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.


Limited Household Risk Sharing: General Equilibrium Implications for the Term Structure of Interest Rates

Indrajit Mitra and Yu Xu
Working Paper 2020-20
November 2020
The authors present a theory in which nondiversifiable labor income risk plays an important role in the aggregate demand for Treasury securities. Their production-based model relates interest rate dynamics to observable labor market variables. They provide evidence for their predictions.

Stock-Bond Return Correlation, Bond Risk Premium Fundamentals, and Fiscal-Monetary Policy Regime

Erica X.N. Li, Tao Zha, Ji Zhang, and Hao Zhouk
Working Paper 2020-19
October 2020
Using a general equilibrium model with monetary and fiscal policies, the authors show that two distinctive types of shocks—technology and investment—drive both positive and negative correlations between stock and bond returns under two policy regimes.

The Fed Takes On Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF

Simon Gilchrist, Bin Wei, Vivian Z. Yue, and Egon Zakrajšek
Working Paper 2020-18
September 2020
The authors assess the efficacy of the Fed's Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the corporate bond market in the wake of the COVID-19 shock. Using a variety of identification strategies, they quantify the significant beneficial effects of the SMCCF on credit spreads and liquidity.

The Impact of the COVID-19 Pandemic on Business Expectations

Brent H. Meyer, Brian Prescott, and Xuguang Simon Sheng
Working Paper 2020-17
September 2020
Evaluating businesses' reactions to the COVID-19 crisis, the authors find that firms view the pandemic largely as a demand shock rather than a supply shock. Further, they have responded to it by lowering their one-year-ahead inflation expectations, in stark contrast to household inflation expectations.

Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data

Kaiji Chen, Haoyu Gao, Patrick Higgins, Daniel F. Waggoner, and Tao Zha
Working Paper 2020-16
August 2020
The authors study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. They find that infrastructure investment, driven by fiscal policy, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure.

Four Stylized Facts about COVID-19

Andrew G. Atkeson, Karen Kopecky, and Tao Zha
Working Paper 2020-15
August 2020
The authors explore the impact of nonpharmaceutical interventions such as various lockdown policies on reducing the spread of COVID-19. Their findings raise doubt about the importance of such interventions in accounting for the evolution of COVID-19 transmission rates.

Shadow Bank Runs

David Andolfatto and Ed Nosal
Working Paper 2020-14
August 2020
Banking arrangements that embody a depositor redemption protocol of first-come, first-served are viewed as being run-prone. During the recent financial crisis, wholesale and shadow banks experienced runs even though sequential service was absent. The authors show that banks can be run-prone in the absence of sequential service if their operations are subject to fixed costs.

Unemployment Insurance during a Pandemic

Lei Fang, Jun Nie, and Zoe Xie
Working Paper 2020-13a
July 2020 (revised September)
The authors of this working paper analyze the effects of CARES Act unemployment insurance (UI) on the unemployment rate and the number of deaths from COVID-19. One important policy experiment is that the research explores the effect of extending the additional $600 weekly UI payment on unemployment and the number of infections.

Doubts about the Model and Optimal Policy

Anastasios G. Karantounias
Working Paper 2020-12
July 2020
The author of this working paper analyzes optimal policy design in environments where multiple agents exhibit fears of model misspecification. Several applications of the methodology are illustrated. Depending on the application, the leader may have incentives to either amplify or mitigate the inherent pessimism of the follower.

The Dynamics of the Smoking Wage Penalty

Michael E. Darden, Julie L. Hotchkiss, and M. Melinda Pitts
Working Paper 2020-11
July 2020
The authors of this working paper examine the wage gap between cigarette smokers and nonsmokers. Accounting for decisions about smoking, working, education, and occupation, they find that continued heavy smoking in young adulthood results in a wage penalty of 14.8 percent for women and 9.3 percent for men, and the source of the gap differs for men and women.

