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Journal Article
The Phillips Curve during the Pandemic: Bringing Regional Data to Bear
The Phillips curve appears to have held up well at the regional level during the COVID-19 era. Areas of the country that took relatively large hits to their unemployment rate and employment-population ratio during the pandemic have had lower inflation, on average, than areas that took relatively small hits. And, just as prior to the pandemic, the inverse relationship between inflation and unemployment continues to be statistically stronger for the prices of services than of goods.The Phillips curve appears to have held up well at the regional level during the COVID-19 era. Areas of the ...
Journal Article
FOMC communications and the predictability of near-term policy decisions
In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee?s decisions and expectations. Has the new apparatus improved the public?s ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months.
Working Paper
GDPNow: A Model for GDP \"Nowcasting\"
This paper documents GDPNow, a "nowcasting" model for gross domestic product (GDP) growth that synthesizes the "bridge equation" approach relating GDP subcomponents to monthly source data with the factor model approach used by Giannone, Reichlin, and Small (2008). The GDPNow model forecasts GDP growth by aggregating 13 subcomponents that make up GDP with the chain-weighting methodology used by the U.S. Bureau of Economic Analysis. Using current vintage data, out-of-sample GDPNow model forecasts are found to be more accurate than a number of statistical benchmarks since 2000. Using ...
Working Paper
Impacts of Monetary Stimulus on Credit Allocation and Macroeconomy: Evidence from China
We develop a new empirical framework to identify and estimate the effects of monetary stimulus on the real economy. The framework is applied to the Chinese economy when monetary policy in normal times was switched to an extraordinarily expansionary regime to combat the impact of the 2008 financial crisis. We show that this unprecedented monetary stimulus accounted for as high as a 4 percent increase of real gross domestic product (GDP) growth rate by the end of 2009. Monetary transmission to the real economy was through bank credit allocated disproportionately to financing investment in real ...
Journal Article
The Chinese renminbi: what’s real, what’s not
China's recent devaluation and liberalization of its exchange-rate policies will, at best, have only a temporary impact on its trade competitiveness with the United States. The type of exchange-rate regime that a country adopts matters little for its long-term international competitiveness. In addition, the recent focus on China's exchange rate diverts attention from the real problem: China?s command economy.
Challenges in Nowcasting GDP Growth
Real gross domestic product (GDP) declined at an annualized rate of 4.8 percent in the first quarter, according to the first estimate from the U.S. Bureau of Economic Analysis (BEA), 3.8 percentage points more than the decline anticipated by the Atlanta Fed's final GDPNow model projection. Why was the error, which was easily the model's largest on record for final GDPNow forecasts, so big? Chart 1 looks at GDPNow's forecast errors since the model went live in mid-2014 and breaks them down into forecast errors for the various subcomponents' contributions to GDP growth.
Working Paper
Monetary Stimulus amid the Infrastructure Investment Spree: Evidence from China's Loan-Level Data
We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same ...
Working Paper
Cyclical Lending Standards: A Structural Analysis
Lending standards are a direct measure of credit conditions. We use the micro data merged from three separate sources to construct this measure and document that an uncertain macroeconomic outlook, rather than banks' balance sheet positions, was an important reason that a majority of banks tightened bank lending standards during the Great Recession. Our extensive data analysis disciplines how we introduce credit frictions in the banking sector into a macroeconomic model. The model estimation reveals that an exogenous shock to credit supply drives cyclical lending standards and accounts for a ...
Discussion Paper
The Phillips Curve during the Pandemic: Bringing Regional Data to Bear
The Phillips curve appears to have held up well at the regional level during the COVID-19 era. Areas of the country that took relatively large hits to their unemployment rate and employment-population ratio during the pandemic have had lower inflation, on average, than areas that took relatively small hits. And, just as prior to the pandemic, the inverse relationship between inflation and unemployment continues to be statistically stronger for the prices of services than of goods. The Phillips curve appears to have held up well at the regional level during the COVID-19 era. Areas of the ...
Working Paper
Forecasting China's Economic Growth and Inflation
Although macroeconomic forecasting forms an integral part of the policymaking process, there has been a serious lack of rigorous and systematic research in the evaluation of out-of-sample model-based forecasts of China's real gross domestic product (GDP) growth and consumer price index inflation. This paper fills this research gap by providing a replicable forecasting model that beats a host of other competing models when measured by root mean square errors, especially over long-run forecast horizons. The model is shown to be capable of predicting turning points and usable for policy analysis ...