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Preview: St. Louis Fed - Review


Our most academic publication offers research and surveys on monetary policy, national and international developments, banking, and more. The content is written for an economically informed readership—from the undergraduate student to the PhD.

Published: Wed, 04 Oct 2017 00:00:00 CDT

Last Build Date: Wed, 04 Oct 2017 00:00:00 CDT

Copyright: Copyright 2017 Federal Reserve Bank of St. Louis

Industrial and Occupational Employment Changes During the Great Recession by Sangmin Aum, Sang Yoon Lee, and Yongseok Shin


The U.S. labor market contracted sharply during the Great Recession. The ensuing recovery has been sluggish and by some measures still incomplete.

Fiscal Federalism and Optimal Income Taxes by Maximiliano Dvorkin


This paper studies how local policies—specifically, taxes on income with redistributive goals—affect the migration decisions of individuals and, in turn, how these migration decisions affect local and economy-wide tax and redistribution policies. The author develops a model of optimal taxation for a federal system of governments in the tradition of Mirrlees (1971), where taxes can be fully nonlinear but informational asymmetries prevent the equalization of well being across workers due to informational rents. 

Return to Capital in a Real Business Cycle Model by Paul Gomme, B. Ravikumar, and Peter Rupert


Can the neoclassical growth model generate fluctuations in the return to capital similar to those observed in the United States? Equating stock market returns with the return to capital, the bulk of the literature concludes that it cannot. 

Monetary Policy with Declining Deficits: Theory and an Application to Recent Argentine Monetary Policy by Rodolfo E. Manuelli and Juan I. Vizcaino


The authors study the nature of the optimal monetary policy in a regime of fiscal dominance when the monetary authority—which can print money or issue interest-earning debt—is required to finance an exogenous sequence of transfers to the Treasury. They show that the degree of commitment on the part of the monetary authority has a significant impact on the details of the optimal policy.

Living Standards in St. Louis and the Eighth Federal Reserve District: Let’s Get Real by Cletus C. Coughlin, Charles S. Gascon, and Kevin L. Kliesen


Recently, the Bureau of Economic Analysis (BEA) has developed the Regional Price Parities (RPPs), spatial price indexes that allow for comparison of cost of living differences across various geographic areas. By construction, RPPs compare the average price level for a region with the national average. 

Why Are Life-Cycle Earnings Profiles Getting Flatter? by B. Ravikumar and Guillaume Vandenbroucke


The authors present a simple, two-period model of human capital accumulation on the job and through college attainment. They use a calibrated version of the model to explain the observed flattening of the life-cycle earnings profiles of two cohorts of workers. 

How Do Local Labor Markets Affect Retirement? by Leora Friedberg, Michael T. Owyang, Wei Sun, and Anthony Webb


The biggest effect of a higher local unemployment rate on older workers is to raise their propensity to stay in their current job. Older workers have fewer voluntary transitions to new jobs when the unemployment rate rises, but they especially have fewer voluntary transitions out of the labor force. Thus, the direct effect of job loss in inducing earlier retirement during recessions is outweighed by retirement delays among those with jobs.

Model Averaging and Persistent Disagreement by In-Koo Cho and Kenneth Kasa


Two agents construct models of an endogenous price process. One agent thinks the data are stationary, the other thinks the data are nonstationary. A policymaker combines forecasts from the two models using a recursive Bayesian model averaging procedure. The actual (but unknown) price process depends on the policymaker’s forecasts.

Terrorism, Trade, and Welfare by Subhayu Bandyopadhyay, Todd Sandler, and Javed Younas


For a standard competitive trade model, the authors show that the incidence of terrorism in different nations can affect the pattern of trade. Nations with a greater incidence of terrorism will export goods that are more immune to terrorism-related disruptions, while importing more terrorism-impacted goods. 

So, Why Didn’t the 2009 Recovery Act Improve the Nation’s Highways and Bridges? by Bill Dupor


Although the American Recovery and Reinvestment Act of 2009 provided nearly $28 billion to state governments for improving U.S. highways, the highway system saw no significant improvement: The number of structurally deficient or functionally obsolete bridges was nearly unchanged, the number of workers on highway and bridge construction did not significantly increase, and the annual value of construction for public highways barely budged.

Household Debt and the Great Recession by Carlos Garriga, Bryan J. Noeth, and Don Schlagenhauf


In the mid-2000s, household private debt reached a new level 1.2 times larger than personal income— before collapsing during the Great Recession. This paper uses microeconomic data to document the main changes in personal debt and explore the behavior of debt across generations over two periods: before and after the Great Recession. 

