The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
The Outlook for
Unemployment
Federal Reserve Bank
of Atlanta
September/October 1979
' Federal R e s e r v e Bank of Atlanta
Federal R e s e r v e Station
Atlanta, Georgia 3 0 3 0 3
Address Correction Requested
Usury Ceilings:
Shield or Scourge?
Fiscal Effects on
Potential Output
Working Paper
Reviews
Bulk Rate
U.S. Postage
PAID
Atlanta, Ga.
Permit 292
/
>
FEATURES:
The Outlook for
Unemployment
107
Accurate measures of discouraged workers and
part-time workers may give advance indication of
changes in the overall unemployment rate.
Usury Ceilings:
Shield or Scourge?
111
Are binding usury ceilings inevitably either detrimental
to a state's economy or ineffective in protecting the
consumer? A review of the evidence suggests that the
twin goals of protecting most mortgage borrowers and
maintaining home building are incompatible.
Fiscal Effects on Potential
Output
117
D i r e c t o r of R e s e a r c h : Harry Brandt
Business Editor: C a r y W .
Tapp
W r i t i n g Assistance: Patrick Keating
and Marjorie Woodruff
Editing Assistance: A d o l p h a Jordan
How do changes in the tax structure and government
spending policies affect the supply of labor and capital
and, hence, output? An analysis shows how these
changes influence basic decisions such as work vs.
leisure and consumption vs. saving.
Production and Graphics:
S u s a n F . T a y l o r a n d E d d i e W . L e e , Jr.
Working Paper Reviews
E c o n o m i c R«vi«w, Vol. LXIV, No. 5. Free subscription and additional copies available upon
request to the Research Department, Federal
Reserve Bank of Atlanta, Atlanta, Georgia 30303.
Material herein may be reprinted or abstracted,
provided this Review, the Bank, and the author
are credited. Please provide this Bank's
Research Department with a copy of any
publication in which such material is reprinted.
106
• Regional Credit Market
Integration: A Survey and
Empirical Examination . . .
120
• A n Empirical Analysis of
Sectoral Money Demand
in the S o u t h e a s t . . . . . . . . . —
121
SEPTEMBER/OCTOBER 1979, E C O N O M I C REVIEW
THE OUTLOOK FOR
UNEMPLOYMENT
Discouraged
workers and part-time workers, traditionally
excluded
from labor
force and unemployment
estimates, nevertheless
provide important
advance
indications of changes in the overall unemployment
rate. Based on the behavior
of these two measures in the last few recessions,
we can expect
unemployment
to rise sharply from now until the end of 1980.
by Charlie Carter
The unemployment rate traditionally
presents a problem in forecasting cyclical
changes in the economy. Recently, most
cyclical indicators suggest that we have
entered or are on the very edge of another
recession. The index of leading economic
indicators, real retail sales, industrial
production, consumer confidence, and
productivity have all deteriorated since
the beginning of the year. Yet, except
for a small increase in July, the overall
unemployment rate had not increased.1
(It averaged 5.7 percent in both the first
and second quarters of 1979.) New estimates of the role of discouraged workers
and part-time workers help explain why
the unemployment rate typically lags
behind other indicators at cyclical turning
points. A better understanding of these
two measures can provide a more accurate
outlook for unemployment in the future.
1
The unemployment rate rose slightly to 5.7 percent in July but jumped to
6 percent in August.
FEDERAL RESERVE BANK O F A T L A N T A
THE PROBLEM OF
DISCOURAGED WORKERS
The usefulness of traditional indicators
of labor market conditions, such as labor
force, employment, and unemployment,
has long been questioned because the
indicators fail to account for discouraged
workers (people who are not currently
seeking work because they think they
cannot find a job). Since 1967, the U.S.
Department of Labor has collected monthly
statistics on discouraged workers, along
with other labor market information
from the monthly household survey. But
economists disagree on how to use
these data. Some economists, who see
discouraged workers as people who have
exhausted all reasonable methods of searching
for work, argue that discouraged workers
should be counted as unemployed. Others
believe they should not be counted as
unemployed because they are not actively
searching for work. The U.S. Department
of Labor has accepted the latter argument
107
and has counted discouraged workers as
neither employed nor unemployed. Discouraged workers are simply excluded
from labor force and unemployment
estimates, a situation which leaves such
estimates open to further questions.
The National Commission on Employment and Unemployment Statistics also
addressed this issue. Although the final
recommendation was not unanimous, the
Commission recommended that the
Department of Labor continue to collect
data on discouraged workers and continue
their practice of not including such persons
in the official unemployment figures. 2
THE PROBLEM OF
PART-TIME WORKERS
Like discouraged workers, persons who
usually work part time and are not seeking
work are not counted as unemployed or in
the labor force. 3 At the very last stage
of expansions, some part-time workers lose
their jobs and generally do not search
for others. If they had been working out
of economic necessity (economic reasons),
they would not have had the option of
leaving the labor force but would have
stayed and searched for other jobs. That
would have driven the unemployment rate
up. But since these workers are simply
classified as "not in the labor force," this
flow away from employment does not
appear in the measured unemployment
rate.
HOW CAN DISCOURAGED AND
PART-TIME WORKERS BE INCLUDED
IN LABOR MARKET ESTIMATES?
The Implications of Worker Discouragement. Whether or not discouraged
workers should be counted in the unemployed category is still open to
debate. Our interest, however, is in finding
a way to use the monthly estimates to extract meaningful information about how
2
!
For details, see T. Aldrich Finegan, "The Measurement, Behavior and Classification of Discouraged Workers," Background paper No. 12 for the National
Commission on Employment and Unemployment Statistics.
To be sure, some discouraged workers are voluntary part-time workers who
have lost their jobs.
108
discouraged workers perceive current
labor market conditions. In theory, employment confidence by persons not
currently seeking work should be consistent with opinion polls designed to
measure general confidence aoout job
availability. 4 Actually, since estimates of
discouraged workers come from a much
larger sample than other surveys, the
figures should be more representative of
current sentiment of the working-age
population. Another useful implication is
that these nonparticipants are more inclined to seek work when confidence by
the general population is high. Therefore,
favorable perceptions by discouraged
workers could be helpful in explaining
the large increases in labor force participation at the latter stage of expansions.
A final important implication is that the
availability and confidence of other family
members in finding work frequently bear
strongly on consumer spending.
Measuring Worker Discouragement.
