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Working Paper
The Effect of the Conservation Reserve Program on Rural Economies: Deriving a Statistical Verdict from a Null Finding
This article suggests two methods for deriving a statistical verdict from a null finding,allowing economists to more confidently conclude when ?not significant" can in fact be interpreted as ?no substantive effect." The proposed methodology can be extended to a variety of empirical contexts where size and power matter. The example used to demonstrate the method is the Economic Research Service's 2004 Report to Congress that was charged with statistically identifying any unintended negative employment consequences of the Conservation Reserve Program (the Program). The report failed to ...
Working Paper
Rising Market Concentration and the Decline of Food Price Shock Pass-Through to Core Inflation
Using a vector autoregression that allows for time-varying parameters and stochastic volatility, we show that U.S. core inflation became 75 percent less responsive to shocks in food prices since the late 1970s. The decline in the pass-through of food price shocks to inflation is a result of a decline in both volatility and the persistence of food price changes in inflation. This decline in pass-through coincides with a period of increasing concentration in the food supply chain, especially among U.S. grocery retailers and distributors. We find that 60 percent of the variation in pass-through ...
Journal Article
COVID-19 Stuns U.S. and Tenth District Economies, but Both Show Signs of Stabilization
COVID-19 and attempts to slow its spread have led to a decline in economic activity unprecedented in both severity and speed. Although every part of the United States experienced dramatic decreases in activity, states in the Tenth Federal Reserve District, with lower COVID-19 cases as a percentage of the population, have fared slightly better. More recently, national and regional measures of business and consumer activity have improved but remain well below pre-pandemic levels.
Journal Article
When the Music Stops: Slowing Wage Growth May Lead to More Delinquent Debt
Subprime auto debt has risen nearly 10 percent above pre-pandemic levels, and delinquency rates have increased despite high wage growth in the economy. Historically, high wage growth has been associated with lower transitions into delinquency. Should wage growth slow, delinquency rates would likely rise even higher, especially among subprime borrowers.
Journal Article
The Widening Divide in Business Turnover between Large and Small Urban Areas
Business turnover?the rate at which new firms enter and old firms exit the economy?has been declining for at least 40 years in the United States. Declining business turnover is potentially problematic, as it may signal a drop in innovation and productivity growth as well as a lower share of economic activity at new businesses. As a result, the economic fortunes of metropolitan areas are likely to be intertwined with the rate of business turnover they experience. {{p}} As the U.S. economy continues to transition from producing goods to providing services, changes in business turnover are ...
Working Paper
Death of Coal and Breath of Life: The Effect of Power Plant Closure on Local Air Quality
The number of U.S. coal-fired power plants declined by nearly 250 between 2001 and 2018. Given that burning coal generates large amounts of particulate matter, which is known to have adverse health effects, the closure of a coal-fired power plant should improve local air quality. Using spatial panel data from air quality monitor stations and coal-fired power plants, we estimate the relationship between plant closure and local air quality. We find that on average, the levels of particulate matter within 25 and 50 mile buffers around air quality monitors declined between 7 and 14 percent with ...
Journal Article
Auto Loan Delinquency Rates Are Rising, but Mostly among Subprime Borrowers
Steady increases in U.S. auto debt over the past seven years have raised concerns over credit quality and delinquency in consumers' repayment. We investigate these concerns and find that the credit quality of auto debt has actually improved throughout the current expansion. Delinquency rates have been rising mostly among subprime borrowers, who represent about a quarter of total outstanding auto debt. However, the potential risks to the financial sector are currently unknown and warrant close monitoring.
Working Paper
The Missing Tail Risk in Option Prices
This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Working Paper
The Missing Tail Risk in Option Prices
This paper contributes to the literature on deviations from rational expectations in financial markets and to the literature on evaluating density forecasts. We first develop a novel statistic to evaluate the overall accuracy of distributional forecasts, and find two methods that yield accurate distributional forecasts. We then propose another statistic to examine the relative accuracy over the entire distribution range. Our results indicate more oil price realizations in the left tail than predicted. We argue that this finding points to a persistent behavioral forecasting bias and a ...
Working Paper
Economic Benefits and Social Costs of Legalizing Recreational Marijuana
We analyze the effects of legalizing recreational marijuana on state economic and social outcomes (2000–20) using difference-in-differences estimation robust to staggered timing and heterogeneity of treatment. We find moderate economic gains accompanied by some social costs. Post-legalization, average state income grew by 3 percent, house prices by 6 percent, and population by 2 percent. However, substance use disorders, chronic homelessness, and arrests increased by 17, 35, and 13 percent, respectively. Although some of our estimates are noisy, our findings suggest that the economic ...