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Working Paper
The St. Louis Fed DSGE Model
Faria-e-Castro, Miguel (2026-06-11)
This document contains a technical description of the dynamic stochastic general equilibrium (DSGE) model developed and maintained by the Research Division of the St. Louis Fed as one of its tools for forecasting and policy analysis. The St. Louis Fed model departs from an otherwise standard medium-scale New Keynesian DSGE model along three main dimensions: first, it allows for household heterogeneity, in the form of workers and capitalists, who have different marginal propensities to consume (MPC). Second, it explicitly models a fiscal sector endowed with multiple spending and revenue ...
Working Papers , Paper 2024-014

Working Paper
The Implications of Labor Market Heterogeneity for Unemployment Insurance Design
Birinci, Serdar; See, Kurt (2026-06-04)
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
Algorithms as Shadow Regulation: Secondary Market Access Overrides Home Buyer Credit Risk
García, Manu; Garriga, Carlos (2026-05-29)
Using confidential HMDA data on 30 million purchase applications, we show how automated underwriting distorts credit allocation. We document a severe 7.5-percentage point jump in denials at the 50% debt-to-income threshold. This "cliff" is unique to Fannie Mae’s software, whereas Freddie Mac’s algorithm exhibits no matching friction. By exploiting institutional routing to isolate secondary market access as the causal mechanism, we find a stark price-quantity asymmetry: the interest rate penalty is a mere 3 basis points, yet the threshold suppresses $7.7 billion in conventional ...
Working Papers , Paper 2026-011

Working Paper
Testing for Multi-Asset Systemic Tail Risk
Erdemlioglu, Deniz; Neely, Christopher J.; Yang, Xiye (2026-05-29)
We develop a test to measure multi-asset (systemic) tail risk in the cross-section of asset returns. Using high-frequency data on individual U.S. stocks and sector-specific ETF portfolios, we estimate time-varying jump intensities and test for multi-asset tail risk around Fed policy announcements. The magnitude of the tail risk induced by Fed policy announcements varies over the business cycle, peaks during the global financial crisis, and remains high during phases of unconventional monetary policy. While most FOMC announcements generate systemic left-tail risk, there is no evidence that ...
Working Papers , Paper 2023-016

Working Paper
What Does It Take? Quantifying Cross-Country Transfers in the Eurozone
Chien, YiLi; Jiang, Zhengyang; Leombroni, Matteo; Lustig, Hanno (2026-05-28)
We measure the cross-country transfers that result from unconventional monetary policy in the Eurozone. The ECB funds its balance sheet expansion mostly by issuing bank reserves and cash in core countries. The national central banks (NCBs) in periphery countries then borrow from the core NCBs at below-market rates, and use these funds to finance asset purchases and bank lending. This arrangement exposes taxpayers in core countries to credit and currency risk without corresponding compensation. By comparing the cross-country distribution of NCB income to a counterfactual scenario without ...
Working Papers , Paper 2025-024

Working Paper
Expanding Access to Selective Colleges
Hendricks, Lutz; Koreshkova, Tatyana; Leukhina, Oksana (2026-05-24)
This paper studies the effects of expanding high-quality public university capacities on student earnings and welfare. Using a quantitative model of college choice, we find that expanding the most selective colleges by 20 percent increases skilled labor supply by 5.3 percent, aggregate earnings by 0.8 percent, and welfare by 2.2 percent. The gains arise because a large number of high ability students are rationed out of selective colleges. When admitted, these students graduate at high rates and enjoy substantial earnings gains. The earnings gains generated by expanding college capacity are ...
Working Papers , Paper 2026-005

Working Paper
Monetary Policy and the COVID-19 Inflation Shock
Andolfatto, David; Martin, Fernando M. (2026-05-23)
We study the surge in U.S. inflation following the COVID-19 pandemic using a small-scale dynamic general equilibrium model calibrated to the 2020–2024 period. The framework emphasizes the interaction among fiscal transfers, monetary policy, and the government’s intertemporal budget constraint in an economy with heterogeneous households, incomplete insurance and borrowing constraints. We evaluate what monetary policy could realistically have achieved given the observed stance of U.S. fiscal policy. While the model implies that monetary policy was late relative to the optimum, earlier ...
Working Papers , Paper 2025-004

Working Paper
Taxation and the Global Allocation of Intangibles
LaBelle, Jesse; Martin, Fernando M.; Santacreu, Ana Maria (2026-05-21)
We study how international tax systems shape the global allocation of intangible assets. Firm-level data show that cross-border patent ownership transfers respond strongly to tax differentials, especially within multinational firms, while arm’s-length transfers are more closely associated with intellectual property rights (IPR) protection. We develop a model in which patent owners choose whether to license, sell, or transfer patents to a foreign affiliate, linking tax rates, IPR protection and transfer-pricing wedges to patent location. Counterfactuals suggest that tax harmonization and ...
Working Papers , Paper 2025-025

Working Paper
Does Uncertainty Really Predict Recessions?
Hathhorn, Brooke; Jackson, Laura E.; Owyang, Michael T. (2026-05-20)
We evaluate the ability of economic uncertainty measures to forecast recessions in real time. We find that including uncertainty increases the predictive power of both in sample and out-of-sample forecast models relative to a baseline set of financial variables. A nonlinear maximum transformation of uncertainty, which captures whether a measure exceeds its maximum over the past year, improves forecast performance for some measures. Adding a contemporaneous indicator like GDP growth alongside uncertainty yields additional predictive gains. Lastly, ex post Bayesian model averaging outperforms ...
Working Papers , Paper 2026-010

Working Paper
Firm-Worker Matches: Experience or Inspection Goods?
Gregory, Victoria; Menzio, Guido; Topa, Giovanni M. (2026-05-14)
We propose a novel empirical strategy to infer the extent to which firm-worker matches are inspection or experience goods. We argue that the informative content of the signals that firms and workers receive about the productivity of their match before entering an employment relationship can be inferred from the gaps between the separation rates of workers hired from unemployment, employment at low-tenure jobs, and employment at high-tenure jobs. We implement the strategy using German administrative data. We find that, before entering an employment relationship, a firm and a worker receive a ...
Working Papers , Paper 2026-009

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