Working Papers - Federal Reserve Bank of Atlanta - FRB Atlanta Several series of papers presenting the scholarly research of Atlanta Fed staff economists and visiting scholars. Community Affairs discussion papers address topical issues in community development. en-us Atlanta Fed Logo Individual Social Capital and Migration Fri, 16 Mar 2018 16:19:00 EST New Atlanta Fed research examines the role of social capital in migration decisions. Bayesian Inference and Prediction of a Multiple-Change-Point Panel Model with Nonparametric Priors Thu, 22 Feb 2018 13:25:00 EST New Atlanta Fed research studies innovative models using Bayesian inference. Some Like It Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy Tue, 30 Jan 2018 12:59:00 EST New Atlanta Fed research studies economic effects of low unemployment. Overconfidence, Subjective Perception, and Pricing Behavior Tue, 28 Nov 2017 12:48:00 EST New Atlanta Fed research studies price setting and overconfidence. General Aggregation of Misspecified Asset Pricing Models Thu, 16 Nov 2017 11:30:00 EST Research studies the general aggregation of misspecified asset pricing models. Asset Co-movements: Features and Challenges Thu, 16 Nov 2017 12:00:00 EST New research studies U.S. and international asset co-movements. Optimal Time-Consistent Taxation with Default Thu, 16 Nov 2017 12:30:00 EST New research studies optimal time-consistent distortionary taxation. Too Good to Be True? Fallacies in Evaluating Risk Factor Models Thu, 16 Nov 2017 11:00:00 EST New Atlanta Fed research studies fallacies in evaluating risk factor models. A Tax Plan for Endogenous Innovation Thu, 16 Nov 2017 13:00:00 EST New Atlanta Fed research studies fiscal incentives to boost innovation. Taxes and Market Hours: The Role of Gender and Skill Mon, 25 Sep 2017 08:38:00 EST Cross-country differences in market hours are mainly due to the hours of women, especially low-skilled women. Taxes and family-care subsidies can account for a substantial fraction of the cross-country differences in market hours by gender and skill. Family Welfare and the Cost of Unemployment Mon, 18 Sep 2017 15:51:00 EST For families overall, the authors find that an unemployment rate increase of 1 percentage point and a 1.8 percent rise in the price level diminish family welfare about as much as a loss of $1,000 in nonlabor income. Losing Public Health Insurance: TennCare Disenrollment and Personal Financial Distress Thu, 31 Aug 2017 12:13:00 EST In 2005, about 200,000 people were disenrolled from TennCare, Tennessee's Medicaid program. Examining the effects, the authors provide the first evidence of the impact of the loss of government-sponsored health insurance on individuals' financial well-being. An Early Experiment with "Permazero" Mon, 08 May 2017 12:29:00 EST The authors examine a monetary regime of the Bank of Amsterdam in the eighteenth century that held policy interest rates near zero for more than a century. They find that the Bank's inability to stabilize large shocks brought adverse results. Fracking and Mortgage Default Wed, 29 Mar 2017 13:43:00 EST Examining the effects of hydraulic fracturing, or "fracking," on mortgage default, the authors consider homes along the Marcellus Formation in Pennsylvania. Using the underlying geology to predict drilling activity, and looking only at mortgages originated before the fracking boom, they find that fracking appears to lower the likelihood of default, most likely by increasing employment. Old, Frail, and Uninsured: Accounting for Puzzles in the U.S. Long-Term Care Insurance Market Tue, 21 Mar 2017 10:58:00 EST Half of elderly individuals will experience a nursing home stay, and the risk of out-of-pocket expenses that exceed $200,000 is significant. Yet only 10 percent of them have private long-term care insurance, and many applications are rejected. We attribute these observations to adverse selection, insurers’ overhead costs, and Medicaid. Foreign Investment, Regulatory Arbitrage, and the Risk of U.S. Banking Organizations Tue, 21 Mar 2017 10:56:00 EST Investigating how cross-country differences in banking regulation and supervision affect international banking flows, the authors find that U.S. bank holding companies are more likely to operate subsidiaries in countries with weaker regulation and supervision. Agency Conflicts in Residential Mortgage Securitization: What Does the Empirical Literature Tell Us? Tue, 