Everyone wno is not looking for work is
not necessarily discouraged. People who
want a job but are not looking are categorized according to their reasons for
not looking: (1) school attendance,
(2) home responsibilities, (3) ill health
or disability, (4) think they cannot find
a job, and (5) other reasons. In the second
quarter of 1979, discouraged workers (category 4) numbered 826,000. But since the
number of discouraged workers fluctuates
with changes in the number of people in
the working-age population, a more
reliable measure of discouragement among
persons not in the labor force is the ratio
of reason (4) to reasons (1-5). This ratio
provides a measure of employment discouragement of those people not currently
seeking work.
The table shows the behavior of this
ratio by race and sex from first quarter
1970 to second quarter 1979. Discouragement declines during expansions as more
people outside the measured labor force
view their chances of finding a job as
4
Our empirical test of the relationship between our measure of employment
confidence and Citibank's measure of employment outlook (for second-half
1970 through second-half 1978) showed strong support for our belief that
the two measures are closely related.
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
TABLE
INDEX OF EMPLOYMENT DISCOURAGEMENT OF NONLABOR
F O R C E PARTICIPANTS, 1970:1-1979:11
Period
1970:1
II
III
IV
1971:1
II
III
IV
1972:1
II
III
IV
1973:1
II
III
IV
1974:1
II
III
IV
1975:1
II
III
IV
1976:1
II
III
IV
1977:1
II
III
IV
1978:1
II
III
IV
1979:1
II
Total
Male
Female
White
Black and
Other
15.2
16.9
16.7
16.7
17.5
16.6
18.2
17.5
18.1
18.3
17.2
15.5
14.4
16.4
15.1
15.4
15.6
14.7
13.3
17.5
21.0
22.3
21.1
18.5
18.2
17.0
18.1
18.3
17.3
18.7
17.5
17.5
16.8
16.2
15.6
14.5
13.8
16.0
15.9
19.2
21.0
17.6
19.3
16.2
18.1
16.7
19.8
18.0
16.3
16.9
16.5
16.0
15.6
16.2
14.6
17.7
14.9
18.9
21.5
23.6
21.5
19.9
22.4
18.8
20.3
20.6
17.4
17.7
19.2
18.2
19.7
18.6
16.8
16.5
17.4
17.3
18.2
20.1
18.6
20.3
16.8
16.8
18.3
17.8
17.3
18.4
17.6
14.9
13.3
16.6
14.9
15.1
16.0
13.4
12.6
16.9
20.7
21.7
21.0
17.8
16.2
16.2
17.1
17.2
17.3
19.1
16.7
17.1
15.5
15.1
15.0
13.6
12.0
15.5
15.0
16.5
16.0
16.5
17.4
15.3
18.7
17.2
17.6
17.5
17.1
14.9
13.7
13.6
15.0
16.3
15.1
14.7
13.3
17.2
19.7
20.1
20.3
17.3
17.5
17.0
17.2
17.9
16.0
17.1
16.7
16.7
15.5
14.7
13.6
13.7
12.8
14.9
18.0
17.8
20.6
17.0
18.5
17.7
19.0
20.7
20.4
17.3
18.5
17.8
17.5
22.4
16.6
13.9
17.6
14.0
14.7
19.8
24.6
27.7
25.9
22.9
18.7
16.3
22.6
20.3
21.6
22.0
20.2
20.2
20.9
20.0
22.3
17.6
16.3
18.2
y
favorable. It increases during economic
contractions as the job outlook dims.
In the first quarter of 1979, the table
shows that only 13.8 percent of nonlabor
force participants gave lack of job availability as their reason for not seeking
work. However, that measure of discouragement rose sharply in the second
quarter.
The Implications of Part-Time Work.
Along with the discouraged worker, the
part-time worker is another useful indicator
FEDERAL RESERVE BANK O F A T L A N T A
of turns in the unemployment rate. When
a significant number of involuntary parttime workers lose their jobs, the unemployment rate will finally begin to rise.
Consequently, reductions in employment
will directly affect the unemployment
rate because these persons will continue
to seek work. With double-digit inflation
and high debt burden, the percentage
of involuntary part-time workers compared to part-time workers for noneconomic reasons has increased. As a
109
result, the unemployment rate is likely to
rise sharply during the current recession.
Measuring Part-Time Work As a New
Indicator 01 Confidence. Geoffrey Moore
of the National Bureau of Economic
Research has developed a measure of parttime workers which may be the best clue
to when the unemployment rate will start
to rise.5 His analysis shows that the ratio of
voluntary part-time workers to involuntary
part-time workers is a useful indicator of
turns in the unemployment rate. When the
ratio peaks, the unemployment rate turns
up, on the average, about eight months
later. This eight-month lead time between
peaks in the ratio and increases in the
unemployment rate is long enough to give
an early indication of turning points in
the overall unemployment rate.
A glance at the last few recessions shows
how the "part-time employment ratio"
provided advance indication of the coming
downturns (see chart). During the 1957-58
recession, the ratio peaked one year prior
to the rise of the unemployment rate.
The lead time was nine months in the
1960-61 recession, seven months before the
onset of the 1970 recession, and only six
months before the beginning of the 1973-75
recession. As you can see, however, the
decline in lead time since 1957 suggests
that the lead time for the next recession
might be even shorter than six months.
THE OUTLOOK
FOR UNEMPLOYMENT
When we updated Moore's results
through the second quarter of 1979, we
foundthat the part-time employment ratio
peaked in the fourth quarter of 1978. If
the lead time behaves as it did before the
last recession, June's unemployment rate
was the lowest point for the current cycle.
Thus, the indicator suggests that the unemployment rate will rise from June to
about the end of 1980.
According to this new indicator, in fact,
unemployment may rise even more than it
did in the last recession. Evidence suggests
that the rate increases with the magnitude
5
Geoffrey Moore, " A New Leading Indicator of Unemployment," Morgan
Guaranty Survey (November 1978), pp. 12-14.
110
PART-TIME
EMPLOYMENT
RATIO
RATIO
- 5
UNEMPLOYMEi
RATE
[-7 .
-
/V
-
1
%
2
(Inverted Scale)
Shaded areas indicate business recessions a s determined by the
National Bureau of Economic Research.
Numbers indicate the length of leads (-) in months preceding business
cycle peaks (beginning of shaded areas).