Chinese Foreign Exchange Reserves, Policy Choices, and the U.S. Economy by Christopher J. Neely


China is both a major trading partner of the United States and the largest official holder of U.S. assets in the world. The value of Chinese foreign exchange reserves peaked at just over $4 trillion in June 2014 but has since declined to $3.19 trillion (as of August 2016). 

Misallocation and Manufacturing TFP in Korea, 1982-2007 by Minho Kim, Jiyoon Oh, and Yongseok Shin


The authors apply the analysis of Hsieh and Klenow (2009) to assess the degree of resource misallocation in the Republic of Korea manufacturing sector from 1982 to 2007. They find improvement in the aggregate allocative efficiency during the first decade and a strong reversal after 1992. 

Does College Level the Playing Field? by Ray Boshara


Whether the topic is responding to poverty and inequality or expanding access to opportunity and the American Dream, college is always the central recommendation. Yet research found that a college degree predicted rising levels of family wealth for Whites and Asians but declining levels of wealth for Blacks and Hispanics. The commissioned papers and discussion here are aimed at understanding the underlying explanations of this troubling finding.

College Is Not Enough: Higher Education Does Not Eliminate Racial and Ethnic Wealth Gaps by William R. Emmons and Lowell R. Ricketts


Differences in college and post-graduate degree attainment alone explain less than half of Black-White and Hispanic-White wealth gaps in a standard wealth regression. Differences in family structure and measures of luck such as income windfalls and inheritances explain even less. Measures of financial decisionmaking, such as the share of housing in total assets and debt ratios, are much more important.

Why Does Wealth Vary Among College Graduates? by Angelyque Campbell


The author describes the topic as one of great interest to the Board of Governors of the Federal Reserve System: Throughout the period of financial unrest that we now refer to as the Great Recession, the Board endeavored to better understand the effects of the financial crisis and the significant erosion of housing wealth experienced by communities of color when house prices plummeted.

Not All College Is Equal When It Comes to Wealth and Race by Su Jin Jez


The author discusses research and analysis of the role of higher education in explaining racial and ethnic disparities in wealth.

Addressing the Wealth Gap for Hispanic Families by Eric Rodriguez


The author reflects on the racial and ethnic wealth gap and what it means for the Latino community and the national economy. In this article, the author examines several factors, including disparities in education, that contribute to the long-standing inequities facing Latino households.

The Political Economy of Education, Financial Literacy, and the Racial Wealth Gap by Darrick Hamilton and William A. Darity, Jr.


This article examines the mismatch between the political discourse around individual agency, education, and financial literacy, and the actual racial wealth gap. The authors argue that the racial wealth gap is rooted in socioeconomic and political structure barriers rather than a disdain for or underachievement in education or financial literacy on the part of Black Americans, as might be suggested by the conventional wisdom.

Explaining Black-White Differences in College Outcomes at Missouri Public Universities by Cory Koedel


Conditional on enrollment at a four-year public university, African American students are less likely to graduate and less likely to graduate with a STEM degree than White students. This article reports on evidence from Missouri showing that these outcome differences in college can be explained entirely by differences in students’ academic preparation prior to college enrollment.

Do Family Structure Differences Explain Trends in Wealth Differentials? by Robert I. Lerman


Race and ethnic wealth differentials are wide and increasing. Some of the gaps are associated with education differences, but education alone cannot account for the substantially higher net worth of White families than of Black and Hispanic families.

Keynote Conversation by Ray Boshara and William A. Darity, Jr.


In an interview format, including questions and answers from attendees, the authors discuss key issues surrounding the central question of the symposium: Does college level the playing field?

“Family Achievements?”: How a College Degree Accumulates Wealth for Whites and Not For Blacks by Tatjana Meschede, Joanna Taylor, Alexis Mann, and Thomas Shapiro


A college education has been linked to higher life-time earnings and better economic achievements, so the expectation would be that it is also linked to higher net wealth for everybody. However, recent analyses challenge this hypothesis and find that the expectation holds true for White college-educated households but not for Black college-educated households.

The Homeownership Experience of Minorities During the Great Recession by Carlos Garriga, Lowell R. Ricketts, and Don Schlagenhauf


It has been argued that during the Great Recession, wealth losses were more concentrated for college-­educated Black and Hispanic families than for White and Asian college-educated families and their non-college-educated Black and Hispanic peers. This article explores the extent to which the homeownership experience for families who purchased homes between 2004 and 2008 is a potentially impor­tant factor in explaining this finding.