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Author:Groen, Jan J. J. 

Discussion Paper
Oil Prices, Global Demand Expectations, and Near-Term Global Inflation

Oil prices have increased by nearly 60 percent since the summer of 2020, coinciding with an upward trend in global inflation. If higher oil prices are the result of constrained supply, then this could pose some stagflation risks to the growth outlook—a concern reflected in a June Financial Times article, “Why OPEC Matters.” In this post, we utilize the demand and supply decomposition from the New York Fed’s Oil Price Dynamics Report to argue that most of the oil price increase over the past year or so has reflected improving global demand expectations. We then illustrate what these ...
Liberty Street Economics , Paper 20211004

Discussion Paper
A New Approach for Identifying Demand and Supply Shocks in the Oil Market

An oil-price spike is often used as the textbook example of a supply shock. However, rapidly rising oil prices can also reflect a demand shock. Recognizing the difference is important for central bankers. A supply-driven increase in the price of oil can result in higher unemployment and inflation, leaving central bankers with the difficult decision to loosen policy, tighten policy, or not respond at all. A demand-driven increase reflecting global growth may support the case for tighter policy. In this post, we describe an approach for decomposing oil price changes into supply and demand ...
Liberty Street Economics , Paper 20130325

Report
Model selection criteria for factor-augmented regressions

In a factor-augmented regression, the forecast of a variable depends on a few factors estimated from a large number of predictors. But how does one determine the appropriate number of factors relevant for such a regression? Existing work has focused on criteria that can consistently estimate the appropriate number of factors in a large-dimensional panel of explanatory variables. However, not all of these factors are necessarily relevant for modeling a specific dependent variable within a factor-augmented regression. This paper develops a number of theoretical conditions that selection ...
Staff Reports , Paper 363

Discussion Paper
Global Asset Prices and Taper Tantrum Revisited

Global asset market developments during the summer of 2013 have been attributed to changes in the outlook for U.S. monetary policy, starting with former Chairman Bernanke’s May 22 comments concerning future curtailing of the Federal Reserve’s asset purchase programs. A previous post found that the signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion which put downward pressure on global asset prices. This post revisits this episode by measuring the impact of changes in Fed’s expected policy rate path and in the economic outlook on the ...
Liberty Street Economics , Paper 20141208

Discussion Paper
Forecasting Inflation with Fundamentals . . . It's Hard!

Controlling inflation is at the core of monetary policymaking, and central bankers would like to have access to reliable inflation forecasts to assess their progress in achieving this goal. Producing accurate inflation forecasts, however, turns out not to be a trivial exercise. This posts reviews the key challenges in inflation forecasting and discusses some recent developments that attempt to deal with these challenges.
Liberty Street Economics , Paper 20141105

Discussion Paper
The Global Supply Side of Inflationary Pressures

U.S. inflation has surged as the economy recovers from the COVID-19 recession. This phenomenon has not been confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies albeit not with the same intensity. In this post, we draw from the current international experiences to provide an assessment of the drivers of U.S. inflation. In particular, we exploit the link among different measures of inflation at the country level and a number of global supply side variables to uncover which common cross-country forces have been driving observed inflation. Our ...
Liberty Street Economics , Paper 20220128

Discussion Paper
A New Barometer of Global Supply Chain Pressures

Supply chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. Factory shutdowns (particularly in Asia) and widespread lockdowns and mobility restrictions have resulted in disruptions across logistics networks, increases in shipping costs, and longer delivery times. Several measures have been used to gauge these disruptions, although those measures tend to focus on selected dimensions of global supply chains. In this post, we propose a new gauge, the Global Supply Chain Pressure Index (GSCPI), which integrates a number of commonly used ...
Liberty Street Economics , Paper 20220104

Discussion Paper
Global Supply Chain Pressure Index: March 2022 Update

Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. In a January post, we presented the Global Supply Chain Pressure Index (GSCPI) as a parsimonious global measure that encompasses several indicators used to capture supply chain disruptions. The main purpose of this post is to provide an update of the GSCPI through February 2022. In addition, we use the index’s underlying data to discuss the drivers of recent moves in the GSCPI. Finally, these data are used to create country-specific supply chain pressures indices.
Liberty Street Economics , Paper 20220303

Discussion Paper
Creating a History of U.S. Inflation Expectations

Central bankers closely monitor inflation expectations because they?re an important determinant of actual inflation. Treasury inflation-protected securities (TIPS) are commonly used to measure bond market inflation expectations. Unfortunately, they were only introduced in 1997, so historical data are limited. We propose a solution to this problem by using the relationship between TIPS yields and other data with a longer history to construct synthetic TIPS rates going back to 1971.
Liberty Street Economics , Paper 20130821

Discussion Paper
An Examination of U.S. Dollar Declines

Although the dollar strengthened somewhat recently, its level relative to the currencies of the United States’ main trading partners is nonetheless 11 percent lower than it was at the start of 2009. This represents one of the more pronounced periods of dollar weakness over the past two decades and consequently has garnered considerable attention from market participants and policymakers alike. In this post, we examine the role of market uncertainty and currency risk premia in the pace and size of episodes of dollar weakness since 1991. We find that the most recent bout of U.S. dollar ...
Liberty Street Economics , Paper 20110926

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