Source: U.S. Department of Labor, Bureau of Labor Statistics.
of the decline in the part-time employment ratio. From 1978:1V to 1979:11, for
example, the ratio fell about 9 percent.
The ratio fell only 7 percent prior to the
onset of the last recession, and the unemployment rate doubled from October
1973 to May 1975. High inflation, high
consumer debt, and a higher initial unemployment rate (5.6 percent vs. 4.6
percent) could easily push the unemployment rate over 9 percent before the current
recession is over.
After almost four years of steady decline,
the discouraged worker ratio jumped
sharply in the second quarter of 1979
from 13.8 percent to 16 percent. The parttime employment ratio peaked in December of 1978. These and other indicators,
including the unemployment rate of adult
men (up .2 percent in July) and the index
of help wanted advertising (declining
since December), clearly suggest that the
5.6-percent unemployment rate in June
was the cyclical low point of the unemployment rate. Joblessness will rise swiftly from
now until the end of 1980. •
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
USURY CEILINGS:
SHIELD OR SCOURGE?
Usury ceilings, originally designed to protect mortgage borrowers
against high
market interest rates, have been raised by state legislatures responding
to
increasingly vigorous opposition from lenders and home builders. This
opposition
has created controversy
about how usury ceilings actually influence
mortgage
lending and home building. What ceilings usually do is divert at least some of the
money and borrowers
into exempt mortgages with rates higher than the usury
ceiling. Where these exempt mortgages are available, ceilings may have only a
small impact on home building. If usury ceilings covered all mortgages,
home
building probably would
decline.
by B. Frank King
Usury ceilings on home mortgage interest
rates have been hailed as a shield protecting borrowers against high credit costs
and damned as a scourge driving away
financial flows necessary for home building. Evidence gathered in several studies
of the effects of these ceilings strongly
suggests that they are seldom a shield and
that they may not be a particularly powerful scourge. Since most states exempt a
significant number of mortgages from their
ceilings, the claims of both advocates and
opponents of mortgage usury ceilings are
typically overstated.
Usury ceilings date from early in the
history of commerce. They have been supported for a variety of reasons. In recent
years, advocates have argued primarily
that such ceilings are necessary to ensure
low cost credit and to protect borrowers
who have little knowledge of credit markets
or who have desperate need for credit
against credit costs that are excessively
high. By limiting the interest rates and
finance charges that lenders are allowed
to levy on these borrowers, the ceilings
FEDERAL RESERVE BANK O F A T L A N T A
keep credit costs within limits consistent
with legislators' concept of protecting
the public.
Although this argument seems to have
been generally appealing to voters and
their representatives (only two states
have no usury ceilings at all), the states
have chosen many different ways of organizing usury protection. Among the states,
ceilings differ in several ways. Maximum
rates, allowable fees and service charges,
and approved methods of interest computation vary substantially. The categories
of credit are differently defined, and
what is covered in one state may be exempt
in another.
Usury ceilings on home mortgages share
in the state-to-state variation. As of
August 1979, 45 states sought to give some
protection to home buyers with usury
ceilings on first mortgages secured" by
single-family residences, but the extent
of the protection varies widely. Although
only five states cover none of these home
mortgages with usury ceilings, most states
exempt certain types of home mortgages
111
from their coverage. The most important
exemption applies to loans backed by
the Federal Government. Thirty-seven
of the states with usury ceilings on home
mortgages do not apply them to FHA and
VA mortgages. Other exemptions occur
much less often. They are generally based
on the institution making the loan (e.g.,
Florida's exemption of mortgages originated
by savings ana loan associations and the
Federal exemption allowing national banks
to charge one percent above the Federal
Reserve discount rate) or on the size of
the loan (e.g., Kentucky's exemption
of loans of more than $15,000). In addition,
at least 16 states have recently adopted
home mortgage usury ceilings that adjust
to some national index of market interest
rates.
In spite of the exemptions and floating
rates, the recent acceleration of inflation
and the accompanying rise in interest rates
have raised opposition to usury ceilings
on mortgages in several states. Where
ceilings have been low relative to market
interest rates and where exemptions have
not been quite liberal, legislators and
governors have been asked to raise usury
ceilings and, implicitly, to explain to
their constituents why they have done so.
This has concentrated attention on the
issue of how usury ceilings actually affect
mortgage lending and home building.
During the past decade, several economists have reported on research that
attempted to answer this question. Their
results form a fairly consistent pattern
when their work is carefully analyzed, but
to accomplish the analysis, one must
consider both of the basics of the economic analysis of price controls and the
arguments of the opponents of binding
usury ceilings.
Economists analyzing usury ceilings have
generally argued that, in a market economy,
usury ceilings set below market interest
rates will have two primary effects. First,
when market interest rates exceed the
usury ceiling on a certain type of loan,
funds will be diverted by lenders from
that type of loan to loans or investments
that carry higher rates and greater profits.
This diversion may be to other types of
loans that are not subject to a binding
112
ceiling or to loans in other states where
usury ceilings do not exist or do not bind.
A corollary to this conclusion is that
borrowers who are not inhibited by the
market interest rate itself will seek other
sources of credit where it is available—
in other types of loans or in other places.
Second, lenders will react to binding usury
ceilings, particularly when the market rates
exceed the ceiling by small amounts, by
attempting to reduce their costs of loans
covered by the ceiling. Various analysts
have suggested that costs may be reduced
by making credit standards tougher or
requiring more collateral, thus reducing
losses from default; by raising minimum
loan size, thus reducing fixed costs per
dollar of loan; and by raising service
charges or fees, if possible, thus covering
some origination costs directly.
Opponents of binding usury ceilings
have used this analysis to argue that binding ceilings will be either detrimental to
a state's economy or ineffective in protecting the consumer. They argue that
ceilings will divert credit flows from types
of economic activity that depend on credit
covered by the usury ceiling. However,
opponents continue, if borrowers and
lenders can find a financing method that
is not covered by the ceiling, the flow may
be brought back to the activity, but with
credit costs exceeding the usury ceiling.
Opponents also claim that lenders' adjustment of credit standards and terms will
raise actual credit costs of loans covered
by the ceiling toward the market rate.
