Atlanta Fed Working Papers

The Research Department of the Federal Reserve Bank of Atlanta publishes a working paper series to convey the research of staff economists and visiting scholars and stimulate professional discussion and exploration of economic and financial subjects.


Sovereign Risk and Financial Risk

Simon Gilchrist, Bin Wei, Vivian Z. Yue, and Egon Zakrajšek
Working Paper 2021-27
November 2021
Studying the interplay between sovereign risk and global financial risk, the authors find that changes in global financial risk account for a substantial portion of the comovement among sovereign spreads and that an increase in global financial risk causes a large and persistent widening of sovereign bond spreads.

Modeling to Inform Economy-Wide Pandemic Policy: Bringing Epidemiologists and Economists Together

Michael Darden, David Dowdy, Lauren Gardner, Barton H. Hamilton, Karen Kopecky, Melissa Marx, Nicholas W. Papageorge, Daniel Polsky, Kimberly Powers, Elizabeth Stuart, and Matthew Zahn
Working Paper 2021-26
November 2021
Divergent policy recommendations from economists and epidemiologists during the pandemic led to uncertainty and confusion among the public and policymakers. To find consensus, an interdisciplinary group of scholars discusses the sources of these differences and a path forward for more effective synergy between disciplines.

Dividend Momentum and Stock Return Predictability: A Bayesian Approach

Juan Antolín-Díaz, Ivan Petrella, and Juan F. Rubio-Ramírez
Working Paper 2021-25
November 2021
Studying the dynamics of aggregate stock returns and dividends, the authors show that omitting dividend growth from the system amounts to imposing the extra restriction that dividend growth is not persistent. Their estimation leads to a much more moderate degree of return predictability and better out-sample forecast performance.

Estimating Hysteresis Effects

Francesco Furlanetto, Antoine Lepetit, Ørjan Robstad, Juan Rubio-Ramírez, and Pål Ulvedal
Working Paper 2021-24
November 2021
The authors examine the kind of demand shocks that can have a permanent effect on output. They find that recessions driven by permanent demand shocks lead to a permanent decline in employment and investment, although output per worker is largely unaffected.

Barriers to Creative Destruction: Large Firms and Nonproductive Strategies

Salomé Baslandze
Working Paper 2021-23
September 2021
Reviewing evidence on large firms and strategies that hinder creative destruction and reallocation, the author finds that as firms gain market share, they increasingly rely on nonproductive strategies but reduce their productive, innovation-based strategies.

High Discounts and Low Fundamental Surplus: An Equivalence Result for Unemployment Fluctuations

Indrajit Mitra, Taeuk Seo, and Yu Xu
Working Paper 2021-22
September 2021
The authors develop a framework to help explain how time varying risk premia lead to more volatile and persistent unemployment fluctuations. Their framework is general and characterizes the unemployment implications for a large class of risk premium processes.

Ambiguity, Long-Run Risks, and Asset Prices

Bin Wei
Working Paper 2021-21
September 2021
The author develops a generalized long-run risks model with smooth ambiguity to explain major asset-pricing puzzles—particularly, the variance premium puzzle. Reproducing the magnitude and dynamics of the variance premium in the data, the model shows that most (77 percent) of the variance premium is attributable to the ambiguity channel.

Monetary Policy over the Life Cycle

R. Anton Braun and Daisuke Ikeda
Working Paper 2021-20a
August 2021 (Revised September 2021)
The authors use an overlapping-generations model to analyze monetary policy's impact on households of different ages. They find that households between the ages of 60 and 80 benefit from a higher nominal interest rate but that other age groups lose.

The S-Curve: Understanding the Dynamics of Worldwide Financial Liberalization

Nan Li, Chris Papageorgiou, Tong Xu, and Tao Zha
Working Paper 2021-19
July 2021
The authors examine the paths of domestic financial reforms in 90 countries from 1973 to 2014, finding that informational diffusion from economic and financial experiences of advanced economies played a crucial role in the policy-formation process.

Impact of the 2017 Tax Cuts and Jobs Act on Labor Supply and Welfare of Married Households

Julie L. Hotchkiss, Robert E. Moore, and Fernando Rios-Avila
Working Paper 2021-18
June 2021
Examining changes to the labor supply and family welfare resulting from the Tax Cuts and Jobs Act of 2017, the authors find that gains in welfare disproportionately benefited the wealthy; families with self-employment income; families with children; and families renting, versus owning, their home.

Taxes, Subsidies, and Gender Gaps in Hours and Wages

Robert Duval-Hernandez, Lei Fang, and Rachel Ngai
Working Paper 2021-17
June 2021
The authors document a negative cross-country correlation between gender ratios in market hours and wages. The effects of taxes and social subsidies on family care through the marketization of female home hours are important in accounting for the cross-country differences.

Near-Rational Equilibria in Heterogeneous-Agent Models: A Verification Method

Leonid Kogan and Indrajit Mitra
Working Paper 2021-16
June 2021
The authors propose a general simulation-based procedure for estimating the quality of approximate policies in heterogeneous-agent equilibrium models. Their method is general and straightforward to implement and can be used in conjunction with various solution algorithms.

Estimating Occupation- and Location-Specific Wages over the Life Cycle

Elias Ilin and Ellyn Terry
Working Paper 2021-15a
June 2021 (Revised 2021)
Using individual-level data from the Current Population Survey, the authors develop a novel method to project location-specific life-cycle wages for all occupations listed in the Occupational Outlook Handbook from the U.S. Bureau of Labor Statistics.

Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI

Simon Fuchs
Working Paper 2021-14
May 2021
Exploring one aspect of the trade shock brought on by WWI, the author finds that the demand shock that emanated from belligerent countries caused drastic increases in wages and consumer prices, as well as a reallocation of labor, in neutral Spain.

Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier

Joonkyu Choi, Veronika Penciakova, and Felipe Saffie
Working Paper 2021-13
May 2021
Using data from the American Recovery and Reinvestment Act, the authors show that firms use their political connections to win stimulus grants and that public expenditure, when channeled through politically connected firms, hinders job creation.

Unit Cost Expectations and Uncertainty: Firms' Perspectives on Inflation

Brent H. Meyer, Nicholas B. Parker, and Xuguang Simon Sheng
Working Paper 2021-12a
March 2021 (Revised November 2021)
Examining firms' inflation perceptions, expectations, and uncertainty, the authors find that firms' expectations for the nominal side of the economy have little in common with households' expectations, moving instead in tandem with inflation expectations of professional forecasters and market participants.

How People Pay Each Other: Data, Theory, and Calibrations

Claire Greene, Brian Prescott, and Oz Shy
Working Paper 2021-11
February 2021
Examining consumer preferences for person-to-person payments, the authors find about two thirds of consumers have a first preference for cash. The remaining one third rank checks first. About 93 percent of consumers rank electronic technologies second. Transaction value, age, and education influence payment choice.

Improved Estimation of Poisson Rate Distributions through a Multi-Mode Survey Design

Marcin Hitczenko
Working Paper 2021-10
February 2021
What is the ideal way for a researcher to obtain quality count data from survey respondents? The author explores the potential tradeoffs between recall and diaries, suggesting that a hybrid survey design can offer researchers considerable benefits.

Sample Bias Related to Household Role

Marcin Hitczenko
Working Paper 2021-9
February 2021
Exploring survey-based inference, the author notes the importance of adjusting for discrepancies between the types of household members recruited and the target population. Researchers who rely on surveys should consider how variables of interest might vary within households and link to respondent selection.

Division of Financial Responsibility among Mixed-Gender Couples

Marcin Hitczenko
Working Paper 2021-8
February 2021
Exploring how mixed-gender couples divide household responsibility, the author finds that females consistently shoulder more responsibility for household shopping than males. For financial decision making, however, responsibility aligns with income and educational standing. Gender skew in roles seems to relate to aggregate household education, though not age.

Consumption and Hours between the United States and France

Lei Fang and Fang Yang
Working Paper 2021-7
January 2021
The authors find that while labor efficiency and home productivity are crucial in accounting for the differences in the allocation of time over the life cycle between the United States and France, consumption tax and social security are more important regarding allocation of expenditures.

COVID-19 and SMEs: A 2021 "Time Bomb"?

Pierre Olivier Gourinchas, Şebnem Kalemli-Özcan, Veronika Penciakova, and Nick Sander
Working Paper 2021-6
January 2021
The authors assess the prospects of a 2021 increase in failures among small and medium-sized enterprises triggered by policies enacted during the COVID-19 crisis. Policies themselves don't create a 2021 time bomb for these enterprises, but the contraction of credit to the corporate sector could trigger failures.

Business Formation: A Tale of Two Recessions

Ermin Dinlersoz, Timothy Dunne, John Haltiwanger, and Veronika Penciakova
Working Paper 2021-5
January 2021
While business applications fell slowly and persistently during the Great Recession, they followed a V-shaped pattern during the COVID-19 recession. Furthermore, the authors find that the changing composition of business applications in 2020 suggests a higher surge in new nonemployer businesses relative to new employer businesses.

The "Matthew Effect" and Market Concentration: Search Complementarities and Monopsony Power

Jesús Fernández-Villaverde, Federico S. Mandelman, Yang Yu, and Francesco Zanetti
Working Paper 2021-4
January 2021
The authors show that search complementarities amplify small differences in productivity among firms. Market concentration fosters monopsony power in the labor market, magnifying profits and further enhancing the output share of high-productivity firms.

COVID-19 Is a Persistent Reallocation Shock

Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, and Brent H. Meyer
Working Paper 2021-3a
January 2021 (Revised March 2021)
Discussing evidence of COVID-19's effects as a reallocation shock, the authors of this working paper find, among other effects, that the pandemic has shifted relative employment growth trends in favor of industries with a high capacity of employees to work from home and against those with a low capacity for teleworking.

Pandemic-Era Uncertainty on Main Street and Wall Street

Brent Meyer, Emil Mihaylov, Steven J. Davis, Nicholas Parker, David Altig, Jose Maria Barrero, and Nicholas Bloom
Working Paper 2021-2
January 2021
Using data from the Survey of Business Uncertainty, the authors make observations about pandemic-era uncertainty in the U.S. economy, including how overall uncertainty continues to substantially dampen capital spending plans, pointing to a source of weak growth in demand and potential gross domestic product.

How Important Is Health Inequality for Lifetime Earnings Inequality?

Roozbeh Hosseini, Karen Kopecky, and Kai Zhao
Working Paper 2021-1a
January 2021 (Revised November 2021)
The authors of this working paper show that poor health accounts for nearly one third of the variation in lifetime earnings at age 65, primarily because it increases eligibility for social security disability benefits. Despite this, they find that these benefits are valuable and should be even more generous.

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