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Series:Working Papers  Bank:Federal Reserve Bank of St. Louis 

Working Paper
Superstar Economists: Coauthorship networks and research output
We study the impact of research collaborations in coauthorship networks on research output and how optimal funding can maximize it. Through the links in the collaboration network, researchers create spillovers not only to their direct coauthors but also to researchers indirectly linked to them. We characterize the equilibrium when agents collaborate in multiple and possibly overlapping projects. We bring our model to the data by analyzing the coauthorship network of economists registered in the RePEc Author Service. We rank the authors and research institutions according to their contribution to the aggregate research output and thus provide a novel ranking measure that explicitly takes into account the spillover effect generated in the coauthorship network. Moreover, we analyze funding instruments for individual researchers as well as research institutions and compare them with the economics funding program of the National Science Foundation. Our results indicate that, because current funding schemes do not take into account the availability of coauthorship network data, they are ill-designed to take advantage of the spillover effects generated in scientific knowledge production networks.
AUTHORS: Liu, Xiaodong; Zimmermann, Christian; Konig, Michael D.; Hsieh, Chih-Sheng
DATE: 2018-10-09

Working Paper
Improving forecast accuracy by combining recursive and rolling forecasts
This paper presents analytical, Monte Carlo, and empirical evidence on combining recursive and rolling forecasts when linear predictive models are subject to structural change. Using a characterization of the bias-variance tradeoff faced when choosing between either the recursive and rolling schemes or a scalar convex combination of the two, we derive optimal observation windows and combining weights designed to minimize mean square forecast error. Monte Carlo experiments and several empirical examples indicate that combination can often provide improvements in forecast accuracy relative to forecasts made using the recursive scheme or the rolling scheme with a fixed window width.
AUTHORS: Clark, Todd E.; McCracken, Michael W.
DATE: 2008

Working Paper
Credit Search and Credit Cycles
The supply and demand of credit are not always well aligned and matched, as is reflected in the countercyclical excess reserve-to-deposit ratio and interest spread between the lending rate and the deposit rate. We develop a search-based theory of credit allocations to explain the cyclical fluctuations in both bank reserves and the interest spread. We show that search frictions in the credit market can not only naturally explain the countercyclical bank reserves and interest spread, but also generate endogenous business cycles driven primarily by the cyclical utilization rate of credit resources, as long conjectured by the Austrian school of the business cycle. In particular, we show that credit search can lead to endogenous local increasing returns to scale and variable capital utilization in a model with constant returns to scale production technology and matching functions, thus providing a micro-foundation for the indeterminacy literature of Benhabib and Farmer (1994) and Wen (1998).
AUTHORS: Dong, Feng; Wang, Pengfei; Wen, Yi
DATE: 2015-08-01

Working Paper
Majority Voting in a Model of Means Testing
We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.
AUTHORS: Ravikumar, B.; Glomm, Gerhard; Cardak, Buly A.
DATE: 2019-11-27

Working Paper
Majority Voting in a Model of Means Testing
We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.
AUTHORS: Cardak, Buly A.; Ravikumar, B.; Glomm, Gerhard
DATE: 2018-06-01

Working Paper
Measuring interest rates as determined by thrift and productivity
This paper investigates the behavior of short-term real and nominal rates of interest by combining consumption-based and production-based models into a single general equilibrium framework. Based on the theoretical nonlinear relationships that link interest rates to both the marginal rates of substitution and transformation in a monetary production economy, we develop an estimation and simulation procedure to generate historical time series of interest rates. We find that the predictions of interest rates based on a general equilibrium theory are partially consistent with US data.
AUTHORS: Wen, Yi; Choi, Woon Gyu
DATE: 2005

Working Paper
A specialized inventory problem in banks: optimizing retail sweeps
Deposits held at Federal Reserve Banks are an essential input to the business activity of most depository institutions in the United States. Managing these deposits is an important and complex inventory problem, for two reasons. First, Federal Reserve regulations require that depository institutions hold certain amounts of such deposits at the Federal Reserve Banks to satisfy statutory reserve requirements against customers* transaction accounts (demand deposits and other checkable deposits). Second, some inventory of such deposits is essential for banks to operate one of their core lines of business: furnishing payment services to households and firms. including wire transfers, ACH payments, and check clearing settlement. Because the Federal Reserve does not pay interest on such deposits used to satisfy statutory reserve requirements, banks seek to minimize their inventory of such deposits. In 1994, the banking industry introduced a new inventory management tool for such deposits, the retail deposit sweep program, which avoids the statutory requirement by reclassifying transaction deposits as savings deposits. In this analysis, we examine two algorithms for operating such sweeps programs within the limits of Federal Reserve regulations.
AUTHORS: Anderson, Richard G.; Nair, Suresh K.
DATE: 2005

Working Paper
Resuscitating the credit cycle
This paper resuscitates the credit-cycle theory of Kiyotaki and Moore (1997) in a two-agent RBC model with conventional preferences and standard neoclassical technologies. It is shown that small transitory shocks to credit demand (or supply) can generate large, highly persistent, dampened cycles in aggregate output. Key to our results is the interaction between credit constraints and habit formation. Credit constraints based on collateralized assets mainly amplify the impact of shocks while habit formation in consumption demand mainly propagates it. Hump-shaped boom-bust cycles do not arise in the model under standard parameter values if either one of the two elements is missing.
AUTHORS: Pintus, Patrick A.; Wen, Yi
DATE: 2008

Working Paper
Interbank Markets and Banking Crises: New Evidence on the Establishment and Impact of the Federal Reserve
This paper examines the impact of the Federal Reserve?s founding on seasonal pressures and contagion risk in the interbank system. Deposit flows among classes of banks were highly seasonal before 1914; amplitude and timing varied regionally. Panics interrupted normal flows as banks throughout the country sought funds from the central money markets simultaneously. Seasonal pressures and contagion risk in the system were lower by the 1920s, when the Fed provided seasonal liquidity and reserves. Panics returned in the 1930s, due in part to shocks from nonmember banks and because the Fed?s decentralized structure hampered a vigorous response to national crises.
AUTHORS: Carlson, Mark A.; Wheelock, David C.
DATE: 2015-11-01

Working Paper
Private and public circulating liabilities
Changes in the legal and technological environment in the U.S. have created the possibility of private banknote issue, or its electronic equivalent. We wish to understand the implications of this possibility for economic performance. Accordingly, we construct and analyze a dynamic general equilibrium model in which privately-issued liabilities may circulate, either by themselves, or alongside a stock of outside money. In each case we provide results on the existence and multiplicity of equilibria, and we characterize local dynamics in a neighborhood of a steady state. Our results support Friedman's (1960) idea that circulating private liabilities as associated with endogenous (or "excess") volatility. But implementing Friedman's (1960) advice-the government should ban private issuance of close currency substitutes-causes significant inefficiency in our model. And implementing the polar opposite advice of Hayek (1976) and Fama (1980)-that the government should withdraw from currency issuance altogether in the presence of circulating private liabilities-also is often constrained suboptimal in our economies. Instead, our economies have both public and private circulating liabilities as part of an optimal monetary arrangement.
AUTHORS: Bullard, James B.; Smith, Bruce D.; Azariadis, Costas
DATE: 2000

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