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Working Paper
An international perspective on oil price shocks and U.S. economic activity
The effect of oil price shocks on U.S. economic activity seems to have changed since the mid-1990s. A variety of explanations have been offered for the seeming change?including better luck, the reduced energy intensity of the U.S. economy, a more flexible economy, more experience with oil price shocks and better monetary policy. These explanations point to a weakening of the relationship between oil prices shocks and economic activity rather than the fundamentally different response that may be evident since the mid-1990s.> ; Using a dynamic stochastic general equilibrium model of world ...
Working Paper
The dynamics of recoveries
Journal Article
Recessions and recoveries
The U.S. recession that began in July 1990 may have ended in April or May 1991. The pace of the subsequent recovery has been so sluggish as to be indistinguishable, in the eyes of many, from continued recession. One explanation for the sluggish pace of the recovery is that the recession itself was not particularly severe, at least when compared with others. ; In this article, Mark Wynne and Nathan Balke use monthly data on industrial production to examine the hypothesis that the severity of a recession determines the pace of the subsequent recovery. They show that, historically, the ...
Journal Article
The federal funds rate as an indicator of monetary policy: evidence from the 1980s
Recently, several economists have argued that movements in the federal funds rate are a good proxy for changes in monetary policy. In this article, Nathan Balke and Kenneth Emery critically examine this view and the evidence supporting it. Using simple vector autoregressions, they find that before 1980 the correlations between the federal funds rate and other important macroeconomic variables are consistent with a traditional monetary policy interpretation of the federal funds rate. However, they show that after 1982 the relationships between the federal funds rate and other macroeconomic ...
Journal Article
Crude oil and gasoline prices: an asymmetric relationship?
Gasoline is the petroleum product whose price is most visible and, therefore, always under public scrutiny. Many claim there is an asymmetric relationship between gasoline and oil prices - specifically, gasoline price changes follow oil price changes more quickly when oil prices are rising than when they are falling. To explore this issue, Nathan Balke, Stephen Brown and Mine Yucel use several different model specifications to analyze the relationship between oil prices and the spot, wholesale, and retail prices of gasoline. They find asymmetry is sensitive to model specification but is ...
Working Paper
The relative price effects of monetary shocks
We document the response of the individual components of the Producer Price Index (PPI) to commonly used measures of monetary shocks, and show that these responses are at variance with many widely-used ?macro? models of monetary non-neutrality. Monetary shocks are shown to have large relative price effects, resulting in an increase in the dispersion of the cross-section distribution of prices. Furthermore, in response to a contractionary (expansionary) monetary shock, a substantial number of prices tend to rise (fall). Most of the existing models of monetary nonneutrality are not capable of ...
Working Paper
How well does the Beige Book reflect economic activity? Evaluating qualitative information quantitatively
Eight times a year, approximately two weeks before every FOMC meeting, the Federal Reserve releases a description of economic conditions in the twelve Federal Reserve districts. Called the Beige Book, this description relies primarily on surveys and anecdotal evidence gathered by the twelve district banks. In this paper, we read and numerically scored past Beige Books in order to determine the extent to which the descriptions in these books accurately reflect current economic activity as measured by quarterly real GDP growth. We find that both in-sample and out-sample, the quantitative Beige ...
Journal Article
Evaluating the Eleventh District's Beige Book
In this study, Nathan Balke and Mine Yucel ask whether the Eleventh Federal Reserve District's Beige Book description contains timely information about economic activity within the District. They examine whether the Beige Book description tracks current Texas real gross state product (GSP) growth and current Texas employment growth. They also study whether the Beige Book has information about growth not present in other regional indicators that would have been available to analysts at the time of the Beige Book's release. They find that both the Beige Book summary and the average across ...