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Presents a list of working papers from the Federal Reserve Bank of Saint Louis, Missouri in 2003. "Asymmetric Common Trends: An Application of Monetary Policy in a Markov-Switching VECM," by Neville Francis and Michael T. Owyang; "FOMC Forecasts: Is All the Information in the Central Tendency?," by William T. Gavin; "Does Consumer Sentiment Predict Regional Consumption?," by Thomas A. Garrett.

The two main explanations for the crisis in the commercial paper (CP) market are credit concerns and liquidity issues. The CP market is not homogeneous in terms of credit quality, maturities and types of issues. We find that lower credit-quality CP suffered more during the crisis. Additionally, we find little evidence that Federal Reserve (Fed) liquidity facilities reduced the impact of the crisis, but that when the Fed became a lender in the CP market, the crisis pressures were dramatically reduced. We conclude that the crisis in the money markets is related more to increases in credit risk. Liquidity is a secondary issue. [ABSTRACT FROM AUTHOR]

In recent years, the global economy has been hit by a sequence of severe shocks that affected the two largest economies, the USA and the Euro Area, severely. Uncertainties about the future abound. While the challenges are similar for both economies and the policy tools resemble each other, they apply to different economic landscapes. What can they learn from each other? This paper looks at the basic structural facts, the nature of uncertainty shocks, and the efficiency of policy tools in the two economies. The key to understanding recent developments is uncertainty. This paper argues that the channel through which uncertainty influences inflation, wage cost, and unemployment is the markup firms charge to cover their cost of capital. While the measurements of uncertainty are uncertain, adding a proxy for uncertainty can improve the estimates of the basic New Keynesian model. The Federal Reserve Bank has been more successful because it operates in a more integrated capital market. In the Euro Area, uncertainty is higher than in the US and this could make disinflation in Europe more painful in terms of unemployment. [ABSTRACT FROM AUTHOR]

Presents several working papers from the Federal Reserve Bank of Saint Louis, Missouri which contain preliminary results of staff research as of 2002.

BACKGROUND: At a time when welfare contracts are in crisis, it is timely to discuss different forms of disruptive innovation and responses of medical finance and economic systems, especially adjusting with new instruments for recovery and innovative solutions for health reforms. OBJECTIVE: The objective of this paper is to propose some ways to develop a framework for policy changes affecting life science sectors and healthcare. It aims to analyze the types of relationships between health or medical systems and the economic systems. METHOD: Medical systems used to be generally closed systems, but the new forms of delivery, especially with increase of telehealth and Mobile health (Mhealth) solutions (boosted by the COVID-19 pandemic, such as online consultations), have open traditional boundaries and generate more interactions with economic systems. It also led to new institutional arrangements at federal, national, or local levels, with different power games according to the history of institutions and cultural differences between countries. RESULTS: Which system dynamics prevail will also depend on the political systems in place, for instance very innovative open innovation systems dominated by private players such as the USA empower individuals and favor intuitive and entrepreneurial states. On the other hand, systems historically dominated by socialized insurance or former communist countries, have investigated "attunements" or adaptation mechanisms in system intelligence. However, systemic changes are not only implemented by traditional rulers (government agencies, federal reserve banks) but also face the emergence of systemic platforms dominated by Big Tech players. The new agendas expressed for instance in the United Nation (UN) framework and the set of Sustainable Development Goals (SDGs) for climate change and sustainable growth, also require global adjustment of supply and demand, in a context where the traditional drug/vaccine split is challenged by the new technologies (e.g., mRNA technologies). Investment for drug research led to the development of COVID-19 vaccines, but also potential cancer vaccines. Finally, welfare economics is increasingly criticized among economist circles; it requires new design for global value assessment framework, facing growing inequalities and inter-generational challenges in aging populations. CONCLUSION: This paper contributes to new models of developments and different frameworks for multiple stakeholders with major technological changes. [ABSTRACT FROM AUTHOR]

