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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.


High-Growth Firms in Georgia
Taelim Choi, John C. Robertson, and Anil Rupasingha
Working Paper 2013-20 (December)
Looking at high-growth firms in Georgia, the authors find that a small number of firms make a disproportionately large contribution to overall job creation. But the number and impact of these high-growth firms have declined during the last decade.

Estimating the Holdout Problem in Land Assembly
Chris Cunningham
Working Paper 2013-19 (December)
The author looks at the effect on land prices when various parcels of land are sought for redevelopment purposes. He finds that land bought in the process of assembling property for redevelopment commands an 18 percent premium, though this premium falls with a parcel's relative size in the assemblage.

Do Homeowners Associations Mitigate or Aggravate Negative Spillovers from Neighboring Homeowner Distress?
Ron Cheung, Chris Cunningham, and Rachel Meltzer
Working Paper 2013-18 (December)
The authors look at how property prices respond to homeowner distress and foreclosure when the properties belong to a homeowners association (HOA). They find that properties in HOAs can be less affected by more distressed neighbor homes compared with non-HOA properties.

Labor Market Polarization and International Macroeconomic Dynamics
Federico S. Mandelman
Working Paper 2013-17 (December)
Assessing the polarization of the U.S. labor market, the author demonstrates that different skill groups experienced varying rates of change in their share of employment during each of the last three decades. The proposed model rationalizes these employment trends.

Flexible Prices, Labor Market Frictions, and the Response of Employment to Technology Shocks
Federico S. Mandelman and Francesco Zanetti
Working Paper 2013-16 (December)
Examining the assertion that a positive technology shock leads to a decline in labor inputs, the authors develop a flexible price model that allows frictions in the labor market to generate a negative employment response to a technology shock. They conclude that these frictions account for the fall in labor inputs.

Measuring Capital Adequacy Supervisory Stress Tests in a Basel World
Larry D. Wall
Working Paper 2013-15 (December)
The author discusses a variety of ways that stress tests could be used to mitigate weaknesses in the Basel capital ratios but notes the tests' effectiveness in practice depends in large part upon supervisory discretion.

The Adoption of Stress Testing: Why the Basel Capital Measures Were Not Enough
Larry D. Wall
Working Paper 2013-14 (December)
The author argues that the 2009 stress tests helped restore credibility in bank's capital by addressing concerns about overstated asset—and equity—values in the Basel ratios.

Small and Orthodox Fiscal Multipliers at the Zero Lower Bound
R. Anton Braun, Lena Mareen Körber, and Yuichiro Waki
Working Paper 2013-13 (December)
What are the effects of higher government purchases on output in a liquidity trap? An emerging consensus is that the government purchase output multiplier is well above one in New Keynesian models. The authors find instead that it is generally close to or even less than one.

Monetary Policy Surprises, Positions of Traders, and Changes in Commodity Futures Prices
Nikolay Gospodinov and Ibrahim Jamali
Working Paper 2013-12 (November)
The authors examine the effect of monetary policy on energy and metal prices. They find that the positions of futures traders are the channel through which monetary policy shocks are propagated to commodity price changes.

Minimum Distance Estimation of Possibly Non-Invertible Moving Average Models
Nikolay Gospodinov and Serena Ng
Working Paper 2013-11 (November)
The authors consider estimation of non-invertible moving average models with non-Gaussian errors. In the application considered, they show overwhelming evidence of non-invertibility in certain portfolio returns.

Entry, Exit, and the Determinants of Market Structure
Timothy Dunne, Shawn D. Klimek, Mark J. Roberts, and Daniel Yi Xu
Working Paper 2013-10 (October)
The authors examine firm dynamics and competition in two health-service industries. Using information on underserved markets, the study examines alternative subsidies to influence provider participation.

Misspecification-Robust Inference in Linear Asset Pricing Models with Irrelevant Risk Factors
Nikolay Gospodinov, Raymond Kan, and Cesare Robotti
Working Paper 2013-9 (October)
The authors propose a linear asset pricing model selection procedure that restores standard inference and is effective in eliminating factors that do not improve the model's pricing ability. They use simulations and empirical applications to demonstrate the practical relevance of their analysis.

A Staggered Pricing Approach to Modeling Speculative Storage: Implications for Commodity Price Dynamics
Hirbod Assa, Amal Dabbous, and Nikolay Gospodinov
Working Paper 2013-8 (September)
The authors incorporate a staggered price feature into the standard speculative storage model and assess its effects on the time series properties of commodity prices. The estimation results lend empirical support to the possibility of staggered prices.

Optimal Fiscal Policy with Recursive Preferences
Anastasios G. Karantounias
Working Paper 2013-7 (September)
Examining optimal capital and labor income taxation in a business cycle model where attitude towards risk is distinct from attitude towards time, the author finds that it is no longer optimal to make the welfare cost of distortionary taxation constant over states and dates. His finding significantly alters standard taxation prescriptions.

Land Prices and Unemployment
Zheng Liu, Jianjun Miao, and Tao Zha
Working Paper 2013-6 (September)
Integrating the housing market and the labor market in a dynamic general equilibrium model, the authors find that a 10 percent drop in land price leads to a 0.34 percentage point increase in the unemployment rate.

A Moment-Matching Method for Approximating Vector Autoregressive Processes by Finite-State Markov Chains
Nikolay Gospodinov and Damba Lkhagvasuren
Working Paper 2013-5 (September)
The authors propose a method for approximating vector autoregressions by finite-state Markov chains. Their proposed method tends to outperform the existing methods for approximating highly persistent multivariate processes.

Unemployment, Negative Equity, and Strategic Default
Kristopher Gerardi, Kyle F. Herkenhoff, Lee E. Ohanian, and Paul S. Willen
Working Paper 2013-4 (August)
Although job loss and negative equity both loom large in a homeowner's decision to default, the authors use household-level data to find that a household's employment status is the strongest predictor of defaults. They also find that the vast majority of homeowners who default do not have enough liquid assets to make a single monthly mortgage payment, which calls into question the significance of strategic default in the mortgage market.

Even One Is Too Much: The Economic Consequences of Being a Smoker
Julie L. Hotchkiss and M. Melinda Pitts
Working Paper 2013-3 (July)
That smoking leads to lower wages is well established, but what factors are behind this negative relationship? Examining the wage gap between smokers and nonsmokers, the authors find that productivity is not the biggest factor hindering smokers' lagging wages. Rather, other characteristics smokers bring to the market play a larger role.

Old, Sick, Alone, and Poor: A Welfare Analysis of Old-Age Social Insurance Programs
R. Anton Braun, Karen A. Kopecky, and Tatyana Koreshkova
Working Paper 2013-2 (July)
Do Social Security, Medicaid and other means-tested social insurance programs benefit retirees? The authors find that means-tested social insurance programs enhance welfare by providing the aged with insurance against medical expense risks such as nursing home stays. When these programs are available, the authors find there is no need for Social Security.

Perturbation Methods for Markov-Switching DSGE Models
Andrew Foerster, Juan Rubio-Ramírez, Daniel F. Waggoner, and Tao Zha
Working Paper 2013-1 (March)
The authors develop a methodology for constructing approximations to Markov-switching models and identify the bottleneck of obtaining all approximated solutions. Application to different models illustrates its feasibility and practicality.

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