21 Mar 2017 10:55:00 EST Conflicts of interest in securitization are believed to have contributed to the recent housing crisis. The author reviews existing empirical research and finds little support for this conclusion, except in the case of low-documentation mortgages. The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure Tue, 13 Dec 2016 10:14:00 EST The authors examine the effects of monetary policy shocks using structural vector autoregressions (SVARs). They consistently find that an increase in the fed funds rate induces a contraction in output. Narrative Sign Restrictions for SVARs Tue, 13 Dec 2016 10:18:00 EST The authors identify structural vector autoregressions (SVARs) using narrative sign restrictions. They show that narrative sign restrictions are highly informative and that adding a single narrative sign restriction sharpens inference of SVARs originally identified via traditional sign restrictions. Killer Debt: The Impact of Debt on Mortality Wed, 30 Nov 2016 10:38:00 EST The authors explore the impact of severely delinquent debt and creditworthiness on health. They find that delinquent debt resulting from a financial crisis has lasting effects on health that are substantial enough to increase mortality rates. The Usefulness of the Median CPI in Bayesian VARs Used for Macroeconomic Forecasting and Policy Wed, 16 Nov 2016 15:27:00 EST Investigating the forecasting performance of the median Consumer Price Index (CPI) in a set of statistical models often used in a monetary policy setting, the authors find including the median CPI improves the forecasting accuracy of inflation and the central bank's primary instrument for monetary policy the federal funds rate. Wage Determination in Social Occupations: The Role of Individual Social Capital Thu, 03 Nov 2016 16:45:00 EST The authors examine factors explaining the difference in wages observed between social and nonsocial occupations. Much of the difference is explained by unobserved ways workers in those occupations differ from one another. A Quantitative Theory of Time-Consistent Unemployment Insurance Thu, 03 Nov 2016 16:22:00 EST The authors find that federal government's discretionary extensions of unemployment insurance (UI) during recessions can be explained by a lack of policy commitment. Our model suggests that a lower unemployment rate could have been achieved if the government had been able to commit to no UI extensions during the 2008–09 recession. Although the extensions led to ex post higher welfare during 2008–13, extensions would not necessarily be welfare improving for a shorter and less severe recession. Optimal Long-Term Contracting with Learning Thu, 03 Nov 2016 16:04:00 EST With uncertain profitability in dynamic agency relationship, the agent has incentive to shirk to manipulate the principal's future belief, giving rise to a long-lasting hidden information problem. The optimal contract implements time-decreasing effort and has a feature of "stock options" in that incentive goes up after good performance. Impacts of Monetary Stimulus on Credit Allocation and Macroeconomy: Evidence from China Thu, 22 Sep 2016 11:09:00 EST Kaiji Chen, Patrick Higgins, Daniel F. Waggoner, and Tao ZhaWorking Paper 2016-9a (Revised October 2017)Attempting to better understand China monetary policy, the authors develop a framework that allows them to quantify the policy effects on output and prices. They also find evidence that monetary policy is designed to support real GDP growth mandated by the central government while resisting inflation pressures. Are Lemons Sold First? Dynamic Signaling in the Mortgage Market Mon, 18 Jul 2016 16:25:00 EST Using detailed information about the residential mortgage market, the authors find a positive relationship between a mortgage's performance and its time to sale, providing some of the first evidence of a signaling mechanism through delay of trade. Forecasting China's Economic Growth and Inflation Tue, 12 Jul 2016 09:54:00 EST Patrick Higgins, Tao Zha, and Karen ZhongWorking Paper 2016-7 (July)The authors develop a model that forecasts China's gross domestic product growth and consumer price index inflation. Their model predicts that China's future GDP growth will be L-shaped, not U-shaped. Fiscal Austerity in Ambiguous Times Thu, 31 Mar 2016 09:32:00 EST Axelle Ferrière and Anastasios G. KarantouniasWorking Paper 2016-6 (March)The authors examine