Search Results
Working Paper
Evaluating FOMC forecasts
Federal Reserve policymakers began reporting their economic forecasts to Congress in 1979. These forecasts are important because they indicate what the Federal Open Market Committee (FOMC) members think will be the likely consequence of their policies. We evaluate the accuracy of the FOMC forecasts relative to private sector forecasts, the forecasts of the Research Staff at the Board of Governors, and a nave alternative forecast. The Fed reports both the range (high and low) of the individual policymaker's forecasts and a truncated central tendency. We find no reason to consider the truncated ...
Working Paper
Negative Correlation between Stock and Futures Returns: An Unexploited Hedging Opportunity?
The negative correlation between equity and commodity futures returns is widely perceived by investors as an unexploited hedging opportunity. A Lucas (1982) asset-pricing model is adapted to analyze the fundamentals driving equity and commodity futures returns. Using the model we argue that such a negative correlation could arise as an equilibrium relationship which reflects traders' perceptions about the shocks driving the fundamentals such as energy and consumables, and does not necessarily indicate any hedging opportunity.
Journal Article
Index funds: hedgers or speculators?
Journal Article
Inside the briefcase: the art of predicting the Federal Reserve
We all know the size of the Fed chairman's briefcase as a policy indicator is a joke. But would knowing what's inside the briefcase be of real help?
Journal Article
Monetary policy and commodity futures
This paper constructs daily measures of the real interest rate and expected inflation using commodity futures prices and the term structure of Treasury yields. We find that commodity futures markets respond to surprise increases in the federal funds rate target by raising the inflation rate expected over the next 3 to 9 months. There is no evidence that the real interest rate responds to surprises in the federal funds target. The data from the commodity futures markets are highly volatile; we show that one can substantially reduce the noise using limited information estimators such as the ...
Journal Article
The nominal facts and the October 1979 policy change
Working Paper
The stimulative effect of forward guidance
This paper examines the stimulative effect of central bank forward guidance?the promise to keep future policy rates lower than its policy rule suggests?when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).We utilize a standard New Keynesian model in which forward guidance enters our model as news shocks to the monetary policy rule. Three key findings emerge: (1) Forward guidance is more stimulative at the ZLB when households believe the economic recovery will be strong. When households expect a weak recovery or initially have low confidence in the economy, forward ...
Working Paper
Zero inflation: transition costs and shoe-leather benefits
A comparison showing that the transition costs of indexing inflation (a major obstacle to monetary policy reform) are approximately equal to the minor shoe-leather benefits of having price stability.
Journal Article
The M1 target and disinflation policy
An examination of the monetary policy goals of the Federal Reserve System, with a discussion of the role of the M1 target.
Journal Article
Payroll jobs and GDP