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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.

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]

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]

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]

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.

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."

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]

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]

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 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.

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]

The New York stock market was plagued by a series of financial crises during the National Banking Era, culminating in the Panic of 1907. The traditional view holds that the crises were rooted in structural flaws related to trade settlement as well as excessive and indiscriminate margin lending that remained unaddressed until the formation of the Federal Reserve Bank. An examination of the historical record, however, shows that brokers sought to control contagion and spillover effects through reform of the settlement process and by modulating margin lending rates and maintenance requirements according to macroeconomic conditions, counterparty credit‐worthiness and market volatility. Using newly gathered archival data, we show that the New York Stock Exchange enacted macro‐prudential regulations that may have reduced the severity of crises during this period. By providing early evidence of private sector responses to rising systemic risk, the paper addresses an important aspect of early market microstructure. [ABSTRACT FROM AUTHOR]