how public debt should be managed when uncertainty about the business cycle is widespread. They find that front-loaded fiscal consolidations and balanced budgets in the long run are optimal if the intertemporal elasticity of substitution is sufficiently low. Uninsured Risk, Stagnation, and Fiscal Policy Fri, 12 Feb 2016 09:00:00 EST R. Anton Braun and Tomoyuki NakajimaWorking Paper 2016-4a Revised March 2016 (Original February 2016)Wealth inequality is rising in Japan. How should fiscal policy respond? The authors find that lowering the tax rate on capital reduces wealth inequality. This same policy increases economic activity and improves welfare. The Role of Commodity Prices in Forecasting U.S. Core Inflation Fri, 12 Feb 2016 09:31:00 EST Nikolay GospodinovWorking Paper 2016-5 (February)The author examines the ability of an aggregator of three commodity futures prices to forecast U.S. core inflation. He finds the predictive power of these convenience yields for future inflation to be significant. Forecasts of Inflation and Interest Rates in No-Arbitrage Affine Models Tue, 09 Feb 2016 13:41:00 EST Nikolay Gospodinov and Bin WeiWorking Paper 2016-3 (February)Examining the forecasting ability of a term structure model of nominal and real yields, the authors find that incorporating inflation derivatives and oil futures into their affine framework tends to improve inflation and yield forecasts, respectively. What We Learn from China's Rising Shadow Banking: Exploring the Nexus of Monetary Tightening and Banks' Role in Entrusted Lending Fri, 29 Jan 2016 09:52:00 EST Kaiji Chen, Jue Ren, and Tao ZhaWorking Paper 2016-1 (January)Arguing that China's rising shadow banking sector was linked to potential balance-sheet risks in the banking system, the authors construct a micro loan dataset and develop a theoretical framework explaining links between China's monetary policy, shadow banking, and traditional banking. The Federal Home Loan Bank System and U.S. Housing Finance Fri, 29 Jan 2016 09:30:00 EST W. Scott FrameWorking Paper 2016-2 (January)Examining the role of the Federal Home Loan Bank System in the U.S. housing finance system, the author highlights its role as a provider of liquidity to its members and discusses its perception as the "lender of next-to-last resort." Fitting a Distribution to Survey Data for the Half-Life of Deviations from PPP Tue, 15 Dec 2015 15:15:00 EST Mark FisherWorking Paper 2015-15 (December)Incorporating a nonparametric Bayesian approach to fitting a distribution to certain survey data, the author represents an unknown density as an average of shape-restricted Bernstein polynomials. For regularization, his approach adopts a sparsity prior. Project Modifications and Bidding in Highway Procurement Auctions Mon, 07 Dec 2015 16:08:00 EST Dakshina G. De Silva, Timothy Dunne, Georgia Kosmopoulou, and Carlos LamarcheWorking Paper 2015-14 (December)Examining bidding behavior by highway contractors, the authors look at the relationship between bidding and project modifications in Texas. They find a reduction in the use of change orders decreased both bidder and project procurement costs. Liquidity Backstops and Dynamic Debt Runs Thu, 03 Dec 2015 14:21:00 EST Bin Wei and Vivian Z. YueWorking Paper 2015-13 (December)Exploring the role of liquidity backstops in financial stability, the authors develop and structurally estimate a dynamic model of debt runs on municipal bond markets during the financial crisis. They estimate the value of a liquidity backstop in mitigating debt runs to be about 14 basis points per annum. Cross-Border Banking on the Two Sides of the Atlantic: Does It Have an Impact on Bank Crisis Management? Tue, 17 Nov 2015 11:39:00 EST Maria J. Nieto and Larry D. WallWorking Paper 2015-11 (November)Examining the cross-border banking integration in the United States and the European Union, the authors discuss the extent of integration before the crisis, how the differing degrees of integration affected their respective response during the crisis, and how integration is evolving postcrisis. Robust Estimation of Nonstationary, Fractionally Integrated, Autoregressive, Stochastic Volatility Tue, 17 Nov 2015 11:50:00 EST Mark J. JensenWorking Paper 2015-12 (November)Studying dynamics in the U.S. stock market, the author develops an estimator designed for nonstationary, fractionally integrated, autoregressive, stochastic