Decomposing Outcome Differences between HBCU and Non-HBCU Institutions

Mels de Zeeuw, Sameera Fazili, and Julie L. Hotchkiss
Working Paper 2020-10
July 2020
The authors of this working paper assess contributors to observed differences between historically Black colleges and universities (HBCU) and non-HBCU student outcomes. The goal is to identify ways in which HBCUs may improve their relative metrics of student success, such as helping STEM graduates translate their training into higher earnings.

Economic Uncertainty before and during the COVID-19 Pandemic

Dave Altig, Scott Brent Baker, Jose Maria Barrero, Nick Bloom, Phil Bunn, Scarlet Chen, Steven J. Davis, Brent Meyer, Emil Mihaylov, Paul Mizen, Nick Parker, Thomas Renault, Pawel Smietanka, and Greg Thwaites
Working Paper 2020-9
July 2020
The authors of this working paper examine several economic uncertainty indicators before and during the COVID-19 pandemic. Although the indicators showed uncertainty in reaction to the pandemic and its economic fallout, the fluctuations highlight the difference in uncertainty measures between Wall Street and Main Street.

Alternative Methods for Studying Consumer Payment Choice

Oz Shy
Working Paper 2020-8 (June)
Using machine learning techniques applied to consumer diary survey data, the author examines methods for studying consumer payment choice. These techniques, especially when paired with regression analyses, provide useful information for understanding and predicting the payment choices consumers make.

Discount Shock, Price-Rent Dynamics, and the Business Cycle

Jianjun Miao, Pengfei Wang, and Tao Zha
Working Paper 2020-7 (May)
To account for the volatility of the price-rent ratio in commercial real estate, the authors develop a model that identifies the discount shock as the most important factor in driving price-rent dynamics and links the dynamics in the real estate market to those in the real economy.

Cyclical Lending Standards: A Structural Analysis

Kaiji Chen, Patrick Higgins, and Tao Zha
Working Paper 2020-6 (May)
Examining the cyclical nature of lending standards, the authors use micro data to reveal that an exogenous shock to credit supply drives cyclical lending standards and accounts for a significant portion of fluctuations in bank loans and aggregate output.

Connecting to Power: Political Connections, Innovation, and Firm Dynamics

Ufuk Akcigit, Salomé Baslandze, and Francesca Lotti
Working Paper 2020-5 (April)
Using social security data and registry of local politicians in Italy, the authors show that political connections among large firms are widespread and help these firms increase their market shares, but not their productivities. These factors have negative consequences for aggregate dynamics.

Patents to Products: Product Innovation and Firm Dynamics

David Argente, Salomé Baslandze, Douglas Hanley, and Sara Moreira
Working Paper 2020-4 (April)
Using textual analysis of products and patent documents, the authors examine the relationship between patents and actual product innovation in the market. While on average patents capture product innovation, patenting is especially important for market leaders to protect large market shares of existing products.

Low-Income Consumers and Payment Choice

Oz Shy
Working Paper 2020-3a (February; revised October 2020)
Low-income consumers are not only constrained with spending, but also with the type and variety of payment methods available. The author analyzes the low level of possession of credit and debit cards among low-income consumers who are also unbanked.

Monetary Policy Implementation with an Ample Supply of Reserves

Gara Afonso, Kyungmin Kim, Antoine Martin, Ed Nosal, Simon Potter, and Sam Schulhofer-Wohl
Working Paper 2020-2 (January)
Before the 2007–09 financial crisis, excess reserves in the banking system were tiny. After the crisis, they became huge. Recently, they have been falling. The authors address the question of whether there is a best level of reserves.

Bundling Time and Goods: Implications for Hours Dispersion

Lei Fang, Anne Hannusch, and Pedro Silos
Working Paper 2020-1 (January)
The authors document large cross-sectional dispersion in hours worked. Using a model in which households combine market inputs and time to produce nonmarket activities, they show that the substitutability between market inputs and time within and across activities is key to accounting for this fact.

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