We build a hybrid model of the aggregate labor market that features both standard labor supply forces and frictions in order to study the cyclical properties of gross worker flows across the three labor market states: employment, unemployment, and nonparticipation. Our goal is to assess the relative importance of frictions and labor supply in accounting for fluctuations in labor market outcomes...

Recently the Board of Governors of the Federal Reserve System solicited comment on a proposal to return to a lagged reserve requirement structure such as that in effect from September 1968 until February 1984. Under such a system the reserve computation period would end well before the beginning of the reserve maintenance period. Individual depository institutions would know their required rese...

Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded offi cial Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Ban...

The high U.S. unemployment rate after the Great Recession is usually considered as a result of changes in factors influencing either the demand side or the supply side of the labor market. However, no matter what factors have caused the changes in the unemployment rate, these factors should have influenced workers’ and firms’ decisions. Therefore, it is important to take into account workers’ e...

The ”irrational exuberance” of the stock market in the late 1990’s lead to a discussion of the appropriate policy response by monetary authorities. Any response would be contingent on the stock market reaction to policy shocks. In this study I employ a structural VAR to estimate the response of the stock market returns to innovations in the federal funds rate. The effect of the stock market on ...

The check clearing and electronic payments systems market are regulated and dominated to various degrees by the Federal Reserve System. This article examines the theoretical and empirical implications of a potential deregulation of this market within the context of three broad effects: price discrimination, network externalities, and anticompetitive pricing. While these are all legitimate conce...

The Federal Reserve’s new primary credit facility offers guilt-free overnight loans to commercial banks at a rate of 100 basis points over the target federal funds rate. If utilized freely by the market, the facility places an upper bound on the rates at which financial institutions lend to one another overnight, reducing the volatility of the daily effective federal funds rate. Conceivably, ho...

We consider a systems market where two complementary components must be used in combination to provide valuable services. The market for the first component is monopolized whereas the market for the second is potentially served by multiple firms. We show that integration of the monopolist into the competitive complementary market may distort incentives for R&D, reducing total economic welfare. ...