volatility. The estimator produces reliable point estimates of the fractional differencing parameters and empirically finds the volatility in the U.S. equity market to be mean reverting but whose variance is infinite. The Impact on Employment and Hours of Allowing Sunday Alcohol Sales in Georgia Mon, 02 Nov 2015 11:24:00 EST Julie L. Hotchkiss and Yanling QiWorking Paper 2015-10 (November)The authors examine the effect of Georgia's removal of Sunday alcohol sales restrictions on employment and hours in the beer, wine, and liquor retail sales industry. They find significant increases in average weekly hours but no employment increase in counties that began allowing Sunday sales. Asymptotic Variance Approximations for Invariant Estimators in Uncertain Asset-Pricing Models Wed, 07 Oct 2015 11:00:00 EST Nikolay Gospodinov, Raymond Kan, and Cesare RobottiWorking Paper 2015-9 (October)Deriving explicit expressions for the asymptotic variances of the maximum likelihood and continuously updated GMM estimators under potentially misspecified models, the authors propose robust variance estimators that allow the researcher to conduct valid inference even when the model is rejected by the data. Foreign Exchange Predictability during the Financial Crisis: Implications for Carry Trade Profitability Thu, 27 Aug 2015 10:56:00 EST Stanislav Anatolyev, Nikolay Gospodinov, Ibrahim Jamali, and Xiaochun LiuWorking Paper 2015-6 (August)Examining carry trade strategies during and after the financial crisis, the authors use a flexible approach to modeling currency returns. Their results show that a decomposition model produces higher forecast and directional accuracy than any of the competing models. Multivariate Return Decomposition: Theory and Implications Thu, 27 Aug 2015 10:57:00 EST Stanislav Anatolyev and Nikolay GospodinovWorking Paper 2015-7 (August)Proposing a model based on multivariate decomposition of multiplicative components of several returns, the authors illustrate the usefulness of their proposed method by applying it to the prediction of bond returns. Assessing the Macroeconomic Impact of Bank Intermediation Shocks: A Structural Approach Thu, 27 Aug 2015 10:58:00 EST Kaiji Chen and Tao ZhaWorking Paper 2015-8 (August)Assessing the empirical importance of shocks to the supply of bank-intermediated credit, the authors develop a model to show how credit supply shocks affect the production economy. They further show that a credit-supply shock of one standard deviation generates an output loss of 1 percent. Government and Private E-Money-Like Systems: Federal Reserve Notes and National Bank Notes Tue, 11 Aug 2015 12:31:00 EST Warren E. Weber CenFIS Working Paper 2015-3 (August)In the United States from 1914 to 1935, both privately issued and government-issued bank notes were in circulation simultaneously. The author examines this period and considers the government's potential role in using e-money. Trends and Cycles in China's Macroeconomy Mon, 15 Jun 2015 10:04:00 EST Chun Chang, Kaiji Chen, Daniel F. Waggoner, and Tao ZhaWorking Paper 2015-5 (June)China's large and growing economy has attracted a great deal of scrutiny. Documenting various patterns in China's macroeconomy, the authors discuss reasons behind the unusual cyclical behaviors they observe, and they also examine some of the factors that characterize China's post-1990s economic transition. Will Talent Attraction and Retention Improve Metropolitan Labor Markets? Fri, 17 Apr 2015 12:32:00 EST Stuart Andreason Working Paper 2015-4 (April)A number of metropolitan areas have made efforts to attract highly educated and skilled workers with the goal of improving their labor markets. The author examines rates of educational attainment in some of these metropolitan areas and its varying impact on labor market outcomes. The Failure of Supervisory Stress Testing: Fannie Mae, Freddie Mac, and OFHEO Mon, 30 Mar 2015 15:36:00 EST W. Scott Frame, Kristopher Gerardi, and Paul S. Willen Working Paper 2015-3 (March)Fannie Mae and Freddie Mac underwent stress testing to ensure they could withstand a downturn in the housing market. The authors find that the stress tests were badly constructed and thus failed to predict how severely the housing swoon would affect the agencies. The Failure of Supervisory Stress Testing: Fannie Mae, Freddie Mac, and OFHEO Mon, 30 Mar 2015 15:36:00 EST W. Scott Frame, Kristopher Gerardi, and