This theory tells one what to expect
when usury ceilings bind. What, in fact,
have the studies of effects of binding
usury ceilings on home mortage lending
and home building shown? At first glance,
the studies seem to support the old saw
that one always gets at least as many conclusions about a subject as the number of
economists studying that subject. Closer
analysis of the studies leads to four
relatively firm conclusions:
1. Usury ceilings divert money and borrowers from covered mortgages.
2. Some (possibly all) of the diverted
money and borrowers go to loans that
are not covered; these may be
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
*
h
i
>
government-backed mortgages, mortgages made by exempt institutions,
or mortgages above a specified size.
Whatever the reason for the exemption,
borrowers effectively pay more than
the usury ceiling on these loans.
3. Usury ceilings cause terms on covered
mortgages to be toughened, making
loans more costly and more difficult
to get for borrowers perceived to be
less credit worthy.
4. Whether usury ceilings reduce home
building is not entirely clear from
the evidence. Their effect seems to
depend in part on whether there are
types of mortgages that are exempt
from the ceilings. If there are, the
impact of binding ceilings may be
small. If there are not, home building
is likely to be significantly reduced.
We have reviewed nine recent studies
of the effects of mortgage usury ceilings
on home building and/or mortgage
credit in the United States.1 (These are
summarized in the Appendix.) Three of
these have dealt with cross sections of
states or metropolitan areas during one
particular year when usury ceilings were
binding in some of the areas. Two dealt
with a group of metropolitan areas over
time. Four followed a single area during
a period in which usury ceilings were
binding part of the time and not binding
at other parts of time.
Five studies dealt with the effects of
binding usury ceilings on conventional
mortgage lending. They reached uniform conclusions. Conventional lending
was reduced in the face of binding
ceilings. Estimates of the magnitude of
the reduction ranged from a low of a 7percent reduction in the value of originations to a high of a 23-percent
reduction in the number of originations.
'Two additional studies were not reviewed. Their results are reportedly
consistent with those covered here. The studies are D. V. Austin and D. A.
Lindsley, " O h i o Usury Ceilings and Residential Real Estate Development,"
American Real Estate and Urban Economics Journal, spring 1976, and
R. Lindsay, " T h e Economics of Interest Rate Ceilings," The Bulletin,
Nos. 68-69, New York University Graduate School of Business Administration,
Institute of Finance (December 1970).
FEDERAL RESERVE BANK O F A T L A N T A
Two studies analyzed the effects of a
binding mortgage rate ceiling on credit
terms. They found some of the terms of
conventional mortgages to be significantly
tougher under binding usury ceilings on
such mortgages and no terms to be easier.
Lenders ten<Jed to charge greater closing
costs and to require higher down payments, but they did not appear to shorten
loan maturity.
Despite general agreement that there
was a significant decline in conventional
mortgage lending when usury ceilings
bound, the studies that dealt with overall
effects of such ceilings on home building
did not agree. Many, but not all, of their
differences seem to turn on their treatment of the usual practice of exempting
FHA and VA mortgages from the ceilings.
Of the four cross-section studies that
dealt with effects of binding ceilings on
the number of housing starts or building
permits, two found significant reductions
and two found little or no reduction.
Such wide differences in conclusions
among studies that differ mainly in the
areas and time periods covered and, to a
lesser extent, in the variables in their
economic models lead one to doubt any
of the studies.
A flaw common to these studies was
first pointed out by Rolnick, Graham,
and Dahl in a report on the effects of a
mortgage usury ceiling in Minnesota
between 1968 and 1978. The analysis of
these economists suggests a reason for the
differences and, at the same time, explains
how conventional mortgage lending can
decline without a concurrent decline in
home building.
A binding conventional mortgage ceiling in areas where FHA and VA mortgages or mortgages made by certain
institutions are exempt might be expected
to divert funds from covered conventional
mortgages and to shift potential mortgage borrowers from covered conventional
to FHA or VA and exempt conventional
mortgages. These borrowers would
generally pay credit costs greater than
the usury ceiling in order to induce lenders
to make the exempt loans, but credit
flows into housing would be maintained.
113
Evidence from Minnesota and New York
indicates that with a binding usury ceiling on conventional mortgages and an
exception for FHA and VA mortgages,
conventional lending declined and FHAVA lending increased. The evidence from
Minnesota goes a step further to indicate
that the binding ceiling had little or no
effect on the number of single-family
building permits issued.
A recent study of the effects of Georgia's
mortgage usury ceiling indirectly lends
further support to this line of reasoning.
In this study, the analysis showed that
binding ceilings reduced savings and loan
associations' mortgage originations.
However, it found no diminution of the
number of building permits issued for
single-family houses. Although the study
ignored the effects of the ceilings on
FHA and VA lending, Georgia's exemption
of government-backed loans from its
usury ceiling seems likely to explain how
the decline in conventional mortgage
lending could have occurred without a
reduction in home building. 2
Although substitution of exempt for
covered mortgages by both borrowers and
lenders seems likely, the substitution may
not fully offset the impact of binding
usury ceilings. In the most sophisticated
work yet on the effects of mortgage rate
ceilings, Rosen recently found significant
declines in home building in some housing
markets when ceilings bound but no
declines in others. He covered eight
metropolitan areas over a ten-year period,
and each area but one had the same
exemptions. Thus, his results are much less
subject to the flaw of ignored exemptions
than most others.
These studies, despite their differences,
paint a consistent picture when their
evidence is properly interpreted. They
indicate that both borrowers and funds will
shift from types of mortgages covered by
2
A study of the Canadian mortgage market also reinforces the explanation
based on exemptions. This study found that originations of mortgages
subject to Canada's interest rate control declined when the rate ceiling was
below market rates but that orginations of exempt mortgages increased
to cover a large portion of the decline.
114
binding ceilings to types that are not
covered but that the shift may not include
all borrowers and funds affected by the
ceiling. Borrowers who shift choose not
to be protected from mortgage credit costs
that state governments consider excessively
high. The studies also indicate that if all
types of mortgages are covered by binding
ceilings, mortgage lending and home
building will decline. This evidence
strongly suggests that the twin goals of
protecting mortgage borrowers from high
market interest rates and maintaining
home building are incompatible. Full protection will most likely reduce home
building. Avoiding such a reduction will
most likely require that ceilings be ineffective on some types of mortgage credit.
Even if they accept these conclusions,
many state lawmakers and their constituents
remain concerned about naive or desperate borrowers. How can these persons
be protected without other undesirable
results? Five general approaches have
been tried (sometimes in combination).
