Atlanta Fed Working Papers

The Research Department of the Federal Reserve Bank of Atlanta publishes a working paper series to convey the research of staff economists and visiting scholars and stimulate professional discussion and exploration of economic and financial subjects.


Narrative Sign Restrictions for SVARs

Juan Antolín-Díaz and Juan F. Rubio-Ramírez
Working Paper 2016-16 (December)
The authors identify structural vector autoregressions (SVARs) using narrative sign restrictions. They show that narrative sign restrictions are highly informative and that adding a single narrative sign restriction sharpens inference of SVARs originally identified via traditional sign restrictions.

The Systematic Component of Monetary Policy in SVARs: An Agnostic Identification Procedure

Jonas E. Arias, Dario Caldara, and Juan F. Rubio-Ramírez
Working Paper 2016-15 (December)
The authors examine the effects of monetary policy shocks using structural vector autoregressions (SVARs). They consistently find that an increase in the fed funds rate induces a contraction in output.

Killer Debt: The Impact of Debt on Mortality

Laura M. Argys, Andrew I. Friedson, and M. Melinda Pitts
Working Paper 2016-14 (November)
The authors explore the impact of severely delinquent debt and creditworthiness on health. They find that delinquent debt resulting from a financial crisis has lasting effects on health that are substantial enough to increase mortality rates.

The Usefulness of the Median CPI in Bayesian VARs Used for Macroeconomic Forecasting and Policy

Brent Meyer and Saeed Zaman
Working Paper 2016-13 (November)
Investigating the forecasting performance of the median Consumer Price Index (CPI) in a set of statistical models often used in a monetary policy setting, the authors find including the median CPI improves the forecasting accuracy of inflation and the central bank's primary instrument for monetary policy—the federal funds rate.

Wage Determination in Social Occupations: The Role of Individual Social Capital

Julie L. Hotchkiss and Anil Rupasingha
Working Paper 2016-12 (November)
The authors examine factors explaining the difference in wages observed between social and nonsocial occupations. Much of the difference is explained by unobserved ways workers in those occupations differ from one another.

A Quantitative Theory of Time-Consistent Unemployment Insurance

Yun Pei and Zoe Xie
Working Paper 2016-11 (November)
The authors find that federal government's discretionary extensions of unemployment insurance (UI) during recessions can be explained by a lack of policy commitment. Our model suggests that a lower unemployment rate could have been achieved if the government had been able to commit to no UI extensions during the 2008–09 recession. Although the extensions led to ex post higher welfare during 2008–13, extensions would not necessarily be welfare improving for a shorter and less severe recession.

Optimal Long-Term Contracting with Learning

Zhiguo He, Bin Wei, Jianfeng Yu, and Feng Gao
Working Paper 2016-10 (November)
With uncertain profitability in dynamic agency relationship, the agent has incentive to shirk to manipulate the principal's future belief, giving rise to a long-lasting hidden information problem. The optimal contract implements time-decreasing effort and has a feature of "stock options" in that incentive goes up after good performance.

China Pro-Growth Monetary Policy and Its Asymmetric Transmission

Kaiji Chen, Patrick Higgins, Daniel F. Waggoner, and Tao Zha
Working Paper 2016-9 (September)
Attempting to better understand China monetary policy, the authors develop a framework that allows them to quantify the policy effects on output and prices. They also find evidence that monetary policy is designed to support real GDP growth mandated by the central government while resisting inflation pressures.

Are Lemons Sold First? Dynamic Signaling in the Mortgage Market

Manuel Adelino, Kristopher Gerardi, and Barney Hartman-Glaser
Working Paper 2016-8a
Revised February 2017
Using detailed information about the residential mortgage market, the authors find a positive relationship between a mortgage's performance and its time to sale, providing some of the first evidence of a signaling mechanism through delay of trade.

Forecasting China's Economic Growth and Inflation

Patrick Higgins, Tao Zha, and Karen Zhong
Working Paper 2016-7 (July)
The authors develop a model that forecasts China's gross domestic product growth and consumer price index inflation. Their model predicts that China's future GDP growth will be L-shaped, not U-shaped.

Fiscal Austerity in Ambiguous Times

Axelle Ferrière and Anastasios G. Karantounias
Working Paper 2016-6 (March)
The authors examine how public debt should be managed when uncertainty about the business cycle is widespread. They find that front-loaded fiscal consolidations and balanced budgets in the long run are optimal if the intertemporal elasticity of substitution is sufficiently low.

The Role of Commodity Prices in Forecasting U.S. Core Inflation

Nikolay Gospodinov
Working Paper 2016-5 (February)
The author examines the ability of an aggregator of three commodity futures prices to forecast U.S. core inflation. He finds the predictive power of these convenience yields for future inflation to be significant.

Uninsured Risk, Stagnation, and Fiscal Policy

R. Anton Braun and Tomoyuki Nakajima
Working Paper 2016-4a Revised March 2016 (Original February 2016)
Wealth inequality is rising in Japan. How should fiscal policy respond? The authors find that lowering the tax rate on capital reduces wealth inequality. This same policy increases economic activity and improves welfare.

Forecasts of Inflation and Interest Rates in No-Arbitrage Affine Models

Nikolay Gospodinov and Bin Wei
Working Paper 2016-3 (February)
Examining the forecasting ability of a term structure model of nominal and real yields, the authors find that incorporating inflation derivatives and oil futures into their affine framework tends to improve inflation and yield forecasts, respectively.

What We Learn from China's Rising Shadow Banking: Exploring the Nexus of Monetary Tightening and Banks' Role in Entrusted Lending

Kaiji Chen, Jue Ren, and Tao Zha
Working Paper 2016-1 (January)
Arguing that China's rising shadow banking sector was linked to potential balance-sheet risks in the banking system, the authors construct a micro loan dataset and develop a theoretical framework explaining links between China's monetary policy, shadow banking, and traditional banking.

The Federal Home Loan Bank System and U.S. Housing Finance

W. Scott Frame
Working Paper 2016-2 (January)
Examining the role of the Federal Home Loan Bank System in the U.S. housing finance system, the author highlights its role as a provider of liquidity to its members and discusses its perception as the "lender of next-to-last resort."

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