This note provides a nontechnical summary of a research paper (Bullard and DiCecio [2021, Classical policy benchmarks for economies with substantial inequality, Federal Reserve Bank of St. Louis, unpublished manuscript]) that I presented as the NIESR 2021 Dow Lecture on 9 February 2021. In the paper, we construct a simple benchmark macroeconomic model with substantial heterogeneity among households, enough to generate empirically plausible Gini coefficients for the distributions of consumption, income and financial wealth. The model includes aggregate shocks as well as both permanent and temporary idiosyncratic uncertainties. Four policymakers—implementing monetary, fiscal, labour market and education policies—act in concert to achieve a first-best allocation of resources. We argue that the roles of these policymaker types are 'classic' and match up well with observed policymaker roles in OECD countries. We regard this simple economy as a benchmark for the study of other aspects of the interaction between policy and inequality. [ABSTRACT FROM AUTHOR]

The views expressed in this paper are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any errors or omissions are the responsibility of the author. No statements here should be treated as legal advice. Preliminary and Incomplete. Do not circulate without consent from the author. [ABSTRACT FROM AUTHOR]

This article examines the practice of the federal reserve banks in requiring eligible or near-eligible paper as so-called "marginal" or "additional collateral," to paper discounted by them, in contradistinction to advances on member bank' notes payable collateraled by United States securities or eligible paper. As a setting for collateraled discounts, the history and purposes of collateraled advances are stated, as well as the reasons for the ascendancy of such advances over discount. In their publications the federal reserve authorities fail to acknowledge any difference between (1) rediscounting and (2) allowing advances against eligible paper pledged; nor do they report separately the absolute or relative amount of discounts to which "additional collateral" is required, nor the "margin" required, nor the number of members putting up such margins, nor any other data relative thereto. There are no provisions in the Federal Reserve act or regulations for the practice; and yet it is no mean method of credit control. The reasons offered by the reserve banks for the practice are: (1) to repress excessive borrowing by the applicant member, in the Interest of the reserve bank, of the applicant member, or of the system as a whole, using this device as a supplement to credit rationing, discount rate variation, and moral suasion; (2) to increase the protection to the reserve banks themselves for credits granted; (8) to compensate for the less rigid insistence by the reserve banks on technical qualifications in credit granting and thus to make possible greater extensions of credit to members than can be had on the strict merit of the paper offered for discount; and (4) to acquiesce in greater degree to the traditional methods of Inter-bank finance and to break down the isolation of the reserve banks from the business and financial world. Each of these reasons is examined and criticized. [ABSTRACT FROM AUTHOR]

This research analyzes factors affecting the scientific success of central bankers. We combine data from the RePEc and EDIRC databases, which contain information about economic publications of authors from 182 central banks. We construct a dataset containing information about 3312 authors and almost 80,000 scientific papers published between 1965 and 2020. The results from Poisson regressions of citation impact measure (called the h-index) on a number of research features suggest that economists from the U.S. Federal Reserve Banks, international financial institutions, and some eurozone central banks are cited more frequently than economists with similar characteristics from central banks located in emerging markets. Researchers from some big emerging economies like Russia or Indonesia are cited particularly infrequently by the scientific community. Beyond these outcomes, we identify a significant positive relationship between research networking and publication success. Moreover, economists cooperating with highly cited scientists also obtain a high number of citations even after controlling for the size of their research networks. [ABSTRACT FROM AUTHOR]

This paper uses data from the Federal Reserve Bank of Atlanta's 2019 Survey and Diary of Consumer Payment Choice and interim rapidresponse surveys in spring and late summer 2020 to give some insights into consumer cash holdings and payments behaviour during the COVID-19 pandemic. The paper describes several key findings from the survey, most notably that US consumers increased their cash holdings at the time of the pandemic lockdowns. More consumers held at least some cash, and almost half of consumers had more than US$100 in spring and late summer 2020, compared with one-third in autumn 2019. In spring, just onethird of consumers reported making an in-person payment, compared with almost everyone in autumn 2019. People who paid in person, however, were about as likely to use cash in the spring as they had been in the previous autumn. Payments of unemployment benefits appear to have affected cash holding for some consumers. Similar to the behaviour of some consumers in advance of hurricanes, some consumers reported getting precautionary amounts of cash. [ABSTRACT FROM AUTHOR]

This paper estimates the conduct of open market operations during the week prior to a change in the federal funds target rate over 1994-2005. The paper finds evidence that the Federal Reserve conducted either no or partial accommodation most of the time when target changes were plus/minus 25 basis points, whereas it conducted anti-accommodation when target changes were plus/minus 50 basis points or larger. Observed, and well-documented, movements of the federal funds rate-away from the existing target level and toward an expected new target level during the week prior to a target change-are consistent with these open market operations. An exception is the 1994-2001 period during which the Federal Reserve most likely conducted complete accommodation, thereby keeping the federal funds rate at the existing target, when target changes were minus 25 basis points. [ABSTRACT FROM AUTHOR]

Focuses on the importance of different cases of commercial paper, bank deposits and collection and letters of credit in United States. Settlement of the immediate funds; Presentment of the Federal Reserve Bank; Affixation of the signature require authentication.

