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2003 Working Papers

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Heterogeneity and Aggregation in the Labor Market: Implications for Aggregate Preference Shifts
By Sun-Bin Kim & Yongsung Chang
Working Paper 03-17
Released: January 2004

The cyclical behavior of hours of work, wages, and consumption does not conform with the prediction of the representative agent with standard preferences. The residual in the intra-temporal first-order condition for commodity consumption and leisure is...

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Payment System Disruptions and the Federal Reserve Following September 11, 2001
By Jeffrey M. Lacker
Working Paper 03-16
Released: December 2003

The monetary and payment system consequences of the September 11, 2001, terrorist attacks are reviewed and compared to selected U.S. banking crises. Interbank payment disruptions appear to be the central feature of all the crises reviewed. For some the...

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Real Implications of the Zero Bound on Nominal Interest Rates.
By Alexander L. Wolman
Working Paper 03-15
Released: December 2003

If monetary policy succeeds in keeping average inflation very low, nominal interest rates may occasionally be constrained by the zero lower bound. The degree to which this constraint has real implications depends on the monetary policy feedback rule and...

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Unsecured Debt with Public Insurance: From Bad to Worse
By Nicole B. Simpson & Kartik Athreya
Working Paper 03-14R
Released: December 2004

In U.S. data, income interruptions, the receipt of public insurance, and the incidence of personal bankruptcy are all closely related. The central contribution of this paper is to evaluate both bankruptcy protection and public insurance in a unified...

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Personal Bankruptcy or Public Insurance?
By Nicole B. Simpson & Kartik Athreya
Working Paper 03-14
Released: November 2003

Bankruptcy and formal public insurance both partially insure households from sharp changes in their income or employment status. Both come at potentially nontrivial societal costs: more bankruptcy results in less credit and/or higher costs of credit,...

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Classical Deflation Theory
By Thomas M. Humphrey
Working Paper 03-13
Released: November 2003

Classical economists David Hume, Pehr Niclas Christiernin, Henry Thornton, David Ricardo, Thomas Attwood, and Robert Torrens looked beyond the redistributive (creditor-debtor) effects of deflationary monetary contraction to its adverse effects on output...

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Shortages of Small Change in Early Argentina.
By Huberto M. Ennis
Working Paper 03-12
Released: September 2003

In this note I review evidence suggesting that shortages of small change occurred in the territory of Argentina during the end of the eighteenth and the beginning of the nineteenth centuries. For the colonial period (until 1810) the main pieces of...

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Fiscal Policy and Regional Inflation in a Currency Union
By Margarida Duarte & Alexander L. Wolman
Working Paper 03-11
Released: September 2003

This paper investigates the ability of a region participating in a currency union to affect its inflation differential with respect to the union through fiscal policy. We study the interaction between regional fiscal policy and inflation differentials...

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Optimal Public Investment with and without Government Commitment*
By Jorge Soares, Marina Azzimonti & Pierre-Daniel G. Sarte
Working Paper 03-10
Released: August 2003

We analyze the problem of optimal public investment when government purchases of productive capital assets are financed through income taxes. Virtually all previous work in this literature has prescribed a share of public investment in GDP that is both...

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Mechanism Design and Assignment Models
By Robert M. Townsend & Edward Simpson Prescott
Working Paper 03-9
Released: July 2003

This mechanism design paper studies the assignment of people to projects over time. Inability to communicate interim shocks is a force for long-term assignments, though exceptions exist for high risk aversion. In contrast, costless reporting of interim...

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James Pennington, (1777-1862): Classical Banking, Monetary, and Trade Theorist and Economic Policy Advisor
By Thomas M. Humphrey
Working Paper 03-8
Released: July 2003

James Pennington's creativity as a scientific economist is matched only by his obscurity. He exemplifies the pioneering innovator who never gets his due recognition. Alone and with others he launched (1) the idea that checking deposits are money just ...



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Labor Supply Shifts and Economic Fluctuations
By Frank Schorfheide & Yongsung Chang
Working Paper 03-7
Released: July 2003

We propose a new VAR identification scheme that distinguishes shifts of and movements along the labor demand schedule to identify labor-supply shocks. According to our VAR analysis of post-war U.S. data, labor-supply shifts account for about 30 percent ...

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On the Employment Effect of Technology: Evidence from U.S. Manufacturing for 1958-1996
By Jay H. Hong & Yongsung Chang
Working Paper 03-6
Released: July 2003

Recently, Galí and others have found that technological progress may be contractionary: a favorable technology shock reduces hours worked in the short run. We ask whether this observation is robust in disaggregate data. According to our VAR analysis...

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From Individual to Aggregate Labor Supply: A Quantitative Analysis based on a Heterogeneous Agent Macroeconomy
By Yongsung Chang & Sun-Bin Kim
Working Paper 03-5
Released: July 2003

We investigate the mapping from individual to aggregate labor supply using a general equilibrium heterogeneous-agent model with an incomplete market. The nature of heterogeneity among workers is calibrated using wage data from the PSID. The gross worker...

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Aggregate Demand Management with Multiple Equilibria
By Huberto M. Ennis & Todd Keister
Working Paper 03-4
Released: July 2003

We study optimal government policy in an economy where (i) search frictions create a coordination problem and generate multiple Pareto-ranked equilibria and (ii). The government finances the provision of a public good by taxing trade...

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Fresh Start or Head Start? Uniform Bankruptcy Exemptions and Welfare
By Kartik Athreya
Working Paper 03-3R
Released: July 2004

The 1990's witnessed a historically unprecedented number of personal bankruptcy filings. In response, congressional debate over bankruptcy law has recently led to several proposals aimed at making it more difficult to exempt wealth in a bankruptcy. In...

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Fresh Start or Head Start? Uniform Bankruptcy Exemptions and Welfare
By Kartik Athreya
Working Paper 03-3
Released: May 2003

The 1990's witnessed a historically unprecedented number of personal bankruptcy filings. In response, congressional debate over bankruptcy law has recently led to several proposals aimed at making it more difficult to exempt wealth in a bankruptcy. In...

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Risky Higher Education and Subsidies
By Ahmet Akyol & Kartik Athreya
Working Paper 03-2
Released: August 2003

Tertiary education in the U.S. requires large investments that are risky, lumpy, and well-timed. Tertiary education is also heavily subsidized. By making the risk of human capital investment more acceptable, especially to low wealth households, subsidies...

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Economic Growth, Liquidity, and Bank Runs
By Todd Keister & Huberto M. Ennis
Working Paper 03-1
Released: March 2003

We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes...

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