Paul S. Willen Working Paper 2015-3 (March)Fannie Mae and Freddie Mac underwent stress testing to ensure they could withstand a downturn in the housing market. The authors find that the stress tests were badly constructed and thus failed to predict how severely the housing swoon would affect the agencies. The Rescue of Fannie Mae and Freddie Mac Wed, 25 Mar 2015 09:35:00 EST W. Scott Frame, Andreas Fuster, Joseph Tracy, and James Vickery Working Paper 2015-2 (March)In 2008, the U.S. government rescued the housing agencies Fannie Mae and Freddie Mac. The authors ask how effectively the conservatorship stabilized mortgage markets and whether the move served larger macroeconomic objectives. The Efficiency of Private E-Money-Like Systems: The U.S. Experience with State Bank Notes Tue, 17 Mar 2015 10:00:00 EST Warren E. Weber CenFIS Working Paper 2015-1 (March)Before 1863 in the United States, each bank issued its own distinct bank notes. Today's e-money shares many of the characteristics of those notes. The author examines lessons relevant to e-money from the U.S. experience with state bank notes. The Efficiency of Private E-Money-Like Systems: The U.S. Experience with National Bank Notes Tue, 17 Mar 2015 10:00:00 EST Warren E. Weber CenFIS Working Paper 2015-2 (March)Starting in 1864, notes of the individual national banks were the predominant medium of exchange in the United States. Comparing national bank notes with e-money, the author suggests that a privately issued e-money system can operate efficiently with appropriate government intervention, regulation, and supervision. Lessons for Forecasting Unemployment in the United States: Use Flow Rates, Mind the Trend Thu, 26 Feb 2015 13:30:00 EST Brent H. Meyer and Murat Tasci Working Paper 2015-1 (February)What is the most accurate method of forecasting the unemployment rate? Using a variety of approaches (including professional forecasters and various models), the authors evaluate the accuracy of near- and longer-term unemployment forecasting methods. Offshoring, Low-Skilled Immigration, and Labor Market Polarization Wed, 17 Dec 2014 15:00:00 EST Federico S. Mandelman and Andrei Zlate Working Paper 2014-28 (December)Many middle-skill jobs have disappeared, and employment for high- and low-skill occupations has been expanding. High-skill real wages increased robustly but remained subdued for both low- and middle-skill workers. The authors attribute these outcomes to the rise in offshoring and low-skilled immigration. The Inflation Expectations of Firms: What Do They Look Like, Are They Accurate, and Do They Matter? Wed, 17 Dec 2014 14:30:00 EST Michael F. Bryan, Brent H. Meyer, and Nicholas B. Parker Working Paper 2014-27a (Revised January 2015)Using a large survey of businesses, the authors investigate firms' inflation expectations and uncertainties. Their results demonstrate that firms' inflation expectations are unbiased predictors of year-ahead observed inflation and that the accuracy of firms' inflation expectations are positively related to their uncertainty about future inflation. A Tale of Two Decades: Relative Intra-family Earning Capacity and Changes in Family Welfare over Time Thu, 11 Dec 2014 17:00:00 EST Julie L. Hotchkiss, Robert E. Moore, Fernando Rios-Avila, and Melissa R. Trussell Working Paper 2014-26a (Revised November 2015)The authors find that the decline in real wages has negatively affected family welfare over time. However, the simultaneous rise in the female/male wage ratio means that families in which the wife earned a higher wage fared better than other families. Optimal Taxation and Debt with Uninsurable Risks to Human Capital Accumulation Fri, 24 Oct 2014 08:00:00 EST Piero Gottardi, Atsushi Kajii, and Tomoyuki Nakajima Working Paper 2014-24 (November)Attempting to determine the optimal level of both taxes and the debt level, the authors show that, in the face of uninsurable risks to human capital, it is beneficial to tax both labor and capital income and to have positive government debt. The Dynamic Striated Metropolis-Hastings Sampler for High-Dimensional Models Fri, 24 Oct 2014 06:30:00 EST Daniel F. Waggoner, Hongwei Wu, and Tao Zha Working Paper 2014-21 (November)Estimation and evaluation of multivariate dynamic models occupy an important role in forecasting and policy analysis. The authors develop a simulator that copes with irregular distributions in high-dimensional