Federal Reserve Bank of St. Louis

About: Federal Reserve Bank of St. Louis is a other organization based out in St Louis, Missouri, United States. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 203 authors who have published 1650 publications receiving 46084 citations.

Money, Credit and Banking

Abstract: In many situations, some people hold large money balances but have no particular urgency to spend them while others are liquidity constrained. This problem creates a role for financial intermediaries who accept nominal deposits and make nominal loans. We show that financial intermediation improves the allocation away from the Friedman rule. The gains in welfare come from the payment of interest on deposits and not from relaxing borrowers' liquidity constraints. We also demonstrate that increasing the rate of inflation can be welfare improving when credit rationing occurs.

Nonlinear Relationship Between Permanent and Transitory Components of Monetary Aggregates and the Economy

Abstract: This paper uses several methods to study the interrelationship among Divisia monetary aggregates, prices, and income; allowing for non-stationary, non-linearities, asymmetries, and time-varying relationships among the series. We propose a multivariate regime switching unobserved components model to obtain transitory and permanent components for each series, allowing for potential recurrent and structural changes in their dynamics. Each component follows distinct two-state Markov processes representing low or high phases. Since the lead-lag relationship between the phases can vary over time, rather than preimposing a structure to their linkages, the proposed flexible framework enables us to study their specific lead-lag relationship over each one of their cycles and over each U.S. recession in the last 40 years. The decomposition of the series into permanent and transitory components reveals striking results. First, we find a strong nonlinear association between the components of money and prices – all low phases of the transitory component of prices were preceded by tight transitory and permanent money phases. We also find that most recessions were preceded by tight money phases, (its cyclical and permanent components), and high transitory price phases, (with the exception of the 2001 and 2009-2010 recessions). In addition, all recessions were associated with a decrease in transitory and permanent income.

Oil Prices: Is Supply or Demand Behind the Slump?

Abstract: A standard decomposition suggests the role of oil supply (understood as the current physical availability of crude) has been small.

Competition, Managerial Slack, and Corporate Governance

Abstract: We model the interaction between product market competition and internal governance at firms. Competition makes it more difficult to infer a manager's action given the realized output, thus increasing the cost of inducing effort. An exogenous change in the incentive to shirk increases managerial slack. However, the effects on firm value are ambiguous; in particular, firm value can increase as slack increases. As a result, empirical tests that focus on changes in value may not capture changes in the level of slack. We also provide conditions under which increased competition leads all firms to switch from high to low effort.

How Persistent Are Unconventional Monetary Policy Effects

Abstract: Event studies show that the Federal Reserve’s announcements of forward guidance and largescale asset purchases had large and desired effects on asset prices but they do not tell us how long such effects last Wright (2012) used a structural vector autoregression (SVAR) to argue that unconventional policies have very transient effects on bond yields, with half-lives of 3 to 6 months The present paper shows, however, that the SVAR is very possibly misspecified, structurally unstable, forecasts very poorly and therefore delivers spurious inference In addition, the implied in-sample return predictability from the SVAR greatly exceeds a level consistent with rational asset pricing and reasonable risk aversion Restricted models that respect more plausible asset return predictability are more stable and imply that the unconventional monetary policy shocks were fairly persistent Estimates of the dynamic effects of shocks should respect the limited predictability in asset prices