Recent St. Louis Fed Banking and Economic Research

Wanted: A New Engine for Economic Growth

Don’t expect consumer spending to be the engine of economic growth it once was, argues St. Louis Fed economist William Emmons. “Can American consumers continue to serve as the engine of U.S. and global economic growth as they did during recent decades? Several powerful trends suggest not, at least for a while,” Emmons writes.

“Instead, new sources of demand, both domestic and foreign, are needed if we are to maintain healthy rates of growth. Unfortunately, this won't be easy because consumer spending constitutes the largest part of our economy, and replacements for it—more investment, more government spending or more exports—either can't be increased rapidly or might create unwanted consequences of their own,” Emmons writes. Read the full article in the January Regional Economist.

New Economic Synopses Essays from St. Louis Fed Economists

Identifying Structural and Cyclical Shocks Across U.S. Regions

The statistical relationship between vacancies and unemployment is not always a stable one, as unemployment remains high even while job vacancy rates are returning to pre-financial crisis levels. A February Economic Synopsis briefly explores why it is not clear how monetary policy might be used to reduce local unemployment rates where recruiting intensity is high but the right kind of worker is hard to find.

Unemployment Dynamics During Economic Recoveries

Employment turnover was significantly lower following the Great Recession than it was after the previous two recessions. A January Economic Synopsis briefly explores slow employment growth and low turnover, and speculates that a decrease in labor reallocation may be caused by higher rigidity and regulations in the labor market as well as more generous unemployment welfare.

Speculation in the Oil Market

When oil prices jump, is speculation in the oil markets truly to blame? A March Economic Synopsis identifies and assesses four components that contribute to the price of oil—which is a critical first step for allocating resources efficiently and designing good policy.

This Economic Synopsis is based on the working paper of the same name co-authored by St. Louis Fed economist Luciana Juvenal.

How Home Loan Modification through the 60/40 Plan Can Save the Housing Sector

Many well-respected economists have suggested plans for mortgage restructuring built on the idea of share appreciation mortgages, which generate rather complex transactions with conflicting interests between the lender and the homeowner. The 60/40 Plan, however, combines several economic principles adapted to the nature of home loans and appears to provide all the benefits but fewer of the drawbacks of many of these programs, including current government programs such as the Home Affordable Refinance (HARP) and Home Affordable Modification (HAMP) programs. Read the full article in the St. Louis Fed’s March/April 2012 Review.

Federal Reserve Lending to Troubled Banks During the Financial Crisis, 2007-2010

Numerous commentaries have questioned both the legality and appropriateness of Federal Reserve lending to banks during the recent financial crisis. This working paper by St. Louis Fed economists addresses two questions motivated by such commentary: Did the Federal Reserve violate either the letter or spirit of the law by lending to undercapitalized banks, and 2) did Federal Reserve credit constitute a large fraction of the deposit liabilities of failed banks during their last year prior to failure. The authors found no evidence that the Federal Reserve ever exceeded statutory limits during the recent financial crisis, recession and recovery periods, and conclude that Federal Reserve lending to depository institutions during the recent episode was consistent with the intentions of the U.S. Congress.

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