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Working Paper
Export-Led Decay: The Trade Channel in the Gold Standard Era
Pedemonte, Mathieu; Candia, Bernardo (2021-11-08)
Flexible exchange rates can facilitate price adjustments that buffer macroeconomic shocks. We test this hypothesis using adjustments to the gold standard during the Great Depression. Using prices at the goods level, we estimate exchange rate pass-through. Using novel monthly data on city-level economic activity, combined with employment composition and sectoral export data, we show that American exporting cities were significantly affected by changes in bilateral exchange rates. With those results we calibrate a general equilibrium model to obtain aggregate effects from cross-sectional ...
Working Papers , Paper 21-11r

Working Paper
Time-varying Uncertainty of the Federal Reserve’s Output Gap Estimate
Berge, Travis J. (2021-04-14)
A factor stochastic volatility model estimates the common component to estimates of the output gap produced by the staff of the Federal Reserve, its time-varying volatility, and time-varying, horizon-specific forecast uncertainty. Output gap estimates are very uncertain, even well after the fact, especially at business cycle turning points. However, the common component of the output gap estimates is clearly procyclical, and innovations to the common factor produce persistent positive effects on economic activity. Output gaps estimated by the Congressional Budget Office have very similar ...
Finance and Economics Discussion Series , Paper 2020-012r1

Working Paper
Understanding Persistent Stagnation
Cuba-Borda, Pablo A.; Singh, Sanjay R. (2019-03-07)
We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy ...
International Finance Discussion Papers , Paper 1243

Working Paper
Estimating Hysteresis Effects
Furlanetto, Francesco; Lepetit, Antoine; Robstad, Ørjan; Rubio-Ramirez, Juan F.; Ulvedal, Pål (2021-11-09)
In this paper, we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks permanent demand shocks. They are found to be quantitatively important in the United States, in particular when the sample includes the Great Recession. Recessions driven by permanent demand shocks lead to a permanent decline in employment and investment, although output per worker is largely unaffected. We find strong evidence that hysteresis transmits through a rise in long-term unemployment and a decline in labor force participation and disproportionately ...
FRB Atlanta Working Paper , Paper 2021-24

Working Paper
Countercyclical policy and the speed of recovery after recessions
Owyang, Michael T.; Francis, Neville; Jackson, Laura E. (2013)
We consider the effect of some policies intended to shorten recessions and accelerate recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which gives us a cross-section of both state- and national-level policies. Because we study multiple recessions for the same state and multiple states for the same recession, we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies. We find that expansionary monetary policy at the national level helps to stimulate the exit of ...
Working Papers , Paper 2013-032

Working Paper
Endogenous Labor Supply in an Estimated New-Keynesian Model: Nominal versus Real Rigidities
Cairó, Isabel; Chung, Hess T.; Ferrante, Francesco; Fuentes-Albero, Cristina; Morales-Jimenez, Camilo; Pfajfar, Damjan (2023-11-03)
The deep deterioration in the labor market during the Great Recession, the subsequent slow recovery, and the missing disinflation are hard to reconcile for standard macroeconomic models. We develop and estimate a New-Keynesian model with financial frictions, search and matching frictions in the labor market, and endogenous intensive and extensive labor supply decisions. We conclude that the estimated combination of the low degree of nominal wage rigidities and high degree of real wage rigidities, together with the small role of pre-match costs relative to post-match costs, are key in ...
Finance and Economics Discussion Series , Paper 2023-069

Working Paper
Credit-Market Sentiment and the Business Cycle
López-Salido, J. David; Zakrajšek, Egon; Stein, Jeremy C. (2015-04-25)
Using U.S. data from 1929 to 2015, we show that elevated credit-market sentiment in year t-2 is associated with a decline in economic activity in years t and t+1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. When credit risk is aggressively priced, spreads subsequently widen. The timing of this widening is, in turn, closely tied to the onset of a contraction in economic activity. Exploring the mechanism, we find that buoyant credit-market sentiment in year t-2 also forecasts a change in the composition of external finance: Net debt ...
Finance and Economics Discussion Series , Paper 2015-28

Journal Article
The Welfare Cost of Business Cycles with Heterogeneous Trading Technologies
Chien, YiLi (2015)
The author investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in equilibrium, while this source of inequality vanishes in an economy without business cycles. Put simply, the heterogeneity in trading technologies amplifies the effect of aggregate output fluctuation on consumption inequality. The welfare cost of business cycles is, therefore, larger in such an economy. In the ...
Review , Volume 97 , Issue 1 , Pages 67-85

Journal Article
A guide to tracking the U.S. economy
Kliesen, Kevin L. (2014)
Analyzing and forecasting the performance and direction of a large, complex economy like that of the United States is a difficult task. The process involves parsing a great deal of data, understanding key economic relationships, and assessing which events or factors might cause monetary or fiscal policymakers to change policy. One purpose of this article is to reinforce several key principles that are useful for tracking the U.S. economy?s performance in real time. Two principles stand out: First, the economy is regularly hit by unexpected economic disturbances (shocks) that policymakers and ...
Review , Volume 96 , Issue 1 , Pages 35-54

Journal Article
The Aggregate and Relative Economic Effects of Government Financed Health Care
Rodrigo, Guerrero; Dupor, Bill (2021-04)
Government‐financed health care expenditures, through Medicare and Medicaid, have grown from roughly 0% to over 7.6% of national personal income over the past 50 years. This paper investigates the stimulative effects of Medicare spending. Using an annual, state‐level panel, we regress state income growth on own‐state spending and spending in other states, instrumented by unanticipated shocks to aggregate Medicare spending, to estimate local and spillover effects. In our benchmark specification, the own‐spending multiplier equals 1.3 and the spillover multiplier equals 0.4. The total ...
Working Papers , Volume 59 , Issue 2

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