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.

Married Men Sit Atop the Wage Ladder

Abstract: Married men earn higher wages than single or married women and single men.

A Spatial Analysis of Sectoral Complementarity

Abstract: This paper presents a spatial econometric method for characterizing productivity comovement across sectors of the U.S. economy. Input-output relations provide an economic distance measure that is used to characterize interactions between sectors, as well as conduct estimation and inference. We construct two different economic distance measures. One metric implies that two sectors are close to one another if they use inputs of other industrial sectors in nearly the same proportion, and the other metric implies that sectors are close if their outputs are used by the same sectors. Our model holds that covariance in productivity growth across sectors is a function of economic distance. We find that (1) positive cross-sector covariance of productivity growth generates a substantial fraction of the variance in aggregate productivity, (2) cross-sector productivity covariance tends to be greatest between sectors with similar input relations, and (3) there are constant to modest increasing returns to scale. We test and reject the hypothesis that these correlations are due to a common shock.

Credit Cycles and Business Cycles

Abstract: Unsecured firm credit moves procyclically in the United States and tends to lead gross domestic product, while secured firm credit is acyclical. Shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. This article surveys a tractable dynamic general equilibrium model in which constraints on unsecured firm credit preclude an efficient capital allocation among heterogeneous firms. Unsecured credit rests on the value that borrowers attach to a good credit reputation, which is a forward-looking variable. Self-fulfilling beliefs over future credit conditions naturally generate endogenously persistent business cycle dynamics. A dynamic complementarity between current and future borrowing limits permits uncorrelated belief shocks to unsecured debt to trigger persistent aggregate fluctuations in both secured and unsecured debt, factor productivity, and output. The author shows that these sunspot shocks are quantitatively important, accounting for around half of output volatility.

Multivariate Forecast Evaluation and Rationality Testing

Abstract: In this paper, we propose a new family of multivariate loss functions that can be used to test the rationality of vector forecasts without assuming independence across individual variables. When only one variable is of interest, the loss function reduces to the flexible asymmetric family recently proposed by Elliott, Komunjer, and Timmermann (2005). Following their methodology, we derive a GMM test for multivariate forecast rationality that allows the forecast errors to be dependent, and takes into account forecast estimation uncertainty. We use our test to study the rationality of macroeconomic vector forecasts in the growth rate in nominal output, the CPI inflation rate, and a short-term interest rate.

Which continuous-time model is most appropriate for exchange rates?

Abstract: This paper evaluates the most appropriate ways to model diffusion and jump features of high-frequency exchange rates in the presence of intraday periodicity in volatility. We show that periodic volatility distorts the size and power of conventional tests of Brownian motion, jumps and (in)finite activity. We propose a correction for periodicity that restores the properties of the test statistics. Empirically, the most plausible model for 1-min exchange rate data features Brownian motion and both finite activity and infinite activity jumps. Test rejection rates vary over time, however, indicating time variation in the data generating process. We discuss the implications of results for market microstructure and currency option pricing.