The main objective of this paper is to analyse investment returns using a stochastic model and inform investors about the best stock market to invest in. To this effect, a Markov chain random walk model was successfully developed and implemented on 450 monthly market returns data spanning from January 1976 to December 2020 for Canada, India, Mexico, South Africa, and Switzerland obtained from the Federal Reserves of the Bank of St. Louis. The limiting state probabilities and six-month moving crush probabilities were estimated for each country, and these were used to assess the performance of the markets. The Mexican market was observed to have the least probabilities for all the negative states, while the Indian market recorded the largest limiting probabilities. In the case of positive states, the Mexican market recorded the highest limiting probabilities, while the Indian market recorded the lowest limiting probabilities. The results showed that the Mexican market performed better than the others over the study period, whilst India performed poorly. These findings provide crucial information for market regulators and investors in setting regulations and decision-making in investment. [ABSTRACT FROM AUTHOR]

The article discusses various topics related to economics and policy. It begins by highlighting the unexpected decline in inflation and the concerns of economists regarding the potential reversal of this trend. The Paycheck Protection Program (PPP) is then examined, with the authors arguing that it reached a significant number of smaller businesses, including those in minority and lower-income communities. The importance of human elements in housing transactions is explored, along with the impact of interest rates on the transition to senior independent living units. The article also includes papers on the development of Macau, a book review on the retirement challenge, and a review of the Federal Reserve's actions during the pandemic. Finally, the passing of economist Robert Solow is acknowledged. [Extracted from the article]

When the federal reserve system was established, elaborate precautions were taken to provide for the elasticity of the federal reserve note. The original plan of issue ailed for the use of rediscounted paper as collateral, and the process of issue and retirement was tenuously connected to member bank borrowing. The original plan has been almost entirely abandoned through statutory changes made in response to alterations in monetary and banking practices and structures. The tremendous growth of the gold stock has been of particular significance. The collateral requirements have been modified, and note issue has been divorced from member bank borrowing. The elasticity of the federal reserve note has not been impaired, which suggests that the correct explanation of note elasticity is to be found in the rôle which cash plays in the monetary system rather than in collateral requirements. Vestiges of the original plan of note issue remain and constitute a potential source of embarrassment to the monetary system. [ABSTRACT FROM AUTHOR]

The existing output gap measures for the US economy rely on aggregate data and assume a constant output gap over sectors (see Coibion et al. [(2018) Brookings Papers on Economic Activity , 333–441] and Owyang et al. [(2018) Federal Reserve Bank of St. Louis Review , 297–316]); however, each sector has its cycle, which does not necessarily match the business cycle (Burns and Mitchell [(1946) National Bureau of Economic Research]). By modeling sectoral cycles based on their investment cycles with a nonparametric method, I estimate output gaps of 20 US sectors over 1948–2020. The weighted mean output gap indicates a persistent spare capacity in the last business cycle, pointing to insufficient stabilization policies behind secular stagnation. Phillips curve estimations with the weighted quartiles of sectoral output gaps show that the output gap of bottleneck sectors (weighted Q3) is correlated strongly with inflation over 1950–2020. Policymakers can track bottleneck sectors to mitigate inflationary pressures while supporting the sectors with negative output gaps to stabilize the output at its potential. My findings show that it is possible to produce more output by sector-level demand supporting policies without generating inflation. [ABSTRACT FROM AUTHOR]

This paper shows that expected inflation risks pose threats to the anchoring of expectations. I propose a new method for fitting subjective probability distributions to density forecasts that allows for asymmetric beliefs over inflation outcomes. Using data from the Federal Reserve Bank of New York's Survey of Consumer Expectations, I show that medium run expectations move in the direction of perceived short run risks. A diffusion index of consumers' perceived balance of risks to inflation shows that high short run inflation expectations coincide with the balance of medium risks being weighted to the upside. [ABSTRACT FROM AUTHOR]

The article presents abstracts on topics related to federal reserve banks in San Francisco, California, including the study of the Great Moderation sources, the calibration of exposure at default (EAD) for corporate credit lines, and the constructing price index with weights on the prices of different personal consumption expenditure goods.

