Irony (and Innuendos). Fed Papers Have It

Friday, September 04, 2009 , , , 0 Comments

I'm a little late but SF Fed's latest bunch of working papers appeared in my inbox awhile back. Dig through if you want but this is what I got:

First, from the Board of Governors. Pawn shops and check cashing stores prefer low income populations. And yet the Fed has a $2 trillion balance sheet (that we're on the hook for) that we don't get to dissect.

Abstract: A large and growing number of low-to-moderate income U.S. households rely upon alternative financial service providers (AFSPs) for a variety of credit products and transaction services, including payday loans, pawn loans, automobile title loans, tax refund anticipation loans and check-cashing services. The rapid growth of this segment of the financial services industry over the past decade has been quite controversial. One aspect of the controversy involves the location decisions of AFSPs. This study examines the determinants of the locations of three types of AFSPs--payday lenders, pawnshops, and check-cashing outlets. Using county-level data for the entire country, I find that the number of AFSP outlets per capita is significantly related to demographic characteristics of the county population (e.g., racial/ethnic composition, age, and education level), measures of the population's credit worthiness, and the stringency of state laws and regulations governing AFSPs.

And of course, there are my hometown heroes here in SF.

It's sort of funny that someone would dedicate this much time and energy into something like monetary policy reaction to oil. Anything can be accomplished in the name of "maximum price stability." Bah.

Richmond delivers "a scheme" on unemployment and the hidden labor market (Richmond loves their moral hazard argument):

This paper considers the problem of optimal unemployment insurance (UI) in a repeated moral hazard framework. Unlike existing literature, unemployed individuals can secretly participate in a hidden labor market. This extension modifies the standard problem in three dimensions. First, it imposes an endogenous lower bound for the lifetime utility that a contract can deliver. Second, it breaks the identity between unemployment payments and consumption. And third, it hardens the encouragement of search effort. The optimal unemployment insurance system in an economy with a hidden labor market is simple, with an initial phase in which payments are relatively flat during unemployment and with no payments for long-term unemployed individuals. This scheme differs substantially from the one prescribed without a hidden labor market and resembles unemployment protection programs in many countries.

St Louis sounds like a mad scientist on Dynamic Taxation, Private Information and Money, please, lay off the Red Bull, STL. Points for Money and Capital.

Extra bonus points to St Louis for this gem (forgive me, I'm 4) Optimal stabilization policy with endogenous firm entry:

We study optimal monetary stabilization policy in a dynamic stochastic general equilibrium model where money is essential for trade and firm entry is endogenous. We do so when all prices are flexible and also when some are sticky. Due to an externality affecting firm entry, the central bank deviates from the Friedman rule. Calibration exercises suggest that the nominal interest rate should have been substantially smoother than the data if preference shocks were the main disturbance and much more volatile if productivity was the driving shock. This result is a direct consequence of policy actions to control entry.

Don't you love it when central bankers talk like that? Hope that answers the "why are you into this crap?" question.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.