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Series:Working Paper Series  Bank:Federal Reserve Bank of Chicago 

Working Paper
Characterizations in a random record model with a non-identically distributed initial record

We consider a sequence of random length M of independent absolutely continuous observations Xi, 1 = i = M, where M is geometric, X1 has cdf G, and Xi, i = 2, have cdf F. Let N be the number of upper records and Rn, n = 1, be the nth record value. We show that N is free of F if and only if G(x) = G0(F (x)) for some cdf G0 and that if E (|X2|) is finite so is E |Rn|) for n = 2 whenever N = n or N = n. We prove that the distribution of N along with appropriately chosen subsequences of E(Rn) characterize F and G, and along with subsequences of E Rn - Rn-1) characterize F and G up to a common ...
Working Paper Series , Paper WP-05-05

Working Paper
Civil Liberties and Social Structure

Governments use coercion to aggregate distributed information relevant to governmental objectives—from the prosecution of regime-stability threats to terrorism or epidemics. A cohesive social structure facilitates this task, as reliable information will often come from friends and acquaintances. A cohesive citizenry can more easily exercise collective action to resist such intrusions, however. We present an equilibrium theory where this tension mediates the joint determination of social structure and civil liberties. We show that segregation and unequal treatment sustain each other as ...
Working Paper Series , Paper WP 2024-05

Working Paper
What Happened to the US Economy During the 1918 Influenza Pandemic? A View Through High-Frequency Data

Burns and Mitchell (1946, 109) found a recession of “exceptional brevity and moderate amplitude.” I confirm their judgment by examining a variety of high-frequency, aggregate and cross-sectional data. Industrial output fell sharply but rebounded within months. Retail seemed little affected and there is no evidence of increased business failures or stressed financial system. Cross-sectional data on manufacturing employment indicates that most of the recession, brief as it was, was due to the Armistice rather than the epidemic. Data from the nationwide coal industry documents the sharp but ...
Working Paper Series , Paper WP-2020-11

Working Paper
The effects of geographic expansion on bank efficiency

We assess the effects of geographic expansion on bank efficiency using cost and profit efficiency for over 7,000 U.S. banks, 1993-1998. We find that parent organizations exercise some control over the efficiency of their affiliates, although this control tends to dissipate with distance to the affiliate. However, on average, distance-related efficiency effects tend to be modest, suggesting that some efficient organizations can overcome any effects of distance. The results imply there may be no particular optimal geographic scope for banking organizations - some may operate efficiently within ...
Working Paper Series , Paper WP-00-14

Working Paper
Regulatory incentives and consolidation: the case of commercial bank mergers and the Community Reinvestment Act

Bank regulators are required to consider a bank?s record of providing credit to low- and moderate-income neighborhoods and individuals in approving bank applications for mergers and acquisitions. We test the hypothesis that banks strategically prepare for the regulatory and public scrutiny associated with a merger or acquisition by increasing their lending to low-and moderate-income individuals in anticipation of acquiring another institution. We find evidence in favor of this hypothesis. In particular, we show that the higher the percentage of the institution?s mortgage originations in a ...
Working Paper Series , Paper WP-02-06

Working Paper
Tracking U.S. Consumers in Real Time with a New Weekly Index of Retail Trade

We create a new weekly index of retail trade that accurately predicts the U.S. Census Bureau's Monthly Retail Trade Survey (MRTS). The index's weekly frequency provides an early snapshot of the MRTS and allows for a more granular analysis of the aggregate consumer response to fast-moving events such as the Covid-19 pandemic. To construct the index, we extract the co-movement in weekly data series capturing credit and debit card transactions, foot traffic, gasoline sales, and consumer sentiment. To ensure that the index is representative of aggregate retail spending, we implementa novel ...
Working Paper Series , Paper WP-2021-05

Working Paper
The value of relationships between small firms and their lenders

This paper investigates the impact of the relationship between a small firm and its lender on the interest rate paid by the firm. I examine detailed data on loans made by small business investment companies (SBICs) to small firms between 1986 and 1991, and my estimates imply that, other things equal, the interest rate charged by an SBIC to a new small business customer is between 40 and 50 basis points higher rate that the rate charged to a repeat customer. These results offer solid evidence that relationships between small firms and their lenders can be quite valuable.
Working Paper Series , Paper WP-99-29

Working Paper
Birth cohort and the black-white achievement gap: the role of health soon after birth

A large literature documents the significant gap in average test scores between blacks and whites, while a related literature finds a substantial narrowing of the gap during the 1980?s, and a stagnation in convergence during the 1990?s. We use two data sources the Long Term Trends NAEP and AFQT scores for the universe of applicants to the U.S. military between 1976 and 1991 to show that most of the racial convergence in the 1980?s is explained by relative improvements across successive cohorts of blacks born between 1963 and the early 1970?s and not by a secular narrowing in the gap over ...
Working Paper Series , Paper WP-08-20

Working Paper
Will writing and bequest motives: early 20th century Irish evidence

This paper develops a simple model of the decision to write a will prior to death and tests the implications of the model using data from Ireland prior to the advent of state provided old age support. The model assumes that individuals write wills in order to change the distribution of their assets from the distribution that would occur in the absence of a will and that individuals incur will writing costs. The model leads to the predictions that individuals whose desired distribution differs most dramatically from the default and those who face the lowest costs will be the most likely to ...
Working Paper Series , Paper WP-06-18

Working Paper
Netting, financial contracts, and banks: the economic implications

Derivatives and certain other off-balance sheet contracts enjoy special legal protection on insolvent counterparties through a process referred to as 'close-out netting.' This paper explores the legal status and economic implications of this protection. While this protection benefits major derivatives dealers and derivatives markets, it is less clear that other market participants or markets in general are better or worse off. While we are not able to conclude whether or not these protections are socially optimal, we outline the wide range of issues that a general consideration of the pros ...
Working Paper Series , Paper WP-04-02

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