Global commerce relies on correspondent banking to execute international transactions. Due to the increasing cost of compliance, however, some US-based global financial institutions have been terminating their correspondent banking relationships — a practice known as de-risking. In some cases, correspondent banks have even terminated their relationships with central banks. This kind of situation creates systemic risk at a country level, and central banks are looking at alternatives to better serve the needs of their respective financial systems. This paper analyses prior work and surveys on the magnitude of de-risking, and cross-references the findings with recent surveys conducted in the Dominican Republic and Argentina to determine whether market failures and systemic risk are inevitable. The results indicate that while the situation is not yet catastrophic, it is sufficiently precarious that foreign countries that rely on the US dollar should start looking for alternative solutions for global correspondent banking immediately. The paper also describes some of the alternatives currently available, including intervention from the Federal Reserve Bank of New York, regional payments systems, and smaller US correspondents. [ABSTRACT FROM AUTHOR]

Following the arrival of COVID-19, consumer spending patterns changed almost overnight, in some cases accelerating trends that had been progressing slowly for years, in particular, the transition of consumer payments from 'traditional' methods such as cash and cheques to electronic payment methods like cards, mobile wallets and mobile payment applications. As the world begins to transition into a post-pandemic economy, the big question is whether these new payment habits will endure. In an economy such as the USA, which produces nearly US$100tn of non-cash payments annually, changes to the way that consumption is conducted have potentially large effects on both cost and risk for financial institutions, payment networks and consumers. This paper uses data from the Federal Reserve Bank of Philadelphia to identify which segments of the population are most likely to maintain these new habits, and which are more likely to shift. While it is still too early to make definitive conclusions, this paper identifies trends that may provide insights into future developments in this area. [ABSTRACT FROM AUTHOR]

This article was previously published in FEDS Notes on February 24, 2021, a publication from the Board of Governors of the Federal Reserve System. The views expressed in this paper are solely those of the authors and should not be interpreted as reflecting the views of the Board of Governors or the staff of the Federal Reserve System. The authors would like to thank Guy Berg and Zofsha Y. Merchant (Federal Reserve Bank of Minneapolis); Jesse Leigh Maniff (Federal Reserve Bank of Kansas City); Joseph R. Torregrossa (Federal Reserve Bank of New York); and David Mills, Stephanie Martin, Lacy Douglas, Brendan Malone, and Sarah Wright (Federal Reserve Board) for their contributions to and assistance with this note. [ABSTRACT FROM AUTHOR]

In this article, I survey the state of remote work in the American economy and investigate the implications for workers, businesses and local economies. Nevertheless, survey data show that employers offer about half a day less WFH than employees desire. What is certain, instead, is that the WFH revolution will redistribute resources among localities and individuals: More educated and geographically mobile workers can take advantage of the flexibility afforded by WFH, while less educated and mobile workers face significant adjustments. [Extracted from the article]

Whether pursuing immediate professional careers or preparing for graduate research, for many students the opportunities to conduct original research as undergraduates can be formative, creating a valuable differentiating factor on their resumes. The Economics Scholars Program builds an environment where undergraduate students can conduct economic research and then follow with another facet of the research experience, namely, presenting at a professional conference. Due to a collaborative effort between Austin College and the Federal Reserve Bank of Dallas, the conference helps create research opportunities for undergraduates. The partnership enhances the Federal Reserve Bank of Dallas's commitment to thoughtful leadership in economics and building relationships. Entering its 14th year, the conference has grown from 23 participants in 2007 to over 300 participants from 36 schools in 2018. [ABSTRACT FROM AUTHOR]

This article examines the underrepresentation of women in research departments at Federal Reserve Banks and explores the factors contributing to this disparity. The data shows that women are more likely to work in academia than at the Reserve Banks, and within academia, they are less likely to be in research tracks compared to men. The article suggests that women may prefer non-research career tracks at universities due to the flexibility they offer. While the representation of women at the Reserve Banks has been slowly increasing, proactive measures are needed to attract and retain female talent, particularly in fields relevant to monetary policy and central banking. The article also discusses the impact of family decisions on women's careers and the importance of creating a supportive ecosystem to foster a more inclusive and gender-balanced community at the Federal Reserve Banks. [Extracted from the article]

