Fourth Quarter 2015

In This Edition

  • Economics and Politics in Selecting Federal Reserve Cities: Why Missouri Has Two Reserve Banks

    Missouri is the only state with two Federal Reserve Banks, and it has long been alleged that political influence explains why Reserve Banks were placed in both St. Louis and Kansas City. Both the Speaker of the U.S. House of Representatives and a powerful member of the Senate Banking Committee hailed from Missouri, which at the time was a solidly Democratic state.

  • How Effective Is Central Bank Forward Guidance?

    This paper investigates the effectiveness of forward guidance for the central banks of New Zealand, Norway, Sweden, and the United States. The authors test whether forward guidance improved market participants’ ability to forecast future short-term and long-term rates relative to several benchmarks.

  • Microfoundations of Money: Why They Matter

    What is the value of having microfoundations for monetary exchange in a macro model? In this article, the author attempts to answer this question by listing what he considers the major accomplishments of the field.

  • Price Equalization Does Not Imply Free Trade

    In this article, the authors demonstrate the possibility of price equalization in a two-country world with barriers to international trade. For price equalization to occur when the countries are asymmetric, the country with higher productivity must also be the one with the lower trade barrier.

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