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Bank:Federal Reserve Bank of St. Louis  Content Type:Working Paper 

Working Paper
The Erosion of Public Capital in Portugal

This article documents the erosion of Portugal’s public capital stock since 2013 and assesses its macroeconomic implications. I extend the IMF capital series through 2027 using European Commission data and construct scenarios through 2035 for alternative infrastructure-project pipelines. In 2026, the stock is projected to remain 12.2 percent below its 2013 peak, while its ratio to GDP is projected to fall from 77.2 percent in 2013 to 52.6 percent. Short-horizon regressions show positive co-movement between public-capital and labor-productivity growth. A calibrated production-function ...
Working Papers , Paper 2026-016

Working Paper
Selective College Access and Intergenerational Mobility

This paper studies how admissions preferences for lower-income students, alone or combined with information provision, affect college sorting, intergenerational earnings mobility, and aggregate earnings. We develop a quantitative model of college choice with quality-differentiated college types. We find that income-adjusted admissions substantially increase lower-income enrollment at selective colleges and improve intergenerational earnings mobility. Even larger-scale reforms generate only a slight decline in aggregate earnings.
Working Papers , Paper 2024-030

Working Paper
The Implications of Labor Market Heterogeneity for Unemployment Insurance Design

We estimate unemployment insurance (UI) eligibility, take-up, and replacement rates at the individual level and document how they vary with earnings, wealth, and unemployment duration. We extend a widely used framework that combines an incomplete-markets model with a frictional labor market to match our findings. We show that the optimal UI policy becomes substantially more generous once the model captures our findings. The gap between optimal policies in the two models is largely driven by endogenous UI take-up, which entails a utility cost: only those who value UI the most choose to claim ...
Working Papers , Paper 2024-026

Working Paper
Geopolitical Distance and Targeted Trade: Evidence from Product-Level Export Controls

Trade policy in advanced economies is closely intertwined with concerns about technology and geopolitical rivalry. Using product-level data on export-related trade interventions, we characterize how contemporary export-side interventions are allocated across products, destinations, and bilateral trade relationships. We show that export controls are broad in regulatory scope but economically concentrated on high-value trade flows. Export controls disproportionately target high-technology products and economically important trade relationships, while geopolitical distance shapes their ...
Working Papers , Paper 2026-014

Working Paper
The Cost of Capital and Misallocation in the United States

We propose a framework to estimate capital misallocation using credit registry data and apply it to the United States. A dynamic corporate finance model maps loan-level observables into three rates: the lender’s discount rate, the firm’s private cost of capital, and the social cost of capital. We derive a sufficient statistic for misallocation that depends only on the mean and dispersion of the social cost of capital. Applying the framework to U.S. loan originations, we find substantial heterogeneity in the cost of capital but modest aggregate losses in normal times: reallocating capital ...
Working Papers , Paper 2025-013

Working Paper
Technology, Geopolitics, and Trade

We study how geopolitical fragmentation shapes cross-border technology licensing and innovation incentives. We show that bilateral royalty flows vary with geopolitical distance differently from goods trade, and that this relationship depends on intellectual property enforcement. To interpret these facts, we develop a growth-trade model in which geopolitical risk weakens licensing enforceability when intellectual property rights are poorly protected. Royalty payments reflect both technology adoption and licensing prices: weaker enforcement can reduce diffusion while inducing firms to reprice ...
Working Papers , Paper 2025-029

Working Paper
The Tradition of Federal Reserve Independence

The tradition of Federal Reserve independence is encoded in statute in important ways but is also rooted in norms and practices. To articulate this tradition, we discuss how those norms and practices emerged historically from compromises over the concentration of power, actions taken by political leaders and Fed officials to define the boundaries of the Fed’s independence, and in reaction to evolving monetary theories and practices. We argue that understanding these historic roots provides essential context for evaluating challenges to the Fed's independence today and in the future.
Working Papers , Paper 2026-013

Working Paper
Sluggish news reactions: A combinatorial approach for synchronizing stock jumps

Stock prices often react sluggishly to news: latent efficient prices may jump immediately, while observed transaction prices adjust with a delay or piecewise, producing mistimed jumps. Econometricians typically treat these sluggish reactions as microstructure effects and settle for a coarse sampling grid to guard against them. We introduce a combinatorial method that synchronizes mistimed stock jump returns on a fine grid, allowing us to better approximate common jumps in the efficient prices of related stocks. In an application to Dow 30 data, the synchronized jumps produce better jump ...
Working Papers , Paper 2024-006

Working Paper
When Regional Isn't Aggregate: Joint Estimation of Government Transfer Multipliers

We develop a framework that jointly identifies local and aggregate effects of government transfer shocks with cross-state spillovers. Using the aggregate Romer–RomerSocial Security transfer shock series and relative state-level exposure to the shock, we combine the two variation sources to recover the local, spillover, and aggregate multipliers. The specification is aggregation-consistent: state coefficients sum to the aggregate response, making the decomposition of the national effect into local and spillover components transparent. The aggregate multiplier is positive and roughly half the ...
Working Papers , Paper 2025-028

Working Paper
What Drives Household Financial Distress? The Role of Earnings Misperceptions

Why do households borrow heavily and experience financial distress? We develop and estimate a heterogeneous-agent model of unsecured credit and default in which households learn about income persistence and overreact to recent income realizations. We estimate overreaction using survey measures of income expectations and forecast errors, and the remaining parameters to match household debt and financial distress. Information frictions and estimated overreaction account for roughly half of delinquencies and one-third of bankruptcies, and improve the model’s fit of the observed negative ...
Working Papers , Paper 2025-030

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