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.

A Specialized Inventory Problem in Banks: Optimizing Retail Sweeps

Abstract: Deposits held at Federal Reserve Banks are an essential input to the business activity of most depository institutions in the United States. Managing these deposits is an important and complex inventory problem for two reasons. First, Federal Reserve regulations require that depository institutions hold certain amounts of such deposits at the Federal Reserve Banks to satisfy statutory reserve requirements against customers' transaction accounts (demand deposits and other checkable deposits). Second, some inventory of such deposits is essential for banks to operate one of their core lines of business: furnishing payment services to households and firms. Because the Federal Reserve does not pay interest on such deposits used to satisfy statutory reserve requirements, banks seek to minimize their inventory of such deposits. In 1994, the banking industry introduced a new inventory management tool for such deposits, the retail deposit sweep program, which avoids the statutory requirement by reclassifying transaction deposits as savings deposits. This is an interesting inventory problem for fungible items, where the conversion process is reversible. We examine two methods for operating such sweeps programs within the limits of Federal Reserve regulations, and we develop a stochastic dynamic programming model to implement one such method, the threshold method.

Authorities' Beliefs about Foreign Exchange Intervention: Getting Back Under the Hood

Abstract: This paper presents the results of a survey of monetary authorities with respect to their beliefs about foreign exchange intervention. The survey provides evidence on new intervention issues that would be difficult to investigate otherwise, such as conditional response times, non-foreign exchange factors in intervention and beliefs about profitability. At the same time, the survey provides new evidence on issues that have been investigated with other methods, such as channels of effectiveness, effect on currency components, profitability, and motivations for secrecy. Respondents disagreed with the predominant views on intervention's effect on volatility and common arguments against intervention. The exchange rate regime of a central bank explains its beliefs about several important aspects of intervention, including factors in a successful intervention and the potential profitability of intervention.

The Labor Supply of Married Women: Why Does it Differ Across U.S. Cities?

Abstract: Using Census Public Use Micro Sample (PUMS) data for 1980, 1990 and 2000, this paper documents a little-noticed feature of U.S. labor markets that there is wide variation in the labor market participation rates and annual work hours of white married women across urban areas. This variation is also large among sub-groups, including women with children and those with different levels of education. Among the explanations for this variation one emerges as particularly important: married women's labor force participation decisions appear to be very responsive to commuting times. There is a strong empirical evidence demonstrating that labor force participation rates of married women are negatively correlated with commuting time. What is more, the analysis shows that metropolitan areas which experienced relatively large increases in average commuting time between 1980 and 2000 also had slower growth of labor force participation of married women. This feature of local labor markets may have important implications for policy and for further research.

Long-Term Finance and Investment with Frictional Asset Markets

Abstract: This paper develops a theory of investment and maturity choices and studies its implications for the macroeconomy. The novel ingredient is an explicit secondary market with trading frictions which leads to a liquidity spread which increases with maturity and generates an upward sloping yield curve. As a result, trading frictions induce firms to borrow and invest at shorter horizons than in a frictionless benchmark. Economies with more severe frictions exhibit a steeper yield curve which further affects maturity and investment choices of rms. A model calibrated to match cross-country moments suggests that reductions in trading frictions-a new channel of financial development-can promote economic development. A policy intervention with government-backed financial intermediaries in the secondary market can improve liquidity and reduce the cost of long-term finance which promotes investment in longer-term projects and generates substantial welfare gains.