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Journal Article
Assessing the Recent Behavior of Inflation
Lansing, Kevin J. (2015)
Inflation has remained below the FOMC's long-run target of 2% for more than three years. But this sustained undershooting does not yet signal a statistically significant departure from the target once the volatility of monthly inflation rates is taken into account. Furthermore, the empirical Phillips curve relationship that links inflation to the size of production or employment gaps has been roughly stable since the early 1990s. Hence, continued improvements in production and employment relative to their long-run trends would be expected to put upward pressure on inflation.
FRBSF Economic Letter

Working Paper
Lock-in of Extrapolative Expectations in an Asset Pricing Model
Lansing, Kevin J. (2005-10-01)
This paper examines an agent’s choice of forecast method within a standard asset pricing model. To make a conditional forecast, a representative agent may choose one of the following: (1) a rational (or fundamentals-based) forecast that employs knowledge of the stochastic process governing dividends, (2) a constant forecast based on a simple long-run average of the forecast variable, or (3) a time-varying forecast that extrapolates from the last observation of the forecast variable. I show that a representative agent who is concerned about minimizing forecast errors may inadvertently become ...
Working Paper Series , Paper 2004-06

Working Paper
Some new variance bounds for asset prices: a comment
Lansing, Kevin J. (2010)
Engel (2005) derives a theoretical variance inequality involving the change in equilibrium stock prices Var ( p) : Assuming that stock prices are "cum-dividend" and that investors are risk neutral, he shows that Var ( p) must be greater than or equal to the variance of the "perfect foresight" (or "ex post rational") price change Var ( p*) ; where p* is computed from the discounted stream of subsequent realized dividends. This paper expands the analysis to consider "ex-divdend" prices and risk aversion in a standard Lucas-type asset pricing model. I show that the direction of the ...
Working Paper Series , Paper 2010-29

Working Paper
Capital-Labor Substitution and Equilibrium Indeterminacy
Guo, Jang-Ting; Lansing, Kevin J. (2009-06-01)
Empirical evidence indicates that the elasticity of capital-labor substitution for the aggregate U.S. economy is below unity. In contrast, the existing indeterminacy literature has mostly restricted attention to a Cobb-Douglas production function which imposes a substitution elasticity exactly equal to unity. This paper examines the quantitative relationship between capital-labor substitution and the conditions needed for equilibrium indeterminacy (and belief-driven fluctuations) in a one-sector growth model. With variable capital utilization, the substitution elasticity has little ...
Working Paper Series , Paper 2008-06

Working Paper
Dynamic optimal fiscal and monetary policy in a business cycle model with income redistribution
Lansing, Kevin J. (1993)
An estimation of an optimal program of distortionary taxes, money growth, and borrowing to finance a stream of expenditures based on a real business cycle model in which distribution issues between the rich and poor play a fundamental role in policy decisions.
Working Papers (Old Series) , Paper 9308

Working Paper
Computable general-equilibrium models and monetary policy advice
Altig, David E.; Lansing, Kevin J.; Carlstrom, Charles T. (1995)
An argument that variations of extant general-equilibrium monetary models can generate real-time economic forecasts comparable in accuracy to those contained in the Federal Reserve Board's "Greenbook" briefing documents.
Working Papers (Old Series) , Paper 9503

Working Paper
Examining the Sources of Excess Return Predictability: Stochastic Volatility or Market Inefficiency?
Lansing, Kevin J.; Ma, Jun; LeRoy, Stephen F. (2022-01-27)
We use a consumption based asset pricing model to show that the predictability of excess returns on risky assets can arise from only two sources: (1) stochastic volatility of fundamental variables, or (2) departures from rational expectations that give rise to predictable investor forecast errors and market inefficiency. While controlling for stochastic volatility, we find that a variable which measures non-fundamental noise in the Treasury yield curve helps to predict 1-month-ahead excess stock returns, but only during sample periods that include the Great Recession. For these sample ...
Working Paper Series , Paper 2018-14

Journal Article
Untangling Persistent versus Transitory Shocks to Inflation
Lansing, Kevin J. (2022-05-23)
How much persistent versus transitory forces contribute to inflation influences the Federal Reserve’s ability to achieve its goal of 2% average inflation over time. If elevated inflation is driven mainly by persistent shocks, then a stronger and longer-lasting policy response is likely to be needed to bring inflation back down. Recent data show that consecutive changes in monthly inflation rates have tended to move increasingly in the same direction. This pattern suggests that the contribution of persistent shocks to inflation has been rising since mid-2019.
FRBSF Economic Letter , Volume 2022 , Issue 13 , Pages 05

Working Paper
Demand versus Supply: Which is More Important for Inflation?
Lansing, Kevin J. (2024-04-24)
I use Phillips curve type regressions to assess the relative contributions of demand and supply forces to U.S. inflation during the pandemic era from February 2020 onward and the decade following the end of the Great Recession. In the first specification (Model 1), demand and supply forces are measured using the vacancy-unemployment ratio and the New York Fed’s Global Supply Chain Pressure Index, respectively. In the second specification (Model 2), demand and supply forces are measured using the demand-driven and supply-driven components of PCE inflation from Shapiro (2025). The results ...
Working Paper Series , Paper 2025-08

Journal Article
Assessing Recent Stock Market Valuation with Macro Data
Lansing, Kevin J. (2020-10-13)
History suggests that elevated values of the cyclically adjusted price-earnings (CAPE) ratio may indicate an overvalued stock market. A valuation model that uses a small set of economic variables can help account for movements in the CAPE ratio over the past six decades. One of these variables is a macroeconomic uncertainty index. Comparing the model’s prediction for the second and third quarters of 2020 to the 2008–2009 period suggests that investors have reacted to macroeconomic uncertainty very differently during the COVID-19 outbreak than they did during the financial crisis.
FRBSF Economic Letter , Volume 2020 , Issue 31 , Pages 01-06

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