Federal and state "truth-in-lending" laws
have attacked this problem by requiring
that borrowers be informed in detail about
the terms of their loan. Two other approaches seek to protect borrowers but
nave no specific usury ceiling. They
depend on borrower-initiated remedies
to unconscionable credit costs. Under one
approach, the borrower may ask a court
to declare an interest rate usurious, free
him from his obligation, and penalize
the lender under general legal guidelines. Under the other, he is allowed to
refinance any loan without penalty for prepayment and may thus avoid continuing
to pay an interest rate that is above
the market rate.
A fourth approach applies the usury
ceiling only to loans below a certain size.
An assumption that naive and desperate
borrowers are concentrated in the market
for small loans underlies this policy. The
approach does not avoid undesirable
economic effects, but it limits them (as
it limits protection) to borrowers of small
amounts.
Recently, a fifth approach has become
more popular. Until the high inflation
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
and interest rates of the past 15 years,
most usury ceilings in the United States
were moderately above market interest
rates. They did not impede credit flows,
but they protected the vulnerable borrower from unconscionable credit costs.
In many cases, these fixed ceilings became
binding as interest rates rose. In response,
several states have adopted ceilings floating
moderately above market interests. In most
cases, these flexible ceilings allow mortgage and housing markets to function
with little impediment, but they still provide some limit to rates charged on mortgages covered by the ceiling.
The effects of these approaches have
not been systematically studied. We do
not know the extent to which borrowers
use the courts or free refinancings to
escape usurious interest rates when there
are no specific usury ceilings. Whether,
under a binding ceiling on small mortgages or a floating ceiling, most vulnerable
borrowers shift (or are shifted) to loans
with higher rates is also uncertain.
However, the strong general evidence that
borrowers and lenders shift from mortgages with binding ceilings to those without
makes shifting by specific borrowers and
lenders seem quite likely. Further study
may find that isolated vulnerable borrowers are as difficult to protect as
borrowers in general. •
SOURCES
Empirical
Research
Dahl, D. S., S. L. Graham, and A. J. Rolnick, "Minnesota Usury Law:
A Réévaluation," Ninth District Quarterly, Federal Reserve Bank of
Minneapolis (spring 1977), pp. 1-6.
France, C. F., Pennsylvania's Floating Usury Ceiling: A n Economic Evaluation"
(Pittsburgh: Federal Home Loan Bank of Pittsburgh), Working Paper No. 1,1975
Kohn, E., C. ). Carlo, and B Kaye, "The Impact of New York's Usury Ceiling
on Local Mortgage Lending Activity" (Albany: New York State Banking
Department), 1976.
McNulty, J., A Reexamination of the Problem of State Usury Ceilings:
The Impact in the Mortgage Market" (Washington: Federal Home Loan Bank
Board), Invited Working Paper No. 21, 1979.
Ostas, J. R., "Effects of Usury Ceilings in the Mortgage M a r k e t , " Journal of
Finance, Vol. 31 (June 1976), pp. 821-834.
Robins, P. K., The Effects of State Usury Ceilings on Single-Family Home
Building," Journal of Finance, Vol. 29 (March 1974), pp. 227-235.
Rolnick, A. J., S. L. Graham, and D. S. Dahl, Minnesota's Usury Law:
An Evaluation," Quarterly Review, Federal Reserve Bank of Minneapolis
(April 1975), pp. 16-25.
Rosen, K., "The Impact of State Usury Laws on the Housing Finance System
and on New Residential Construction," mimeo, Princeton University, 1978.
Smith, L. B., " O n the Economic Implications of the Yield Ceiling on Government Insured Mortgages," Canadian Journal of Economics and Political Science,
Vol. 33 (August 1967), pp. 421-431.
Strangways, R. and B. Yandle, Jr., ' Effects of State Usury Laws on Housing
Starts in 1966," Journal of Financial and Quantitative Analysis, Vol. 6
(January 1971), pp. 665-669.
Yandle, B., Jr., and J. Procter, "Effect of State Usury Laws on Housing Starts:
Comments," Journal of Financial and Quantitative Analysis, Vol. 13
(September 1978), pp. 549-554.
Surveys
Nathan, H. C . , "Economic Analysis of Usury Laws: A Survey, " W o r k i n g Paper
Nc. 78-7, Federal Deposit Insurance Corporation, 1978.
Parliment, T. J., et al, "Usury Ceilings: The Threat to Housing," Economic
Working Paper No. 25, United States League of Savings Associations, 1979.
FEDERAL RESERVE BANK O F A T L A N T A
115
APPENDIX
A SUMMARY OF RECENT STUDIES OF THE INFLUENCE OF USURY
CEILINGS ON MORTGAGE LENDING AND HOME BUILDING
Author(s)
Activity Studied
Time Period/
Area(s)
Analytic Method
Results
Strangways and
Yandie
permits for singleunit houses
1966
50 states
cross-section multiple
regression
usury ceilings not an
influence
Yandle and Procter
permits for singleunit houses
1970 and 1974
50 states
cross-section multiple
regression
1 9 7 0 — u s u r y ceilings
not an influence
1 9 7 4 — u s u r y ceilings
reduce permits
about 7 percent
Robins
starts of singleunit houses
1970
77 S M S A s
cross-section multiple
regression
usury ceilings reduce
starts 16 to 28 percent
Ostas
permits for singleunit houses
1965-1970
15 S M S A s
pooled time series
cross-section
multiple regression
usury ceilings reduce
permits 11 to 18
percent; most
terms made tougher
time series multiple
regression
usury ceilings reduce
loans; closed about
23 percent
comparisons over time
in-state outstandings of
home loans a t S & L s
fell; did not change at
banks and M S B s
outstandings of multifamily and commercial
loans rose
conventional loan terms
France
loans closed at s a v i n g s
and loan
associations
Kohn, Carlo, and
Kaye
outstanding loans
secured by 1-2 unit
in-state houses
1966-1970
Philadelphia
1966-1975
New York
(state)
outstanding loans
secured by multifamily and commercial property
outstanding loans
secured by 1-2 unit
out-of-state houses
Rolnick
permits for singleunit houses
out-of-state outstanding home loans rose
comparisons over time
within Minnesota
and among states
usury ceilings not an influence on permits
1966-1977
Georgia
time series multiple
regression
usury ceilings reduced
conventional mortgage
lending
usury ceilings not an
influence on permits
1965-1975
15 S M S A s
time series multiple
generalized least
squares for each
area
usury ceilings reduced
permits and tightened
mortgage terms in
some markets; did not
do so in others
1951-1963
Canada
time series multiple
regression
usury ceilings reduced
government-backed
mortgage lending
usury ceilings increased
conventional
mortgage lending
1968-1978
Minnesota
value of conventional
loans originated
value of FHA-VA loans
originated
McNulty
loans closed at s a v i n g s
and loan associations
permits for single-unit
houses
Rosen
permits for single-unit
houses
usury ceilings reduced
conventional mortgage
lending
u s u r y ceilings increased
FHA-VA lending
conventional loan
terms
Smith
116
loan approvals,
government-backed
loans (rate fixed)
loan approvals, conventional loans
(market rate)
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
FISCAL EFFECTS ON
POTENTIAL OUTPUT
Changes in tax structure and government spending
on the supply of labor and capital. Tax reductions
of labor services because of shifts from leisure to
market activity. Tax reductions
also increase the
shifts from consumption
to savings and investments
productive
domestic uses of capital.