models and test it against two dynamic models. The Implications of a Graying Japan for Government Policy Fri, 24 Oct 2014 05:00:00 EST R. Anton Braun and Douglas H. Joines Working Paper 2014-18 (November)The fraction of the Japanese population over age 65 is increasing rapidly. As Japan ages, government outlays will rise sharply. The authors quantify the size of the resulting fiscal imbalances and analyze alternative strategies for correcting them. Impact of First-Birth Career Interruption on Earnings: Evidence from Administrative Data Fri, 24 Oct 2014 07:30:00 EST Julie. L Hotchkiss, M. Melinda Pitts, and Mary Beth Walker Working Paper 2014-23 (November)Exploring the role a woman's labor intermittency decisions play in wage determination, the authors find that penalty for being intermittently attached to the labor force increases with the woman's education level. Do Minimum Wages Really Increase Youth Drinking and Drunk Driving? Fri, 24 Oct 2014 06:00:00 EST Joseph J. Sabia, M. Melinda Pitts, and Laura Argys Working Paper 2014-20 (November)Previous research indicated that increases in minimum wages led to increased drunk driving–related fatalities among youths. However, the authors find little evidence of this causal relationship and suggest a much smaller set of plausible causal channels. Constrained Inefficiency and Optimal Taxation with Uninsurable Risks Fri, 24 Oct 2014 08:30:00 EST Piero Gottardi, Atsushi Kajii, and Tomoyuki Nakajima Working Paper 2014-25 (November)Examining certain types of labor and capital income, the authors attempt to determine how they should be taxed. They use a general equilibrium model with incomplete markets to show when different levels of taxation improve welfare. The Gap between the Conditional Wage Distributions of Incumbents and the Newly Hired Employees: Decomposition and Uniform Ordering Fri, 24 Oct 2014 07:00:00 EST Esfandiar Maasoumi, M. Melinda Pitts, and Ke Wu Working Paper 2014-22 (November)Wage differentials among different cohorts of employees have been the focus of much attention from labor economists. Using data from 1996 to 2012, the authors examine the wage gap between incumbent employees and the newly hired, finding numerous factors at work in wage distributions. Remittances, Entrepreneurship, and Employment Dynamics over the Business Cycle Fri, 24 Oct 2014 05:30:00 EST Alan Finkelstein Shapiro and Federico S. Mandelman Working Paper 2014-19 (November)The authors study the impact of cyclical remittances on labor market and business cycle dynamics and highlight the importance of accounting for labor force participation and self-employment to match key stylized facts in emerging economies. Death of a Reserve Currency Thu, 18 Sep 2014 00:00:00 EST Stephen Quinn and William Roberds Working Paper 2014-17 (September)The Dutch bank florin the dominant currency in Europe during much of the 17th and 18th centuries lost its reserve currency status during the period 1781–92. The authors reconstruct the Bank of Amsterdam's balance sheet to determine how the bank's accommodative policies led to loss of control over the value of its money. Perturbation Methods for Markov-Switching DSGE Models Wed, 17 Sep 2014 00:00:00 EST Andrew Foerster, Juan Rubio-Ramírez, Daniel F. Waggoner, and Tao ZhaWorking Paper 2014-16 (August)Examining structural shifts in the economy, the authors propose a methodology that constructs high-order approximations to the solutions of certain types of macroeconomic models. They use two examples to illustrate the tractability of their methodology. Liquidity Premia, Price-Rent Dynamics, and Business Cycles Mon, 15 Sep 2014 00:00:00 EST Jianjun Miao, Pengfei Wang, and Tao ZhaWorking Paper 2014-15 (August)House prices have fluctuated more widely than house rents in the last 25 years. The authors develop a model that assesses the empirically important role that price-rent fluctuations play in the business cycle. The Response of Stock Market Volatility to Futures-Based Measures of Monetary Policy Shocks Fri, 12 Sep 2014 00:00:00 EST Nikolay Gospodinov and Ibrahim JamaliWorking Paper 2014-14 (August)Investigating how changes in stock market volatility respond to changes in monetary policy, the authors show that market participants' uncertainty regarding monetary policy stances affects volatility in the stock market. Hedging and Pricing in Imperfect Markets under Non-Convexity Wed, 10 Sep 2014 00:00:00 