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In The Regional Economist: European Sovereign Debt Crisis, Underground Economy, Youth Labor Force and More


ST. LOUIS – A new issue of The Regional Economist, the Federal Reserve Bank of St. Louis’ quarterly review of regional, national and international economic issues of the day, has been posted online at

In this issue, St. Louis Fed President James Bullard discusses the 1994 and 2004-06 normalization cycles and lessons that can be learned from them. For the upcoming normalization cycle, he says that the data dependency from the 1994 case plus the transparency from the 2004-06 case would probably provide the optimal method of returning the policy rate to normal.

Articles from the publication include:

  • “Sovereign Debt Crisis in Europe Recalls the Lost Decade in Latin America” In many ways, the European debt crisis is reminiscent of Latin America’s experience in the 1980s, characterized by a period of high growth interrupted by an external shock. But there are some notable differences. The authors, economist Paulina Restrepo-Echavarria and research associate Maria A. Arias, explore these similarities and differences.
  • “Youth Labor Force Participation Continues to Fall, but It Might Be for a Good Reason.” Workforce participation has declined among those 16 to 24, but there may be good reasons for this. The authors – economists  Maria Canon and Marianna Kudlyak, along with research associate  Yang Liu—analyze  by age, gender and education who is in school and who is not.
  • “Income Inequality Is Growing in the District, but Not as Fast as in the Nation.” Income inequality has increased in the St. Louis Fed’s District over the past 30 years, although at a slower pace than in the nation as a whole. Economist Maximiliano Dvorkin and research associate Hannah Shell look at how in both areas the inequality is increasing primarily between the top-income earners and the middle-income earners.
  •  “Measuring Underground Economy Can Be Done, but It Is Difficult.” There are at least two main ways to measure “the informal sector” of an economy, both of which entail difficulties. Author Paulina Restrepo-Echavarria points out that the sector is important, given that it accounts for about 13 percent of GDP in developed countries and almost three times that number in developing countries.
  • “Where’s the Wage Pressure?” As the unemployment rate declines, many people assume the average wage in the United States will increase.  But economist David G. Wiczer and research associate James D. Eubanks explain that the average wage does not move that fast over a single business cycle.  They add that any movement over the long term is more in favor of high-wage earners than low-wage earners.

Also in this issue: