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

Working Paper
Terror Externalities and Trade: An Empirical Analysis
We report robust evidence of adverse cross-border externalities from terrorism on trade for over 160 countries from 1976 to 2014. Terrorism in one country spills over to reduce trade in neighboring nations. These externalities arise from higher trade costs due to trade delays and macroeconomic uncertainty.
AUTHORS: Bandyopadhyay, Subhayu; Doucouliagos, Hristos; Pham, Cong S.
DATE: 2019-05-29

Working Paper
On the frequency of large stock returns: putting booms and busts into perspective
Numerous articles have investigated the distribution of share prices, and find that the yields are leptokurtic. There is still controversy about the amount of leptokurtosis, and hence about the most appropriate distribution to use in modeling returns. This controversy has proven hard to resole, as the alternatives are non-nested. We propose to employ extreme value theory focusing exclusively on the larger observations, in order to assess the leptokurtosis within a unified framework. This enables one to generate robust probabilities on large changes, which put the recent stock market swings into historical perspective.
AUTHORS: Jansen, Dennis W.; Casper de Vries
DATE: 1988

Working Paper
Neighborhood income inequality
This paper offers a descriptive empirical analysis of the geographic pattern of income inequality within a sample of 359 US metropolitan areas between 1980 and 2000. Specifically, we decompose the variance of metropolitan area-level household income into two parts: one associated with the degree of variation among household incomes within neighborhoods - defined by block groups and tracts - and the other associated with the extent of variation among households in different neighborhoods. Consistent with previous work, the results reveal that the vast majority of a city?s overall income inequality - at least three quarters - is driven by within-neighborhood variation rather than between-neighborhood variation, although we find that the latter rose significantly during the 1980s, especially between block groups. We then identify a number of metropolitan area-level characteristics that are associated with both levels of and changes in the degree of each type of residential income inequality.
AUTHORS: Wheeler, Christopher H.; Elizabeth A. La Jeunesse
DATE: 2007

Working Paper
The economic effects of violent conflict: evidence from asset market reactions
This paper studies the effects of conflict onset on asset markets applying the event study methodology. We consider a sample of 112 conflicts during the period 1974-2004 and find that a sizeable fraction of them had a significant impact on stock market indices and on major commodity prices. Furthermore, our results suggest that we are more likely to see investor reactions in response to conflicts that occur in highly polarized settings, possibly because the expected duration and intensity of the conflict is higher.
AUTHORS: Guidolin, Massimo; Eliana La Ferrara
DATE: 2005

Working Paper
The importance of nonlinearity in reproducing business cycle features
This paper considers the ability of simulated data from linear and nonlinear time-series models to reproduce features in U.S. real GDP data related to business cycle phases. We focus our analysis on a number of linear ARIMA models and nonlinear Markov-switching models. To determine the timing of business cycle phases for the simulated data, we present a model-free algorithm that is more successful than previous methods at matching NBER dates and associated features in the postwar data. We find that both linear and Markov-switching models are able to reproduce business cycle features such as the average growth rate in recessions, the average length of recessions, and the total number of recessions. However, we find that Markov-switching models are better than linear models at reproducing the variability of growth rates in different business cycle phases. Furthermore, certain Markov-switching specifications are able to reproduce high-growth recoveries following recessions and a strong correlation between the severity of a recession and the strength of the subsequent recovery. Thus, we conclude that nonlinearity is important in reproducing business cycle features.
AUTHORS: Piger, Jeremy M.; Morley, James
DATE: 2005

Working Paper
Tests of Conditional Predictive Ability: Some Simulation Evidence
In this note we provide simulation evidence on the size and power of tests of predictive ability described in Giacomini and White (2006). Our goals are modest but non-trivial. First, we establish that there exist data generating processes that satisfy the null hypotheses of equal finite-sample (un)conditional predictive ability. We then consider various parameterizations of these DGPs as a means of evaluating the size and power properties of the proposed tests. While some of our results reinforce those in Giacomini and White (2006), others do not. We recommend against using the fixed scheme when conducting these tests and provide evidence that very large bandwidths are sometimes required when estimating long-run variances.
AUTHORS: McCracken, Michael W.
DATE: 2019-03-01

Working Paper
The influence of fiscal and monetary actions on aggregate demand: a quantitative appraisal
AUTHORS: Karnosky, Denis S.; Carlson, Keith M.
DATE: 1968

Working Paper
How effective is central bank forward guidance?
This paper investigates the effectiveness of forward guidance for the central banks of four countries: New Zealand, Norway, Sweden, and the United States. We test whether forward guidance improved market participants? ability to forecast future short-term and long-term rates. We find that forward guidance improved market participants? ability to forecast short-term rates over relatively short forecast horizons, but only for Norway and Sweden. Importantly, there is no evidence that forward guidance has increased the efficacy of monetary policy for New Zealand, the country with the longest history of forward guidance.
AUTHORS: Kool, Clemens J. M.; Thornton, Daniel L.
DATE: 2012

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

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