EST Hirbod Assa and Nikolay GospodinovWorking Paper 2014-13 (August)The authors study hedging strategies in incomplete markets for a wide range of risk measures and pricing rules. They illustrate their approach with an application on hedging economic risk. Spurious Inference in Unidentified Asset-Pricing Models Mon, 08 Sep 2014 00:00:00 EST Nikolay Gospodinov, Raymond Kan, and Cesare RobottiWorking Paper 2014-12 (August)Examining seemingly anomalous results arising in some asset-pricing models, the authors perform simulations and an empirical application to reveal the spurious nature of inference. Minimum Distance Estimation of Dynamic Models with Errors-In-Variables Thu, 04 Sep 2014 00:00:00 EST Nikolay Gospodinov, Ivana Komunjer, and Serena NgWorking Paper 2014-11 (August)The authors propose a class of estimators for models with mismeasured predictors. They use their methodology to re-examine the Phillips curve in situations where the real activity gap is latent. Family Welfare and the Great Recession Wed, 27 Aug 2014 00:00:00 EST Julie L. Hotchkiss, Robert E. Moore, and Fernando Rios-AvilaWorking Paper 2014-10 (August)Examining the impact of the past recession on family welfare, the authors estimate losses generated by wage and nonlabor income declines experienced across the recession and by labor market constraints existing after the recession. Early Public Banks Sat, 02 Aug 2014 00:00:00 EST William Roberds and François R. VeldeWorking Paper 2014-9 (August)Publicly owned banks have been common in Europe since the 15th century. The authors look at early (pre-1814) attempts by these banks to create a reliable monetary asset. Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength Fri, 01 Aug 2014 00:00:00 EST Julie L. HotchkissWorking Paper 2014-8 (August)Using the raw employment-to-population ratio (EPOP) to measure labor market strength can be problematic. The author proposes an adjustment to EPOP's calculation that disentangles employment outcomes from changes in labor force participation. GDPNow: A Model for GDP "Nowcasting" Mon, 07 Jul 2014 00:00:00 EST Patrick HigginsWorking Paper 2014-7 (July)Many ways exist to nowcast real gross domestic product (GDP) growth. The author develops a bottom-up approach that incorporates much of the source data used to estimate GDP. Risk, Return, and Volatility Feedback: A Bayesian Nonparametric Analysis Tue, 17 Jun 2014 00:00:00 EST Mark J. Jensen and John M. MaheuWorking Paper 2014-6 (June)The authors examine the relationship between risk and return, an intensely scrutinized topic in finance. Their nonparametric approach allows for departure from Gaussianity, resulting in an unambiguous positive relationship between expected excess returns and expected variance. Home Hours in the United States and Europe Tue, 17 Jun 2014 00:00:00 EST Lei Fang and Cara McDanielWorking Paper 2014-5 (June)This paper documents the common decreasing trend in home hours for the United States and a few European countries during the past 50 years. The authors also find that home hours between the United States and Europe are more different for female and young/old age groups. The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities Tue, 01 Apr 2014 00:00:00 EST Manuel Adelino, W. Scott Frame, and Kristopher S. GerardiWorking Paper 2014-4a (Revised March 2017)How did the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac influence the risk characteristics and prices of deals involving subprime private-label mortgage-backed securities? The authors find that mortgage pools involving the GSEs performed better during the financial crisis than similar pools without the GSEs' involvement. Trimmed-Mean Inflation Statistics: Just Hit the One in the Middle Wed, 05 Mar 2014 00:00:00 EST Brent Meyer and Guhan VenkatuWorking Paper 2014-3 (March)Investigating trimmed-means inflation measures, the authors explore whether a particular measure dominates the median consumer price index. Using an equality of prediction test, they find that a large swath of trimmed means have statistically indistinguishable performance. Human Capital Dynamics and the U.S. Labor Market Wed, 05 Feb 2014 00:00:00 EST Lei Fang and Jun NieWorking Paper 2014-2 (February)The authors explore the impact of shocks, unemployment insurance, and human capital dynamics on the unemployment rate in the Great Recession. They emphasize the importance of workers' and firms' endogenous responses to these factors. Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications Tue, 04 Feb 2014 00:00:00 EST Jonas E. Arias, Juan F. Rubio-Ramírez, and Daniel F. WaggonerWorking Paper 2014-1b (Revised October 2017)Some recent research shows that optimism shocks are an important source of business cycle fluctuations and deficit-financed tax cuts are better than deficit-financed spending for increasing output. The authors' new methodology does not support these results. Labor Market Polarization and International Macroeconomic Dynamics Tue, 24 Dec 2013 12:00:00 EST Federico S. MandelmanWorking 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. High-Growth Firms in Georgia Tue, 24 Dec 2013 15:00:00 EST Taelim Choi, John C. Robertson, and Anil RupasinghaWorking 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. Do Homeowners Associations Mitigate or Aggravate Negative Spillovers from Neighboring Homeowner Distress? Tue, 24 Dec 2013 13:00:00 EST Ron Cheung, Chris Cunningham, and Rachel MeltzerWorking 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. Estimating the Holdout Problem in Land Assembly Tue, 24 Dec 2013 14:00:00 EST Chris CunninghamWorking 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. Small and Orthodox Fiscal Multipliers at the Zero Lower Bound Mon, 02 Dec 2013 12:00:00 EST R. Anton Braun, Lena Mareen Körber, and Yuichiro WakiWorking 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. Flexible Prices, Labor Market Frictions, and the Response of Employment to Technology Shocks Mon, 02 Dec 2013 16:00:00 EST Federico S. Mandelman and Francesco ZanettiWorking 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. The Adoption of Stress Testing: Why the Basel Capital Measures Were Not Enough Mon, 02 Dec 2013 13:00:00 EST Larry D. WallWorking 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. Measuring Capital Adequacy Supervisory Stress Tests in a Basel World Mon, 02 Dec 2013 14:00:00 EST Larry D. WallWorking 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. Minimum Distance Estimation of Possibly Non-Invertible Moving Average Models Thu, 14 Nov 2013 12:00:00 EST Nikolay Gospodinov and Serena NgWorking 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. Monetary Policy Surprises, Positions of Traders, and Changes in Commodity Futures Prices Thu, 14 Nov 2013 13:00:00 EST Nikolay Gospodinov and Ibrahim JamaliWorking 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. Entry, Exit, and the Determinants of Market Structure Mon, 28 Oct 2013 13:00:00 EST Timothy Dunne, Shawn D. Klimek, Mark J. Roberts, and Daniel Yi XuWorking 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 Mon, 28 Oct 2013 12:00:00 EST Nikolay Gospodinov, Raymond Kan, and Cesare RobottiWorking 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 Moment-Matching Method for Approximating Vector Autoregressive Processes by Finite-State Markov Chains Fri, 20 Sep 2013 12:00:00 EST Nikolay Gospodinov and Damba LkhagvasurenWorking 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. Land Prices and Unemployment Fri, 20 Sep 2013 13:00:00 EST Zheng Liu, Jianjun Miao, and Tao ZhaWorking 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. Optimal Fiscal Policy with Recursive Preferences Fri, 20 Sep 2013 14:00:00 EST Anastasios G. KarantouniasWorking Paper 2013-7cSeptember 2013 (Revised January 2018)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. A Staggered Pricing Approach to Modeling Speculative Storage: Implications for Commodity Price Dynamics Fri, 20 Sep 2013 15:00:00 EST Hirbod Assa, Amal Dabbous, and Nikolay GospodinovWorking 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. Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default Mon, 05 Aug 2013 00:00:00 EST Kristopher Gerardi, Kyle F. Herkenhoff, Lee E. Ohanian, and Paul S. WillenWorking Paper 2013-4aAugust 2013 (Revised June 2017)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 Thu, 11 Jul 2013 00:00:00 EST Julie L. Hotchkiss and M. Melinda PittsWorking 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 Mon, 08 Jul 2013 00:00:00 EST R. Anton Braun, Karen A. Kopecky, and Tatyana KoreshkovaWorking Paper 2013-2a (Revised February 2015)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 Mon, 18 Mar 2013 00:00:00 EST Andrew Foerster, Juan Rubio-Ramírez, Daniel F. Waggoner, and Tao ZhaWorking 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.