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.

The Dynamic Relationship Between the Federal Funds Rate and the Treasury Bill Rate: An Empirical Investigation

Abstract: This article examines the dynamic relationship between two key US money market interest rates - the federal funds rate and the 3-month Treasury bill rate. Using daily data over the period from 1974-99, we find a long-run relationship between these two rates that is remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting. Employing a non-linear asymmetric vector equilibrium correction model, which is novel in this context, we find that most of the adjustment toward the long run equilibrium occurs through the federal funds rate. In turn, there is strong evidence for the existence of significant asymmetries and non-linearities in interest rate dynamics that have implications for the conventional view of interest rate behaviour.

Foreign Know-How, Firm Control, and the Income of Developing Countries

Abstract: Managerial know-how shapes the productivity of firms by defining the set of available technologies, production choices, and market opportunities. This know-how can be reallocated across countries as managers acquire control of factors of production abroad. In this paper, we construct a quantitative model of cross-country income differences to study the aggregate consequences of international mobility of managerial know-how. We use the model and aggregate data to infer the relative scarcity of this form of know-how for a sample of developing countries. We also conduct policy counterfactuals and find that on average, developing countries gain up to 23% in output and 9% in consumption when they eliminate all barriers to foreign control of domestic factors of production.

A simple model of trading and pricing risky assets under ambiguity: any lessons for policy-makers?

Abstract: The 2007–2008 financial crisis has made it painfully obvious that markets may quickly turn illiquid. Moreover, recent experience has shown that distress and lack of active trading can jump ‘around’ between seemingly unconnected parts of the financial system contributing to transforming isolated shocks into systemic panic attacks. We develop a simple two-period model populated by both standard expected utility maximizers and ambiguity-averse investors who trade in the market for a risky asset. We show that, provided there is a sufficient amount of ambiguity, market breakdowns where large portions of traders withdraw from trading are endogenous and may be triggered by modest re-assessments of the range of possible scenarios on the performance of individual securities. Risk premia (spreads) increase with the proportion of traders in the market who are averse to ambiguity. When we analyse the effect of policy actions, we find that when a market has fallen into a state of impaired liquidity, bringing the marke...

So, Why Didn't the 2009 Recovery Act Improve the Nation's Highways and Bridges?

Abstract: Although the American Recovery and Reinvestment Act of 2009 (the Recovery Act) provided nearly $28 billion to state governments for improving U.S. highways, the highway system saw no significant improvement. For example, relative to the years before the act, the number of structurally deficient or functionally obsolete bridges was nearly unchanged, the number of workers on highway and bridge construction did not significantly increase, and the annual value of construction put in place for public highways barely budged. The author shows that as states spent Recovery Act highway grants, many simultaneously slashed their own contributions to highway infrastructure, freeing up state dollars for other uses. Next, using a cross-sectional analysis of state highway spending, the author shows that a state?s receipt of Recovery Act highway dollars had no statistically significant causal impact on that state?s total highway spending. Thus, the amount of actual highway infrastructure investment following the act?s passage was likely very similar to that under a no-stimulus counterfactual.