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Working Paper
Forecasting U.S. Economic Activity with a Small Information Set
Cooper, Daniel H.; Olivei, Giovanni P.; Rhodenhiser, Hannah (2025-06-01)
We provide a parsimonious setup for forecasting U.S. GDP growth and the unemployment rate based on a few fundamental drivers. This setup yields forecasts that are reasonably accurate compared with private-sector and Federal Reserve forecasts over the 1984–2019 and post COVID-19 pandemic periods. This result is achieved by jointly estimating the processes for GDP growth and the unemployment rate, with the constraint that GDP and unemployment follow Okun’s law in first differences. This setup can be easily extended to replace the variables in the information set with factors that might ...
Working Papers , Paper 25-4

Working Paper
Technological innovation in mortgage underwriting and the growth in credit, 1985–2015
Foote, Christopher L.; Loewenstein, Lara; Willen, Paul S. (2019-11-01)
The application of information technology to finance, or ?fintech,? is expected to revolutionize many aspects of borrowing and lending in the future, but technology has been reshaping consumer and mortgage lending for many years. During the 1990s, computerization allowed mortgage lenders to reduce loan-processing times and largely replace human-based assessments of credit risk with default predictions generated by sophisticated empirical models. Debt-to-income ratios at origination add little to the predictive power of these models, so the new automated underwriting systems allowed higher ...
Working Papers , Paper 19-11

Working Paper
The liquidity trap, the real balance effect, and the Friedman rule
Ireland, Peter N. (2005)
This paper studies the behavior of the economy and the efficacy of monetary policy under zero nominal interest rates, using a model with population growth that nests, as a special case, a more conventional specification in which there is a single infinitely lived representative agent. The paper shows that with a growing population, monetary policy has distributional effects that give rise to a real balance effect, thereby eliminating the liquidity trap. These same distributional effects, however, can also work to make many agents much worse off under zero nominal interest rates than they are ...
Working Papers , Paper 05-3

Working Paper
The distributional effects of contractual norms: the case of cropshare agreements
Burke, Mary A. (2015-04-01)
According to principal-agent theory, a share contract strikes an optimal balance between risk-sharing and incentive provision when it is difficult to gauge the agent's contribution. This theory predicts that the size of the share should vary with economic fundamentals. In practice, however, the share divisions that are specified often cluster around "usual and customary" levels ? even when there is substantial heterogeneity among principal - agent pairs. Using Illinois farm-level data observed between 1980 and 1994 that include soil productivity ratings, tenant net income, and crop yields, ...
Working Papers , Paper 15-7

Working Paper
Troubled banks, impaired foreign direct investment: the role of relative access to credit
Rosengren, Eric S.; Peek, Joe; Klein, Michael W. (2000)
The relative wealth hypothesis of Froot and Stein (1991), motivated by the aggregate correlation between real exchange rates and foreign direct investment (FDI) observed in the 1980s, cannot explain one of the major shifts in FDI in the 1990s: the continued decline in Japanese FDI during a period of stable stock prices and a rapidly appreciating yen. However, when the relative wealth hypothesis is supplemented with the relative access to credit hypothesis proposed in this study, we are able to show that unequal access to credit by Japanese firms can explain the FDI puzzle in the 1990s. We ...
Working Papers , Paper 00-4

Working Paper
Optimal time-consistent government debt maturity
Debortoli, Davide; Yared, Pierre; Nunes, Ricardo (2016-05-17)
The current literature on a government's optimal debt maturity structure contends that by purchasing short-term assets and selling long-term debt, it is possible to fully insulate the economy against fiscal shocks. The required short and long positions are large relative to GDP and constant. The market value of debt adjusts automatically and the constant debt positions and fluctuating bond prices insulate against potential shocks. However, achieving the goal of averting future shocks depends on the government perfectly committing to the future fiscal policy, for without this sustained ...
Working Papers , Paper 16-4

Working Paper
The behavior of China's stock prices in response to the proposal and approval of bonus issues
Ma, Shiguang; Barnes, Michelle L. (2002)
Event study analysis is applied to investigate stock price reaction to the announcement of bonus issues for the emerging stock markets of China. Results show that the issues with a high bonus ratio (number of bonus shares in the issue/number of existing shares) usually attract positive returns for both Chinese (A-share traders) and foreign (B-share traders) residents. Issues with a low bonus ratio are rewarded with negative returns for A-share traders and do not stimulate significant activity by B-share traders. The hypothesis of semi-strong form market efficiency is rejected only for ...
Working Papers , Paper 02-1

Working Paper
Doing good or doing well? Image motivation and monetary incentives in behaving prosocially
Meier, Stephan; Ariely, Dan; Bracha, Anat (2007)
This paper examines image motivation?the desire to be liked and well-regarded by others? as a driver in prosocial behavior (doing good), and asks whether extrinsic monetary incentives (doing well) have a detrimental effect on prosocial behavior due to crowding out of image motivation. ; By definition, image depends on one?s behavior being visible to other people. Using this unique property we show that image is indeed an important part of the motivation to behave prosocially. Moreover, we show that extrinsic incentives interact with image motivation and are therefore less effective in public ...
Working Papers , Paper 07-9

Working Paper
Price setting in online markets: does IT click?
Talavera, Oleksandr; Gorodnichenko, Yuriy; Sheremirov, Viacheslav (2015-01-01)
Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, this paper explores how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. High-quality data are not only useful to estimate price rigidity and other properties of price adjustment in online commerce but also allow comparing the behavior of those properties with estimates available from ...
Working Papers , Paper 15-1

Working Paper
Does the Federal Reserve possess an exploitable informational advantage?
Tootell, Geoffrey M. B.; Rosengren, Eric S.; Peek, Joe (1999)
This paper provides evidence that the Federal Reserve has an informational advantage over the public that can be exploited to improve activist monetary policy. The informational advantage derives from the Fed?s role as a bank supervisor, and it is shown to be of sufficient duration to be effective in guiding activist monetary policy, even in simple rational expectations models. The informational superiority does not result from the Fed having earlier access to publicly released data about the financial condition of banks. Instead, this informational advantage is generated by confidential ...
Working Papers , Paper 99-8

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