Decision makers often ask experts to forecast a future state. Experts, however, can be biased. In the economics and psychology literature, one extensively studied behavioral bias is called herding. Under strong levels of herding, disclosure of public information may lower forecasting accuracy. This result, however, is derived only for point forecasts. In this paper, we consider experts' probabilistic forecasts under herding, find a closed-form expression for the first two moments of a unique equilibrium forecast, and show that the experts report too similar locations and inflate the variance of their forecasts because of herding. Furthermore, we show that the negative externality of public information no longer holds. In addition to reacting to new information as expected, probabilistic forecasts contain more information about the experts' full beliefs and interpersonal structure. This facilitates model estimation. To this end, we consider a one-shot setting with one forecast per expert and show that our model is identifiable up to an infinite number of solutions based on point forecasts but up to two solutions based on probabilistic forecasts. We then provide a Bayesian estimation procedure for these two solutions and apply it to economic forecasting data collected by the European Central Bank and the Federal Reserve Bank of Philadelphia. We find that, on average, the experts invest around 19% of their efforts into making similar forecasts. The level of herding shows an increasing trend from 1999 to 2007 but drops sharply during the financial crisis of 2007–2009 and then rises again until 2019. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Supplemental Material: The electronic companion and data are available at https://doi.org/10.1287/mnsc.2022.4487. [ABSTRACT FROM AUTHOR]

Introduces the papers published in the July/August 2005 issue of "Federal Reserve Bank of St. Louis Review."

Conclusion This article shows that high-productivity firms place more establishments in high-density locations than low productivity firms, and that the opposite is true in low density locations. The cost of opening an extra establishment in a location is equal to the sum of the direct cost of opening the establishment (measured by rent) and the firm's marginal span of control cost. When considering how many establishments to open in a location, firms attempt to equate the gains from opening the establishments with the costs. [Extracted from the article]

The results of most recent econometric studies of the banking sector which employ quarterly data suggest that commercial banks close less than half the gap between their actual and "desired" levels of excess and/or borrowed reserves per quarter. At this rate, the banking system would take a full year to close nine-tenths of the gap. The length of this lag has been regarded as implausible by many researchers. Among the skeptics, many have expressed suspicion of the statistical techniques underlying the estimates. This paper investigates two commonly-proposed statistical sources of bias. The investigation reveals that one of them, temporal data aggregation (averaging over time), does exaggerate the lag. Nonetheless, even after correction for this bias, the estimates indicate a full adjustment period of a quarter or more. The primary purpose this paper is to explain the remaining lag. The major hypothesis of this study is that the lag in the aggregate is caused by lagged interactions among banks in different regions. As this paper demonstrates, when Federal Reserve Member Banks are disaggregated by region, estimated adjustment speeds rise dramatically. Moreover, the lag in the aggregate is well explained statistically by the impact of some regions' reserve adjustments on other regions. The more important of these interregional effects are identifiable and statistically significant, and they are shown to be useful in analyzing the timing of the regional impacts of monetary policy. [ABSTRACT FROM AUTHOR]

This paper investigates whether the Federal Reserve Bank (FED) reacted to asset price bubbles before the Great Recession and whether this affected macroeconomic variables. We estimate a DSGE model featuring a financial accelerator and a process for asset price bubbles with different Taylor-rule specifications. We find that a Taylor-rule with a feedback to Tobin's Q and bubble shocks fits best. Our findings suggest that the FED followed a cleaning rather than a leaning approach prior to the global financial crisis (GFC). Then, we perform a counterfactual analysis and show that this policy created a lower interest rate prior to the GFC compared to a standard Taylor-rule without feedback to financial variables. [ABSTRACT FROM AUTHOR]

One of the signature policy achievements of the Progressive era was the passage of the Federal Reserve Act in 1913. This paper argues that the original Act did not create an effective central bank and consequently did not bring about significant structural change in domestic monetary institutions. Early leaders of the Federal Reserve, frustrated with the constraints on reserve bank operations, actively lobbied Congress to secure changes to the Act. These efforts only succeeded after the U.S. entered World War 1 in the spring of 1917, triggering a transformation in the monetary base that elevated the position and centrality of the Federal Reserve. Seen in this light, the wartime amendments were a victory for the activist institution-builders within the Federal Reserve in addition to being essential for the federal government's ability to finance the war effort. [ABSTRACT FROM AUTHOR]

