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Working Paper
Expectations and economic fluctuations: an analysis using survey data
Using survey-based measures of future U.S. economic activity from the Livingston Survey and the Survey of Professional Forecasters, the authors study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. They find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations: a perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation. The authors also find that the short-term interest rate rises ...
Working Paper
Regional employment dynamics
There is a widespread belief that different geographic regions of the U.S. respond differently to economic shocks, perhaps because of factors such as differences in the composition of regional output, adjustment costs, or other frictions. The author investigates the comovement of regional employment series using a common features framework. Little evidence is found to suggest that regions move synchronously; rather, it takes about three quarters before regions respond in a similar fashion to a common shock. The author identifies leading and lagging regions. None of the regional employment ...
Journal Article
Inflation dynamics and the New Keynesian Phillips curve
A 1977 amendment to the Federal Reserve Act states that the Fed?s mandate is ?to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.? Moderate long-term interest rates require low and stable inflation. Monetary policymakers use instruments such as a short-term interest rate to guide the economy with the aim of achieving an inflation objective. To help guide their decisions, monetary policymakers benefit from having a reliable theory of how inflation is determined, one that relates the setting of their instrument to the unexpected events ...
Journal Article
Forecasts, indicators and monetary policy
When setting monetary policy, should policymakers target variables such as commodity prices or interest rate spreads, which are sensitive to the market's expectations of inflation? Or are variables such as money growth, which are tied to the underlying causes of inflation and economic growth, better indicators of the economy's path? Keith Sill considers these questions as he reviews indicators past and present
Working Paper
DSGE model-based forecasting of non-modelled variables
This paper develops and illustrates a simple method to generate a DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). The authors use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core variables to the state variables of the DSGE model. Predictions for the non-core variables are obtained by applying their measurement equations to DSGE model- generated forecasts of the state variables. Using a medium-scale New Keynesian DSGE model, the authors apply their approach to generate and evaluate ...
Working Paper
The cyclical behavior of regional per capita incomes in the postwar period
This paper examines the cyclical dynamics of per capita personal income for the major U.S. regions during the 1953:3-95:2 period. The analysis reveals considerable differences in the volatility of regional cycles. Controlling for differences in volatility, the authors find a great deal of comovement in the cyclical response of four regions (New England, Southeast, Southwest, and Far West), which the authors call the core region, and the nation. The authors also find a great deal of comovement between the Mideast and Plains regions, but these regions are only weakly correlated with national ...
Journal Article
Regional economies: separating trends from cycles
The various regions of the United States, although linked, respond differently to changing economic circumstances. Traditional approaches to understanding these different reactions have relied on the assumption that long-run trends in regional income or employment are constant. Recently, many economists have adopted the view that trends also change during business cycles. Using a new technique, Jerry Carlino and Keith Sill distinguished changing trends from cycles in the eight major regions of the United States and identified regions that have similar cycles. In this article, they share their ...