by Robert E.
policies have two main effects
tend to increase the supply
work and from nonmarket
to
supply of capital because of
and from tax shelters to more
Keleher
The nation's tax structure and spending
policies produce significant supply side
effects which also influence the size and
growth of potential output. An analysis
of how these fiscal side effects influence
the available market supply of labor,
capital, and, ultimately, aggregate supply
(or output) reveals the importance of tax
structure for realistic estimates of growth.
FISCAL EFFECTS
ON LABOR SUPPLY
Conventional economics indicates that
the tax structure affects labor supply in
two basic choices workers make: (1) the
choice between working for more taxable
income or enjoying more leisure time and
(2) the choice between working for taxable income or for nontaxable income.
The first choice is based in part on how
much the worker can earn net of taxes. If
a worker chooses to work less, the price of
his additional leisure is the amount of
after-tax income he gives up. A reduction
in the tax rate, then, would increase the
FEDERAL RESERVE BANK O F A T L A N T A
price of leisure because the worker stands
to lose more net income by not working.
Based on this principle, most economists
believe that tax rate cuts increase the
''price" of leisure and, consequently,
induce an increase in the supply of labor
services. They have in mind a worker who
says, "Why should I put in more hours
working to pay taxes?"
Other economists, however, argue for
the opposite effect. The desire for more
income, they claim, offsets the desire for
leisure time so that when tax rates are
reduced, people want to work less, not
more, in an attempt to maintain their level
of income. They nave in mind a worker
who says, "I have to work more just to
stay even because more and more of my
income goes for taxes." It also means
that when tax rates are lowered and the
relative price of leisure rises, people
demand more leisure.
Which idea seems to prevail in reality?
Several recent studies of the income versus
leisure relationship show that when the
117
effects on the entire economy are considered, the first theory (tax cuts increase
labor supply) tends to receive support. 1
The studies demonstrate that when the
government cuts taxes and reduces spending, the effects emphasized by the second
theory (tax cuts reduce labor supply) tend
to be very small. This is because tne reduced
effort of the taxpayer (because of his higher
net income) will be offset by the increased
effort of the government-spending recipient
(because of nis lower income). Consequently, the effects stressed by the second
theory will largely offset one another,
whereas the effects emphasized by the first
theory (tax cuts increase labor supply)
are not offset.2
Specifically, reduced welfare benefits
may increase the price of leisure and affect the work-leisure choice. When lower
welfare benefits accompany lower tax rates,
then both taxpayers and welfare recipients
will consume less leisure and offer more
labor in the market.
Tax rate changes also affect a second
choice the worker makes: the choice between working for taxable income or for
nontaxable income. Nontaxable or "underground" work may take the form either of
illegal activities (gambling, drug sales, prostitution, "off-the-oooks" transactions, etc.)
or legal nonmarket activities (do-it-yourself
work, barter transactions, payment in fringe
benefits, etc.). Because this "underground"
activity is not taxed, tax rate increases
(and sometimes stricter regulations) make
this nontaxed activity relatively more
profitable than taxable market activity. 3
It will not, however, be more profitable
for the economy as a whole. An increase
in nonmarket activity often implies a loss
of efficiencies (from division of labor,
specialization, and economies of scale).
As a result, economic output as well as economic growth may be slowed or reduced.
1
Studies that take a more general approach in that they include tax uses, as
well as tax sources, include, for example, Victor A. Canto, Arthur B. Laffer,
and O n w o c h e i O d o g w u , " T h e Output and Employment Effects of Fiscal
Policy in a Classical M o d e l , " unpublished manuscript, and P.C. Roberts, " T h e
Breakdown of the Keynesian M o d e l , " The Public Interest, No. 52, summer
1978, pp.30-31.
2
Since the income effects offset each other, there is no important aggregate
income effect. A n d substitution effects reinforce one another, so the aggregate
substitution effect will not be offset by a netted out income effect.
3
Estimates of the size of the so-called underground economy, although
unreliable, run from $100 billion (an IRS estimate) to $176 billion (1976).
(P. Gutmann, " T h e Subterranean Economy," Financial Analysts Journal,
November-December 1977.)
118
A reduction of tax rates, then, reduces
the attractiveness of such "underground"
activity and, consequently, increases the
supply of labor services for normal taxable
market activities. 4 Lack of reliable data,
however, makes the magnitude of this
effect difficult to estimate. In sum, tax
reductions apparently will increase the
market supply of labor services not only
because of shifts from leisure to work but
also because of shifts from nonmarket to
market activity. 5
FISCAL EFFECTS
ON CAPITAL SUPPLY
While labor supply decisions are based
on work-leisure and market-nonmarket
alternatives, the tax structure's two major
effects on investment in capital stock are
the decisions whether to consume or save
and whether to engage in market or nonmarket activities. An individual, for
example, can use his income for either
additional consumption or for increased
savings and investments, depending in
part on the relative price ot these two
choices. The price of consuming more
now, for example, is the amount of future
income the individual foregoes to obtain
his current level of consumption. This
price increases as the real rate of return
on savings and investments grows. As a
result, the less future income foregone
to obtain greater current consumption,
the less saving that will take place.
How do tax rates affect the consumption-saving choice? Recent evidence
suggests that the lower the tax rate on
saving-investment activity, the larger the
amount of after-tax future income that is
sacrificed by enjoying added current consumption. 6 Lower taxes, therefore, tend
to increase the price of consuming more
now and result in increased savings and
investments. The end result of this process
is an increase in the supply of capital.
