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Working Paper
Forecasting GDP Growth with NIPA Aggregates
Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates?particularly consumption and GDP less inventories and trade?together with these simple ...
Journal Article
Federal Funds Rates Based on Seven Simple Monetary Policy Rules
Monetary policymakers often use simple monetary policy rules, like the Taylor rule, as an input into their decision-making. However, there are many different simple rules, and there is no agreement on a single ?best? rule. We look at the federal funds rates coming from seven simple rules and three economic forecasts to investigate the range of results that can be produced. While there are some commonalities, we document that the differences in the federal funds rates suggested by the rules can be quite pronounced.
Journal Article
The Survey of Firms’ Inflation Expectations
The inflation expectations of individuals who lead firms can influence the prices that their firms charge customers and hence can influence overall inflation. This Economic Commentary summarizes results from the Survey of Firms’ Inflation Expectations (SoFIE), which asks top business executives for their inflation expectations once per quarter alongside a second question from a rotating set. We document that this group’s inflation expectations increased with the run-up in inflation over 2021 and 2022 but then began to decline in early 2023. The Cleveland Fed will post estimates from the ...
Journal Article
Regional Economic Sentiment: Constructing Quantitative Estimates from the Beige Book and Testing Their Ability to Forecast Recessions
We use natural language processing methods to quantify the sentiment expressed in the Federal Reserve's anecdotal summaries of current economic conditions in the national and 12 Federal Reserve District-level economies as published eight times per year in the Beige Book since 1970. We document that both national and District-level economic sentiment tend to rise and fall with the US business cycle. But economic sentiment is extremely heterogeneous across Districts, and we find that national economic sentiment is not always the simple aggregation of District-level sentiment. We show that the ...
Working Paper
The Effect of Component Disaggregation on Measures of the Median and Trimmed-Mean CPI
For decades, the Federal Reserve Bank of Cleveland (FRBC) has produced median and trimmed-mean consumer price index (CPI) measures. These have proven useful in various contexts, such as forecasting and understanding post-COVID inflation dynamics. Revisions to the FRBC methodology have historically involved increasing the level of disaggregation in the CPI components, which has improved accuracy. Thus, it may seem logical that further disaggregation would continue to enhance its accuracy. However, we theoretically demonstrate that this may not necessarily be the case. We then explore the ...
Working Paper
A New Tool for Robust Estimation and Identification of Unusual Data Points
Most consistent estimators are what Müller (2007) terms “highly fragile”: prone to total breakdown in the presence of a handful of unusual data points. This compromises inference. Robust estimation is a (seldom-used) solution, but commonly used methods have drawbacks. In this paper, building on methods that are relatively unknown in economics, we provide a new tool for robust estimates of mean and covariance, useful both for robust estimation and for detection of unusual data points. It is relatively fast and useful for large data sets. Our performance testing indicates that our baseline ...