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.

Resolving the Unbiasedness and Forward Premium Puzzles

Abstract: There are two unresolved puzzles in the empirical foreign exchange literature. The first is the finding that tests of forward rate unbiasedness using the forward rate and forward premium equations yield markedly different conclusions. A companion puzzle - the forward premium puzzle - is the fact that the forward premium incorrectly predicts the direction of the subsequent change in the spot rate, which implies a massive rejection of uncovered interest parity. This paper resolves both puzzles.

Monetary Policy, the Tax Code, and the Real Effects of Energy Shocks

Abstract: This paper develops a monetary model with taxes to account for the time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data. In our model, the real effects of an energy shock are amplified when the monetary authority responds to that shock by changing its inflation objective. Specifically, higher inflation raises households’ nominal capital gains taxes since those taxes are not indexed to inflation. The increase in taxes behaves as a negative wealth effect and generates an immediate decline in output, investment, and hours worked. The large drop in investment then causes a gradual but very persistent decline in the capital stock. That protracted decline in the capital stock is associated with an extended period of low labor productivity and high inflation. The real effects from the increase in nominal capital gains taxes are magnified by the tax on nominal interest income, which is also not indexed to inflation. A prolonged period of higher inflation and lower labor productivity following a negative energy shock is consistent with the stagflation of the 1970s. The negative effects, however, subsided greatly after 1980 due to the Volcker disinflation policy which prevented the Fed from accommodating negative energy shocks with higher inflation.

What Inventories Tell Us about Aggregate Fluctuations - A Tractable Approach to (S,s) Policies

Abstract: We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking inventories into account can significantly improve the empirical fit of DSGE models in matching the standard business-cycle moments (in addition to explaining inventory fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output fluctuations, in contrast to the findings of the recent general-equilibrium inventory literature; and (iii) aggregate demand shocks become more important than technology shocks in explaining the business cycle once inventories are incorporated into the model. An independent contribution of our paper is that we develop a solution method for analytically solving (S,s) inventory policies in general-equilibrium models with heterogeneous firms and a large aggregate state space, and we illustrate how standard log-linearization methods can be used to solve various versions of our inventory model, generate impulse response functions, and estimate the model’s deep structural parameters.

Financial wellness programs in the workplace: Employer motivations and experiences

Abstract: Employee financial wellness programs (EFWPs) are a benefit innovation that promise to address the financial challenges of employees while also benefiting employers. Results from a mixed-methods stu...