The shortcomings of conventional back‐propagation neuronets, such as slow training speed and local minimum, are known to be addressed by neuronets trained under the weights‐and‐structure‐determination (WASD) algorithm. Derived from power activation feed‐forward neuronets, a multi‐input WASD for time‐series neuronet (MI‐WASDTSN) model is presented in this paper. The MI‐WASDTSN is equipped with a novel WASD for time‐series (WASDTS) algorithm, for handling time‐series modeling and forecasting problems. Employing a power sigmoid activation function, the WASDTS algorithm handles the model fitting and validation by determining the optimal input variables number and the weights of the MI‐WASDTSN. More specifically, the WASDTS algorithm finds and holds only the activation function powers that reduce the model's error during validation. Applications on Federal Reserve Bank of St. Louis (FRED) industrial indices under three different patterns of time‐series validate our MI‐WASDTSN model in order to demonstrate its outstanding learning and forecasting performance. In addition, to support and advance the findings of this work, we created a MATLAB repository for interested users, which is freely available via GitHub. [ABSTRACT FROM AUTHOR]

Japanese art collectors acquired a large number of Rodin's sculptures in the 1920s. While recent exhibitions have detailed the increasingly favourable critical reception of Rodin's oeuvre in Japan during the early twentieth century, the underlying economic context behind the translocation of Rodin's sculptures from Paris to Japan has remained largely unstudied. This paper argues that the collapse in the value of the French franc, among other economic disruptions occurring in France during the 1920s, played a significant role in the timing and scale of this translocation. The paper draws on board reports from the archives of the Musée Rodin in Paris and quantitative currency data recorded by the United States Federal Reserve Bank to examine the demand and supply characteristics of the market for Rodin's sculptures in Japan. This analysis provides the alternative perspective within which the dynamics of art market translocations can be further understood. [ABSTRACT FROM AUTHOR]

The goal of the paper is to compare nonstandard solutions implemented by Federal Reserve System, European Central Bank and National Bank of Poland in response to the outbreak of a subrime crisis in United States and to debt crisis in European Union. For that purpose there is carried out a comparative, descriptive analysis of institutional steps taken by the three central banks and the governments to preserve macroeconomic stability. The nonstandard measures allowed to avoid a comeback of the Great Depression and restored market's confidence, unfortunately at the cost of decreased resilience for future possible crises along with many other medium and long run unintended consequences. [ABSTRACT FROM AUTHOR]

This paper examines the spillover effects of unconventional monetary policies (UMPs) by the Bank of Japan (BOJ) and the Federal Reserve (Fed) on the domestic and global financial markets, taking a possible regime change into account. Applying a smooth-transition global VAR model to ten countries and the Euro zone for the sample period between 2002–2015, we find that the BOJ's expansionary UMPs have significantly increased the equity prices and depreciated the exchange rates, regardless of the regimes. Also, our results indicate that the BOJ's UMPs have become more effective for the government and corporate bond prices in more recent years. In addition, we find that the Fed's expansionary UMPs have had significant positive effects on their domestic financial markets throughout the sample period. Finally, our results suggest that the BOJ's UMPs have rather limited effects on global financial markets and that the effects of the Fed's UMPs are considerably larger. [ABSTRACT FROM AUTHOR]

In academic and policy circles, the assumption is often made that the Fed and the European Central Bank (ECB) have a perfectly identical understanding of what monetary policy can achieve and they follow the same policy strategy. This assumption seats uncomfortably with the different legislative mandates of the Fed and the ECB. Drawing on a critical analysis of the "new consensus" view in macroeconomics and its policy recommendations, this paper argues that the dual mandate of the Fed allows for a less restrictive set of theoretical assumptions than the single mandate of the ECB, and, for this reason, has to be preferred. [ABSTRACT FROM AUTHOR]

The article presents a comment on the article "Nominal Bonds and Interest Rates," by Shouyong Shi, published in the 2005 issue of the journal International Economic Review. Shi addresses two questions in his article. The first is why there are positive interest rates on government bonds even though they are default free. The second is why money circulates, but government bonds do not. There have been some past approaches to answering these questions that do not seem satisfactory. One is to posit that government bonds are more easily stolen or are more easily counterfeitable. However, such an approach seems unreasonable, especially today. The U.S. government has not issued bearer securities since the 1980s, and since 1986 all securities, except Savings Bonds, only exist in book-entry form at district Federal Reserve Banks, so that counterfeiting is not possible. A second approach has been to argue that government bonds are imperfect substitutes for currency because they are issued only in large denomination or are not bearer instruments.

