Working Paper
Equity Regulation and U.S. Venture Capital Investment
There is a growing consensus that the long-run per capita growth rate of the U.S. economy has drifted lower since the early 2000s, consistent with a perceived slowdown in business dynamism. One factor that may have contributed to this is a downshift in venture capital investment and its failure to recover in line with stock prices, as pre-2003 patterns would suggest. Critics have argued that this is associated with the increased regulatory burden for publically traded firms to comply with the Sarbanes-Oxley Act of 2002 (SOX). There is inconclusive evidence of SOX deterring firms from becoming publically traded as indicated by IPO activity, a proxy reflecting several factors that may not be as tied to innovation as venture capital. Earlier tests of SOX?s impact on venture capital activity, which tended to focus on cross-sectional evidence, were hampered by a short time-series sample following the Internet-stock bust of the early 2000s. Taking advantage of the large-sized rise, fall, and recovery in stock prices since then, this study assesses whether the time-series behavior of venture capital investment shifted following SOX. We find evidence of a time-series break in the middle of our sample, consistent with the passage of SOX. Estimates indicate that the slower post-SOX pace of venture capital investment is mainly attributed to a reduced elasticity of such investment with respect to stock prices rather than to a simple downshift in the level of investment. Our estimates suggest that a cost-benefit analysis of SOX could be worthwhile, especially given concerns that the long-run growth rate of U.S. productivity and GDP has been unusually sluggish and the emerging consensus that excessive debt financing?not equity financing?is more tied to the subset of financial crises associated with severe macroeconomic downturns.
AUTHORS: Atkinson, Tyler; Duca, John V.
DATE: 2017-08-23

Working Paper
The Zero Lower Bound and Estimation Accuracy
During the Great Recession, many central banks lowered their policy rate to its zero lower bound (ZLB), creating a kink in the policy rule and calling into question linear estimation methods. There are two promising alternatives: estimate a fully nonlinear model that accounts for precautionary savings effects of the ZLB or a piecewise linear model that is much faster but ignores the precautionary savings effects. Repeated estimation with artificial datasets reveals some advantages of the nonlinear model, but they are not large enough to justify the longer estimation time, regardless of the ZLB duration in the data. Misspecification of the estimated models has a much larger impact on accuracy. It biases the parameter estimates and creates significant differences between the predictions of the models and the data generating process.
AUTHORS: Atkinson, Tyler; Richter, Alexander W.; Throckmorton, Nathaniel
DATE: 2018-05-07

Journal Article
Is rising unemployment an early warning of state-level recession?
Based on experience with national unemployment, analysts have viewed sharply higher state joblessness as signaling possible further deterioration. However, analyses indicate increasing state-level unemployment by itself does not indicate a recession, and that applying rule-of-thumb properties regarding recession to state economies is misguided.
AUTHORS: Armen, Alan ; Atkinson, Tyler
DATE: 2016-07

Journal Article
High unemployment points to below-target (but still stable) inflation
The Federal Reserve has a mandate to promote price stability and full employment. Generally, ?price stability? is given a forward-looking interpretation. Policy should be conducted so that expected medium-term (two- to five-year) inflation is low and stable or, less strictly, so that expected inflation beyond the next few years is low and stable. Households and businesses, too, are generally more interested in where prices are headed than in where they have been.
AUTHORS: Atkinson, Tyler; Koenig, Evan F.
DATE: 2012-10

Journal Article
Assessing the costs and consequences of the 2007–09 financial crisis and its aftermath
There are few estimates of what society gave up due to the crisis: Our conservative estimate is $50,000 to $120,000 for every U.S. household.
AUTHORS: Rosenblum, Harvey; Luttrell, David; Atkinson, Tyler
DATE: 2013-09

Journal Article
America’s Missing Workers Are Primarily Middle Educated
The labor force participation rate has fallen since 2008, partly due to an aging population and despite a more highly educated one. After accounting for aging, those whose highest educational attainment is a high school diploma, some college or an associate degree have primarily driven the participation decrease.
AUTHORS: Atkinson, Tyler; Armen, Alan
DATE: 2017-03

Journal Article
Gauging the odds of a double-dip recession amid signals and slowdowns
Public sentiment says the recession isn't over. Never mind that the National Bureau of Economic Research (NBER), the arbiter of recessions, declared that the Great Recession of 2008 and 2009 officially ended in June 2009. An unrelenting pessimism constrains the recovery as consumers spend reluctantly while paying down debt, gripped by persistent fears of unemployment. The economy grew at a 2.5 percent annualized pace in the third quarter, according to the second estimate of real gross domestic product (GDP), a moderate improvement after two quarters of decelerating growth during the recovery. This tepid expansion has raised concern that things could get worse again before getting better and that the likelihood of another recession may have risen.
AUTHORS: Atkinson, Tyler; Rosenblum, Harvey
DATE: 2010-12

Working Paper
Inflation, slack, and Fed credibility
It is generally agreed that slack has some impact on inflation. There is much less agreement on what form the relationship takes and whether it is stable enough to reliably help predict inflation. This analysis focuses on the Great Moderation period. We find that slack (as measured by the unemployment rate) and changes in slack are negatively correlated with changes in inflation and also deviations of inflation from long-forward inflation expectations.> ; These relationships could have been exploited to produce forecasts of trimmed mean PCE inflation more accurate than rule-of-thumb forecasts. Forecasts of trimmed mean PCE inflation also serve well as predictions of GDP inflation and headline PCE inflation. Our analysis suggests that currently high levels of slack should hold inflation below two percent over 2012.
AUTHORS: Atkinson, Tyler; Koenig, Evan F.
DATE: 2012-01

Working Paper
How bad was it? The costs and consequences of the 2007–09 financial crisis
The 2007?09 financial crisis was associated with a huge loss of economic output and financial wealth, psychological consequences and skill atrophy from extended unemployment, an increase in government intervention, and other significant costs. Assuming the financial crisis is to blame for these associated ills, an estimate of its cost is needed to weigh against the cost of policies intended to prevent similar episodes. We conservatively estimate that 40 to 90 percent of one year's output ($6 trillion to $14 trillion, the equivalent of $50,000 to $120,000 for every U.S. household) was foregone due to the 2007?09 recession. We also provide several alternative measures of lost consumption, national trauma, and other negative consequences of the worst recession since the 1930s. This more comprehensive evaluation of factors suggests that what the U.S. gave up as a result of the crisis is likely greater than the value of one year's output.
AUTHORS: Rosenblum, Harvey; Atkinson, Tyler; Luttrell, David
DATE: 2013-07