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Working Paper
A chronology of turning points in economic activity: Spain 1850-2011
This paper codifies in a systematic and transparent way a historical chronology of business cycle turning points for Spain reaching back to 1850 at annual frequency, and 1939 at monthly frequency. Such an exercise would be incomplete without assessing the new chronology itself and against others ?this we do with modern statistical tools of signal detection theory. We also use these tools to determine which of several existing economic activity indexes provide a better signal on the underlying state of the economy. We conclude by evaluating candidate leading indicators and hence construct ...
Discussion Paper
Underlying Inflation: An Ensemble Averaging Approach
Following the pandemic, inflation has been high and variable. Future inflation likely depends on expected or underlying inflation—the inflation rate that would prevail in the absence of resource slack, supply shocks, and other temporary disturbances to inflation. We introduce a new estimate of underlying inflation, which we produce by averaging many individual estimates from statistical filters and macroeconometric models. We estimate that between 2019 and 2022 underlyling inflation moved up from 1.8 to 2.1 percent and the risks around it increased and became skewed to the upside. ...
Journal Article
Global effects of U.S. monetary policy: is unconventional policy different?
U.S. monetary policy can affect asset prices both in the United States and outside of the country as investors arbitrage away price differentials between assets with similar risk/reward characteristics. Since late 2008, however, the conventional tool for monetary policy in the United States?the federal funds rate?has been near zero. As a result, the Federal Reserve has turned to unconventional monetary policies to provide additional accommodation. These unconventional policies may have altered the response of asset prices to Fed policy. Berge and Cao show that changes in U.S. monetary policy ...
Discussion Paper
Which Market Indicators Best Forecast Recessions?
In this note, we use econometric methods to infer which economic and financial indicators reliably identify and predict recessions.
Working Paper
A chronology of international business cycles through non-parametric decoding
This paper introduces a new empirical strategy for the characterization of business cycles. It combines non-parametric decoding methods that classify a series into expansions and recessions but does not require specification of the underlying stochastic process generating the data. It then uses network analysis to combine the signals obtained from different economic indicators to generate a unique chronology. These methods generate a record of peak and trough dates comparable, and in one sense superior, to the NBER's own chronology. The methods are then applied to 22 OECD countries to obtain ...
Working Paper
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases
We synthesize the recent, at times conflicting, empirical literature regarding whether fiscal policy is more effective during certain points in the business cycle. Evidence of state dependence in the multiplier depends critically on how the business cycle is defined. Estimates of the fiscal multiplier do not change when the unemployment rate is above or below its trend. However, we find that the multiplier is higher when the unemployment rate is increasing relative to when it is decreasing. This result holds using both a long time-series at the U.S. national level and for a panel of U.S. ...
Working Paper
Duration Dependence, Monetary Policy Asymmetries, and the Business Cycle
We produce business cycle chronologies for U.S. states and evaluate the factors that change the probability of moving from one phase to another. We find strong evidence for positive duration dependence in all business cycle phases but find that the effect is modest relative to other state- and national-level factors. Monetary policy shocks also have a strong influence on the transition probabilities in a highly asymmetric way. The effect of policy shocks depends on the current state of the cycle as well as the sign and size of the shock.
Journal Article
Future recession risks
An unstable economic environment has rekindled talk of a double-dip recession. The Conference Board's Leading Economic Index provides data for predicting the probability of a recession but is limited by the weight assigned to its indicators and the varying efficacy of those indicators over different time horizons. Statistical experiments with LEI data can mitigate these limitations and suggest that a recessionary relapse is a significant possibility sometime in the next two years.
Journal Article
Has globalization increased the synchronicity of international business cycles?
The inexorable rise in levels of interaction and interdependence among the nations of the world has, over the past several decades, caused their economies' business cycles to grow ever more synchronized. ; That is one finding that emerges from an examination of the chronologies of business cycle turning points, in 32 major economies, over a 40-year period. Author Travis Berge demonstrates these cycles have grown more synchronized as trade flows have expanded. ; However, although the trend does seem to be driven by trade linkages, it appears that financial linkages play little or no role. ...
Working Paper
Understanding Survey Based Inflation Expectations
Survey based measures of inflation expectations are not informationally efficient yet carry important information about future inflation. This paper explores the economic significance of informational inefficiencies of survey expectations. A model selection algorithm is applied to the inflation expectations of households and professionals using a large panel of macroeconomic data. The expectations of professionals are best described by different indicators than the expectations of households. A forecast experiment finds that it is difficult to exploit informational inefficiencies to improve ...