* When the receipt of welfare benefits is conditioned on the unemployment
of the recipient, a dual incentive for working in the underground economy
is created. (See Jude Wanniski, The Way the World Works, Basic Books,
New York, 1978, pp. 84, 95.)
5
6
The supply of labor is probably more elastic (with respect to changes in tax
rates) in a longer time frame as well as in an open economy.
See, for example, Roberts, op. cit, p. 24, as well as " T h e Economic Case
for Kemp-Roth," Wall Street Journal, August 1, 1978.
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
The second major effect which change
in the tax rate has on capital supply is in
the choice of taxable (market) savinginvestment activity versus domestic and
international nontaxable savings and investments. This decision directly affects the
taxable market supply of capital. A reduction of tax rates reduces the relative
returns of nontaxable investing (domestic
or international tax shelters) and, consequently, drives funds out of these tax
shelters into taxable domestic investments.
Tax rate reductions on taxable (market)
saving-investment activity, then, will
increase the supply of capital not only
because of shifts from consumption to
savings and investments but also because
of shifts out of both domestic and international tax shelters and into productive
domestic uses of capital.
EFFECTS OF TAX RATES ON
AGGREGATE SUPPLY OR OUTPUT
Since fiscal effects influence both the
supply of labor and capital, they also influence potential output, or GNP. A recent
analysis of these effects by Neil J. McMullen
for the National Planning Association
shows what happens to aggregate output
as tax rates rise.7 When tax rates are near
zero, output is low because certain public
services (justice, defense, law and order,
road maintenance, and education, for
example) which are essential for markets
to operate are not being provided. As tax
rates rise, these essential public goods
and services are provided and economic
activity expands. The provision of these
public goods helps create rapid increases
in the productive efficiency of capital and
labor and, consequently, output. At this
earlv stage of development, the effects
of tnese increases in productive efficiency
outweigh any negative effects of higher
tax rates. But as tax rates continue to rise,
disincentives and inefficiencies begin to
become more important. People do less
saving, investing, and working for taxable
income and begin to increase their leisure,
7
Neil ). M c M u l l e n , "Appendix A : Conceptualizing Welfare/Efficiency
Relationships," Wellare and Efficiency: Their Interactions in Western Europe
and Implications for International Economic Relations, National Planning
Association, Washington, D. C , 1978.
FEDERAL RESERVE BANK O F A T L A N T A
consumption, tax shelters, and work for
nontaxable income. The market supply of
goods and services is thus decreased. 8
At the same time, improvements in productive efficiency based on public goods
slow down because less essential public
oods are provided. 9 Gains in output
egin to shrink. Eventually, the efficiency
gains due to government expenditures
are completely offset by efficiency losses
and disincentives due to high tax rates.
Potential output peaks and oegins to decline. Tax rates have then become so high
that they induce factors of production to
leave the producing sector. If tax rates
continue to rise, output declines even
further as supplies continue to withdraw
from production.
The problem for policy makers is to
determine the point at which output is
maximized. According to McMullen's analysis, the point of maximum output depends
on how factor supplies (labor, capital, land,
etc.) respond to those same changes in tax
rates. These supply responses to tax rate
changes depend, in turn, on several other
factors. These factors include, for example,
the openness of the economy, the uses
to which tax revenues are put, the intensity of the work and saving ethics of
society, and the time period over which
the output/tax relationship is considered.
The analysis has shown that, in general,
the supply of both labor and capital tends
to increase when tax rates are reduced.
The significance of these fiscal effects for
our long-term economic progress, while
still a matter of debate, may well be as
important as our technological progress
or our changing demographic structure.
In any case, it is clear tnat we must continue to examine carefully the effect of
the tax structure and spending policies of
government in order to make an accurate
assessment of the nation's potential
economic growth.
f
A more technical discussion of this topic can be found in Robert E. Keieher,
"Supply-Side Effects of Fiscal Policy: S o m e Preliminary Hypotheses,"
Research Paper No. 9, Federal Reserve Bank of Atlanta, June 1979.
8
Roberts, "The Economic Case for K e m p - R o t h , " op. cit.
9
At some point, government expenditures instead of improving efficiency
may actually diminish it, for example, as larger and larger welfare payments
provide disincentives to labor supply.
119
WORKING
PAPER
REVIEWS
The following articles are staff reviews of more complete
studies that are available as part of a series of Federal
Reserve Bank of Atlanta Working Papers. Single copies of
these and other studies are available upon request to the
Research Department, Federal Reserve Bank of Atlanta,
Atlanta, Georgia 30303.
REGIONAL C R E D I T MARKET INTEGRATION:
A S U R V E Y AND EMPIRICAL EXAMINATION
If the United States is really a series of
compartmentalized, disassociated, and regional credit markets, then:
•Monetary policy makers cannot ignore
the varying regional impacts of their
deliberations. To be effective, they
must deal with more than just aggregate policies.
*The financial intermediation process
in this country is probably inefficient in
allocating credit across regions.
On the other hand, if the regional
credit markets are integrated into a unified
national market, then the above statements are not necessarily true and macroeconomic life becomes a little easier.
Many authors on the subject, however,
do not believe that a national credit
market exists for certain assets such as
small loans and conventional mortgages.
In his examination of this vital question,
Robert Keleher takes a stand that is very
much at variance with the other authors.
Keleher's paper begins with an examination and review of the previously
published literature on the subject
of national vs. regional credit markets.
Almost all researchers in his survey are in
agreement that the U.S. is—and always
has been—a group of regional credit
markets for certain loan and mortgage
categories. Empirical studies cited by
120
Keleher support the view that a national
credit market exists only in abstract
macroeconomic theory and not in the
real world.
There are several reasons, contends
Keleher, to be skeptical of these conclusions. He uncovers two basic faults in
the previous studies of U.S. credit markets.
Both faults evolve from the universal
use of cross-section interest rate data by
all previous authors. Keleher concedes
that by using this method, a researcher
will normally find actual differences in
interest rates between regions at any given
point in time. But, he claims, these interest
rate variances between regions could
easily be the result of transactions and information costs, not capital market
imperfections and inefficiencies.
