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Research Notes–November 2004

Featuring research published in October 2004

Macroeconomics

Monetary Explanations of the Great Depression: A Selective Survey of Empirical Evidence
Economic Review 2004Q3
Looking at recent macroeconomic modeling efforts and empirical work, the authors consider the difficulties in coming to a consensus about whether the Federal Reserve’s monetary policies were the primary cause of the Great Depression.

Employment Growth and Labor Force Participation: How Many Jobs Are Enough?
Working Paper 2004-25
This paper demonstrates that, because of slowing labor force participation rates, the usual estimates of job creation needed to keep unemployment in check are too high. It is estimated that only 98,000 jobs (rather than the usual goal of 150,000 jobs) need to be created per month to absorb the growing labor force. As the population ages, the labor force will grow even more slowly, and the number of jobs that need to be created will decline.

Dollar Down in September
In September the average monthly value for the trade-weighted dollar index of 15 major currencies tracked by the Federal Reserve Bank of Atlanta declined 0.5 percent.

Finance

Banks and the Growing Remittance Market
EconSouth 2004Q3
As the immigrant population in the United States booms, the amount of money sent out of the country is skyrocketing. Banks are taking steps to enter the lucrative remittance market despite significant cultural barriers.

Modeling the Term Structure of Interest Rates: An Introduction
Economic Review 2004Q3
The yield curve, or the term structure of interest rates, plays a central role in the economy. This article presents a model of the term structure that takes into account the ongoing uncertainty about an asset’s price over time. The article focuses on modeling the dynamics of the state-price deflator, which depend directly on the interest rate and the price of risk.

Fussing and Fuming over Fannie and Freddie: How Much Smoke, How Much Fire?
Working Paper 2004-26
The roles of Fannie Mae and Freddie Mac have become increasingly controversial in the modern world of residential mortgage finance. The authors describe the special features of these two companies and their roles in the mortgage markets and then discuss the controversies that surround the companies and offer recommendations for improvements in public policy.

Agency Problems and Goal Conflicts
Working Paper 2004-24
Agency theory is used to evaluate how the European Union (EU) may deal with the resolution of goal and agency conflicts in dealing with failing financial institutions. Experience in the United States suggests that the financial and regulatory structure being put in place is not likely to be robust to the failure of a large EU institution that threatens the solvency of the deposit insurance fund or that poses systemic risk.

Regional

Trucking: Where the Rubber Meets the Road
EconSouth 2004Q3
The trucking industry today is on the upswing after a deep and difficult shakeout following the 2001 recession. The surviving carriers are enjoying higher profits and a rising demand for their services. But to remain in business over the long haul, trucking firms must continue to innovate to meet the persistent challenges of driver shortages and rising costs.

Paradise Found (or Lost)?
EconSouth 2004Q3
The tide of older Americans moving into Florida is rising. While the newcomers bring affluence, policymakers are confronting the issues caused by their rapidly swelling ranks.