The I SEJ i has a relatively large team of co-editors in order to adequately cover each specialized area of economics. I typical serve as co-editor myself for submissions related to health economics. Differential publication rates across categories typically reflects differences in submission rates rather than acceptance rates. [Extracted from the article]

The FOMC decided at its September meeting that the best way to accomplish that goal was to keep the federal funds rate at its effective lower bound until both the inflation goal had nearly been reached and the FOMC's maximum employment goal had been reached. Interpretation The September 2020 FOMC meeting was the first one to occur after the Aug. 27 release of the FOMC's revised Statement on Longer-Run Goals and Monetary Policy Strategy ("Consensus Statement"). [Extracted from the article]

This paper investigates political pressure from incumbent Presidents and Congress on US monetary policy during the period that Greenspan was the chairman of the Federal Reserve. We propose an expectations-augmented Taylor rule in which we replace realized values with expectations, and use the unemployment gap instead of the output gap. We apply a state-space framework that allows the use of mixed frequency data. Our findings suggest that the Federal Reserve under Greenspan did not create election driven cycles, but also did not strictly follow the Taylor rule. The deviations from the Taylor rule are not driven by partisan politics, but are rooted in the expected economic conditions. [ABSTRACT FROM AUTHOR]

Using the WHO announcement on 11 March 2020 and the Federal Reserve Bank announcement on 9 April 2020 as two events that represent the shock and the stimulus, this study finds that COVID-19 caused a negative shock to the global stock markets, especially in emerging markets and for small firms. We find that the US stock market experienced positive abnormal returns from the Fed stimulus compared to other developed countries and emerging markets. We find that the positive abnormal returns from the stimulus were garnered by the US large firms instead of the small firms. [ABSTRACT FROM AUTHOR]

The traditional argument for unbacked fiat money stresses its potential benefits in terms of production costs. While there is an undeniable grain of truth in the traditional cost‐saving argument, actual fiat money regimes around the world are belying it. The Eurosystem, the Bank of England, the Bank of Japan and the Federal Reserve System all operate under relatively high costs. In fact, their operating expenses exceed the estimated costs of a generic fractional‐reserve gold standard. Even when the reserve ratio of the estimated gold standard is increased up to 100% on M1, the operating expenses of these modern central bank systems remain in a similar range. Hence, the cost‐saving argument is illusory in these cases. These results suggest that a return to a money that is at least partially backed by gold might be more efficient even from the vantage point of the production costs of money. The Eurosystem and the Bank of Japan are particularly expensive institutions. Their annual operating expenses as a fraction of nominal GDP are more than twice as high as those of the Federal Reserve System and the Bank of England. [ABSTRACT FROM AUTHOR]

The article presents a diversity of recommendations of monetary policy. Several policies ended by one speaker are rejected by another. Most of the policies followed by U.S. President Franklin D. Roosevelt Administration are rejected. There is little sympathy with the stagnation doctrine, with government spending on a long-time basis, with promoting recovery by easy money or with giving monetary policy a dominant role in control of national economic activity. With the total volume of eligible paper in the portfolios of the Federal reserve banks amounting to only 3 million dollars, out of total assets of 19 billion for the Federal reserve banks and of 74 billion for the banks of the country and with excess cash and bank balances of 16 billion dollars and no likelihood of members borrowing from the reserve banks in the near future, it is difficult to see how any control can be exercised by qualitative considerations. To enforce the rule that banks match their total demand deposits by cash and self-liquidating paper and dispose of the non-self-liquidating loans and investments in excess of their savings deposits would be ruinous to the banks. Finally, it is becoming increasingly clear that unless taxation and labor policies, in particular, are harmonized with public investment policy, the latter can do but little to promote a higher level of private investment.

