnings is compensation for risk, but selection is responsible for the observed relationship between temporary risk and the level of earnings.

The Bank of Amsterdam through the Lens of Monetary Competition
Stephen Quinn and William Roberds
Working Paper 2012-14 (September)
In 1683 the Bank of Amsterdam introduced a form of irredeemable money. The authors argue that this new form of money flourished because it could compete with coin as a store of value and medium of exchange.

The Safety and Soundness Effects of Bank M&A in the EU
Jens Hagendorff, Maria J. Nieto, and Larry D. Wall
Working Paper 2012-13 (September)
Studying European bank mergers and acquisitions, the authors find that the acquirer and target become financially stronger if the acquirer's home country supervision is stronger than the target's.

The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury
W. Scott Frame, Larry D. Wall, and Lawrence J. White
Working Paper 2012-12 (August)
What form the U.S. government's role in the housing finance market should take is a matter of robust debate. The authors provide a critical assessment of the various types of policy proposals that have been offered to further the conversation.

Foreclosure Externalities: Some New Evidence
Kristopher Gerardi, Eric Rosenblatt, Paul S. Willen, and Vincent W. Yao
Working Paper 2012-11 (August)
Although all distressed properties have negative effects on nearby properties' values, the authors find that the magnitude of the effects is economically small, peaks prior to the property's completion of the foreclosure process, and goes to zero about a year after a new owner buys the property from the bank.

A Closer Look at Nonparticipants During and After the Great Recession
Julie L. Hotchkiss, M. Melinda Pitts, and Fernando Rios-Avila
Working Paper 2012-10 (August)
Around the 2008 recession, people increasingly gave"schooling" and "other" as reasons for leaving the labor market. Using matched individual-level data, the authors examine the reasons behind this shift and its implications for the labor force.

Bayesian Semiparametric Multivariate GARCH Modeling
Mark J. Jensen and John M. Maheu
Working Paper 2012-9 (July)
Examining comovements in asset returns, the authors propose a flexible Bayesian nonparametric distribution for asset returns that can capture general forms of asymmetry, thick tails, and correlations.

Responding to a Shadow Banking Crisis: The Lessons of 1763
Stephen Quinn and William Roberds
Working Paper 2012-8 (June)
A European financial crisis in 1763 had notable parallels with the recent financial crisis. Examining data and circumstances from the eighteenth century crisis, the authors provide contrasts with the events of late 2008.

Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis
Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen
Working Paper 2012-7 (May)
The choices made by homeowners and financial institutions prior to the financial crisis didn't seem so bad at the time, but in hindsight they proved disastrous. New Atlanta Fed research looks at what led to some of these decisions and how policymakers should address them in the future.

Estimating a Semiparametric Asymmetric Stochastic Volatility Model with a Dirichlet Process Mixture
Mark J. Jensen and John M. Maheu
Working Paper 2012-6 (April)
The authors develop a novel way to model the correlation between returns and volatility, enabling them to examine how volatility responds to unexpected market movement.

Some Unpleasant Properties of Log-Linearized Solutions When the Nominal Rate Is Zero
R. Anton Braun, Lena Mareen Körber, and Yuichiro Waki
Working Paper 2012-5a (Revised September 2012)
The authors examine the nonlinearity created by a zero lower bound on the nominal interest rate. They demonstrate that the log-linearized equilibrium conditions can give an incorrect classification of the types of zero-bound equilibria that can arise in the true economy.

The Wage Impact of Undocumented Workers
Julie L. Hotchkiss, Myriam Quispe-Agnoli, and Fernando Rios-Avila
Working Paper 2012-4 (March)
Using data from Georgia, the authors find that earnings of a documented worker employed by a firm that hires undocumented workers are marginally lower than if he or she were employed by a firm that does not hire undocumented workers.

Human Capital Portfolios
Pedro Silos and Eric Smith
Working Paper 2012-3 (February)
The authors assess the trade-off between diversification and specialization in portfolios of skills when there is uncertainty about occupational fit. Forced specialization decreases income growth but also decreases inequality.

Does Employing Undocumented Workers Give Firms a Competitive Advantage?
J. David Brown, Julie L. Hotchkiss, and Myriam Quispe-Agnoli
Working Paper 2012-2a (Revised November 2012)
The authors find that a firm not employing undocumented workers is at a competitive disadvantage, especially if its rivals do. However, they also determine that the impact of employing undocumented workers varies across sectors and with the skill level of the workers, among other factors.

Making the Case for a Low Intertemporal Elasticity of Substitution
R. Anton Braun and Tomoyuki Nakajima
Working Paper 2012-1 (January)
The responsiveness of consumption growth to changes in expected interest rates plays a central role in dynamic decision making. The authors provide some new evidence that this elasticity is small.

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