Keleher states the second fault of the
cross-section approach arises from
the presumption that the interest rates
being studied are rates on identical
credit instruments. He contends that
this is not an appropriate assumption for
nontraded assets such as bank loans
and conventional mortgages.
Using a framework derived from
studies of international credit markets,
Keleher examines the U.S. interest rate
data and discovers definite indications
of a national market for both mortgages and business loans. The Keleher
framework is based on using time series
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
data rather than cross-section data.
With this technique, he concedes that
actual rate differences might exist in
different regions, but that, when viewed
through time, the movement of all
regional interest rates was virtually
identical. The rate in any given region
would move in the same direction, and
at the same time, as the national rate.
This evidence, argues Keleher, constitutes sounder criteria for determining
whether the market is national or regional.
This paper marks the first study that
applies time series testing to the hypothesis that for similar nontraded assets (bank
loans and conventional mortgages),
regional interest rates move with
and are determined by national interest
rates. By concluding that the hypothesis is true, after empirical testing, Keleher's
Working Paper stands in direct conflict
with almost all of the literature he
surveys. His conclusion, however, is in
strong accord with what is considered the
"abstract" assumptions of macroeconomics.
The implications of these conclusions
are important. In a national credit market, monetary policies should be smoothly
and rapidly diffused throughout the
nation. There would be no reason, therefore, for monetary policy makers to be
concerned with how their policies impact differently in various regions.
Any such difference, according to Keleher,
is likely due to industrial composition,
not inefficiencies in the monetary transmission mechanism.
Another important implication concerns the monopoly powers of large
regional banks. In an integrated national
credit market, financial institutions,
lending in their markets, cannot have substantial monopolistic lending powers—
even if they lend to a large share of
local borrowers. •
AN E M P I R I C A L A N A L Y S I S O F S E C T O R A L
MONEY DEMAND IN T H E S O U T H E A S T
In his Working Paper, Stuart G. Hoffman
uses Sixth District data from the Demand
Deposit Ownership Survey to estimate
separate money demand functions for the
household ana nonfinancial business
sectors. His analysis provides important
new insights, since sectoral money demand
functions have previously been estimated
using national data only. Theoretically,
alternative measures of opportunity
costs, wealth, and transactions variables
are significant for each deposit-holding
sector. Such factors, including real income
and the interest rate on time and savings
deposits, were not statistically significant
in the combined sectors' (aggregate)
estimated demand equation. When broken
down into separate sectors, however, real
income and tne interest rate paid on time
and savings deposits proved highly
significant in tne household sector's demand function, as did business loans
(compensating balances proxy) and the
FEDERAL RESERVE BANK O F A T L A N T A
high-grade corporate bond yield in the
nonfinancial business sector's demand
function.
The sectoral analysis also allows the
speeds of adjustment to differ among types
of depositors, something that is impossible
to detect with aggregate estimates. Hoffman's study shows that the District's
households adjust their demand for deosits more slowly than nonfinancial
usinesses to changes in interest rates
and income.
A third interesting finding involves the
shortfall in money demand relative to
interest rates and income growth nationally
in late 1974 and 1975. Many economists
have explained this shortfall as a result of
increased business participation in the
Federal funds and security repurchase
markets. However, money demand by Sixth
District individuals was also overpredicted, not underpredicted, during this
period. Individuals aid not participate
C
121
WORKING
PAPER
REVIEWS
in the immediately available funds market,
and the overprediction was not due to a
failure to include the yield on less liquid
assets (corporate bonds and stocks). Hoffman concludes that a shift in the demand
for money by individuals in the Sixth
District (and likely elsewhere) occurred
in late 1974, which significantly contributed
to overprediction of aggregate money
demand functions estimated with national
data.
Finally, the most impressive evidence
that information is lost in aggregate estimates of money demand appears when
Hoffman compares dynamic simulations
using the two methods with actual figures
of money demand. Summary statistics for
the estimated errors from the aggregate
equation are over 50 percent higner than
comparable errors from the sum of the sectoral ("disaggregated") demand functions."
ALSO AVAILABLE...
WORKING PAPER SERIES:
Estimating Sixth District Consumer Spending
by Brian D. Dittenhafer
Changes in Seller Concentration in Banking Markets
by B. Frank King
Regional Impacts of Monetary and Fiscal Policies in the Postwar Period: Some Initial Tests
by William D. Toal
A Framework for Examining the Small, Open Regional Economy: An Application of the
Macroeconomics of Open Systems
by Robert E. Keleher
Southern Banks and the Confederate Monetary Expansion
by John M. Godfrey
An Empirical Test of the Linked Oligopoly Theory: An Analysis of Florida Holding Companies
by David D. Whitehead
Regional Credit Market Integration: A Survey and Empirical Examination
by Robert E. Keleher
An Empirical Analysis of Sectoral Money Demand in the Southeast
by Stuart G. Hoffman
Entry, Exit, and Market Structure Change in Banking
by B. Frank King
Future Holding Company Lead Banks: Federal Reserve Standards and Record
by B. Frank King
122
S E P T E M B E R / O C T O B E R 1979, E C O N O M I C REVIEW
?
RESEARCH PAPER SERIES:
No. 1 Impact of Holding Company Affiliation on Bank Performance: A Case Study of Two
Florida Multibank Holding Companies
by Stuart G. Hoffman
No. 2 Convenience and Needs: Holding Company Claims and Actions
by Joseph E. Rossman
No. 3 Small Banks and Monetary Control: Is Fed Membership Important?
by William N. Cox, III
No. 4 Component Ratio Estimation of the Money Multiplier
by Stuart G. Hoffman
No. 5 Holding Company Power and Market Performance: A New Index of Market
Concentration
by David D. Whitehead
No. 6 Fundamental Determinants of Credit Volume: A Survey and Regional Application
by Robert E. Keleher
No. 7 State Usury Laws: A Survey and Application to the Tennessee Experience
by Robert E. Keleher
No. 8 Of Money and Prices: An Historical Perspective
by Robert E. Keleher
No. 9 Supply —Side Effects of Fiscal Policy: Some Preliminary Hypotheses
by Robert E. Keleher
Copies of these publications are available upon
request from:
Research Department
Federal Reserve Bank of Atlanta
Atlanta, Georgia 30303
Please include a complete mailing address with ZIP
Code to ensure delivery. Interested parties may also
have their names placed on a subscription list for
future studies.
FEDERAL RESERVE BANK O F A T L A N T A 19
h
@FedFRASER