This paper explains a systematic way to code qualitative text data to generate causal maps for system dynamics modeling. The study was motivated by the important role qualitative data play in system dynamics and the need for formal methods to document the interpretive process of using text data in modeling. The coding method elucidated in the study was influenced by grounded theory, a flexible, yet rigorous way to build a theory from raw qualitative data. The inductive nature of grounded theory generation fits well with the conceptualization phase of simulation modeling. This paper uses verbatim transcripts from the Federal Open Market Committee meetings to illustrate the coding and mapping process, and it provides practical guidelines for systematic and reliable ways to ground simulation models in qualitative text data in order to build higher levels of confidence in models. Copyright © 2012 System Dynamics Society. [ABSTRACT FROM AUTHOR]

In the wake of an unprecedented increase in the trade policy-related uncertainty of the US since 2017, we analyze the ability of a newspaper-based trade policy uncertainty index (TPU) of the US in predicting the growth rate of emerging market economies. The newspaper-based trade policy uncertainty index was developed by Caldara et al. (2020), while GDP data was obtained from the Global Economic Database maintained by the Federal Reserve Bank of Dallas, in the form of an aggregate value for all emerging economies. We analyze the data in a bi-variate VAR(2) setup, with the number of lags identified using Akaike Information Criterion, using the novel multivariate time-varying causality framework developed by Rossi and Wang (2019) on an effective sample of 1984:Q3 to 2019:Q3. Starting with the standard constant parameter Granger causality test, we find no evidence of TPU to the growth of GDP. We then proceed with the time-varying parameter causality test of Wang and Rossi (2019), where we find overwhelming evidence of the role of trade uncertainty in impacting the growth of emerging markets in a statistically significant manner, with the effect being on the rise since the Great Recession. Our results are robust to the usage of an alternative econometric methodology, metric of trade uncertainty, and also over an out-of-sample forecasting exercise. While the time-varying predictive analysis is the focus of our paper, causality tests are silent about the sign of the impact of TPU on the GDP growth of the emerging markets. Given this, we estimate a time-varying parameter VAR model with stochastic volatility (TVP-VARSV). We find that the impact is sharp and negative. Our results imply that policymakers in emerging countries must be aware of the possible threat of an upcoming recession in the wake of heightened trade policy uncertainty in the US, and hence, must be ready to undertake necessary (expansionary) policies to prevent a downturn in their respective domestic economies. To draw optimal policy responses, authorities would need to utilize time-varying econometric models, since the effect of uncertainty related to trade policies of the US are indeed non-constant over time. [ABSTRACT FROM AUTHOR]

This paper provides new evidence on the rise of the dollar as an international currency, focusing on its role in the conduct of trade and the provision of trade credit. We show that the shift to the dollar occurred much earlier than conventionally supposed: during and immediately after World War I. Not just market forces but also policy support-the Fed in its role as market maker-was important for the dollar's overtaking of sterling as the leading international currency. On balance, this experience challenges the popular notion of international currency status as being determined mainly by market size. It suggests that the popular image of strongly increasing returns and pervasive network externalities leaving room for only one monetary technology is misleading. [ABSTRACT FROM AUTHOR]

Infant mortality rates in 34 Sub-Saharan African countries (1960–2016), obtained from the Federal Reserve Bank of St. Louis database, were examined in this paper by focusing on the degree of persistence and non-linearities in the growth rate series. Persistence deals with the degree of association between the observations. Non-linearity occurs when departing from the linear assumption as in a time trend. These two issues are relevant in this context because they are intimately related. Based on the high degree of persistence observed in the series examined, instead of investigating structural breaks, which produce abrupt changes in the data, a non-linear approach was used based on Chebyshev polynomials in time, producing smooth rather than abrupt changes. This approach has never been examined in a unified framework in the treatment of infant mortality rates. The results indicate that half of the countries examined display non-linearities and the orders of integration of the series are extremely large in all cases, being around two in the majority of them. Looking at the growth rate series, significant negative trends were observed for: Chad, Equatorial Guinea and Mozambique. Evidence of mean reversion and thus transitory shocks, were observed for Lesotho, Rwanda, Botswana and Mozambique. Time dynamics of the series were expected to persist in order to ascertain the decline in mortality rates. Therefore, serious government interventions are required in managing infant health in these countries. [ABSTRACT FROM AUTHOR]