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Working Paper
The Accuracy of Forecasts Prepared for the Federal Open Market Committee
Hanson, Tyler J.; Chang, Andrew C. (2015-07-09)
We analyze forecasts of consumption, nonresidential investment, residential investment, government spending, exports, imports, inventories, gross domestic product, inflation, and unemployment prepared by the staff of the Board of Governors of the Federal Reserve System for meetings of the Federal Open Market Committee from 1997 to 2008, called the Greenbooks. We compare the root mean squared error, mean absolute error, and the proportion of directional errors of Greenbook forecasts of these macroeconomic indicators to the errors from three forecasting benchmarks: a random walk, a first-order ...
Finance and Economics Discussion Series , Paper 2015-62

Working Paper
Forecasting Consumption Spending Using Credit Bureau Data
Croushore, Dean; Wilshusen, Stephanie M. (2020-06-04)
This paper considers whether the inclusion of information contained in consumer credit reports might improve the predictive accuracy of forecasting models for consumption spending. To investigate the usefulness of aggregate consumer credit information in forecasting consumption spending, this paper sets up a baseline forecasting model. Based on this model, a simulated real-time, out-of-sample exercise is conducted to forecast one-quarter ahead consumption spending. The exercise is run again after the addition of credit bureau variables to the model. Finally, a comparison is made to test ...
Working Papers , Paper 20-22

Working Paper
Selecting Primal Innovations in DSGE models
Ferroni, Filippo; León-Ledesma, Miguel A.; Grassi, Stefano (2017-08-01)
DSGE models are typically estimated assuming the existence of certain primal shocks that drive macroeconomic fluctuations. We analyze the consequences of estimating shocks that are "non-existent" and propose a method to select the primal shocks driving macroeconomic uncertainty. Forcing these non-existing shocks in estimation produces a downward bias in the estimated internal persistence of the model. We show how these distortions can be reduced by using priors for standard deviations whose support includes zero. The method allows us to accurately select primal shocks and estimate model ...
Working Paper Series , Paper WP-2017-20

Working Paper
Consumption, Wealth, and Income Inequality: A Tale of Tails
Gaillard, Alexandre; Hellwig, Christian; Wangner, Philipp; Werquin, Nicolas (2023-12-05)
We provide evidence that the distributions of consumption, labor income, wealth, and capital income exhibit asymptotic power-law behavior with a strict ranking of upper tail inequality, in that order, from the least to the most unequal. We show analytically and quantitatively that the canonical heterogeneous-agent model cannot replicate the proper ranking and magnitudes of these four tails simultaneously. Mechanisms addressing the wealth concentration puzzle in these models through return heterogeneity lead to a mirror consumption concentration puzzle. We match the cross-sectional data on ...
Working Paper Series , Paper WP 2023-43

Working Paper
Beyond Financial Conditions: Measuring Structural Vulnerabilities in the U.S. Financial System
Modugno, Michele; Roscoe, Benjamin; Zoi, Sarah (2026-09-21)
We introduce the Financial Vulnerability Index (FVI), a novel indicator of financial vulnerabilities in the U.S. Unlike financial condition indices, which measure current credit market conditions and spike during periods of financial turmoil, the FVI displays the gradual build-up of structural financial weaknesses and declines as such episodes materialize. We demonstrate that the FVI exhibits properties consistent with theoretical mechanisms of financial vulnerabilities. When the index is high, adverse shocks are substantially amplified, generating larger declines in consumption and ...
Finance and Economics Discussion Series , Paper 2026-065

Working Paper
The forecasting power of consumer attitudes for consumer spending
Olivei, Giovanni P.; Barnes, Michelle L. (2014-10-30)
The widely studied Reuters/Michigan Index of Consumer Sentiment is constructed from the answers to five questions from the more comprehensive Reuters/Michigan Surveys of Consumers. Yet little work has been done on what predictive power the information taken from this more thorough compilation of consumer attitudes and expectations may have for forecasting consumption expenditures. The authors construct a limited set of real-time summary measures for 42 questions selected from these broader Surveys corresponding to three broad economic determinants of consumption?income and wealth, prices, and ...
Working Papers , Paper 14-10

Working Paper
A Composite Likelihood Approach for Dynamic Structural Models
Matthes, Christian; Canova, Fabio (2018-07-23)
We describe how to use the composite likelihood to ameliorate estimation, computational, and inferential problems in dynamic stochastic general equilibrium models. We present a number of situations where the methodology has the potential to resolve well-known problems. In each case we consider, we provide an example to illustrate how the approach works and its properties in practice.
Working Paper , Paper 18-12

Working Paper
Fed Communication, News, Twitter, and Echo Chambers
Schmanski, Bennett; Scotti, Chiara; Vega, Clara (2023-05-26)
We estimate monetary policy surprises (sentiment) from the perspective of three different textual sources: direct central bank communication (FOMC statements and press conferences), news articles, and Twitter posts during FOMC announcement days. Textual sentiment across sources is highly correlated, but there are times when news and Twitter sentiment substantially disagree with the sentiment conveyed by the central bank. We find that sentiment estimated using news articles correlates better with daily U.S. Treasury yield changes than the sentiment extracted directly from Fed communication, ...
Finance and Economics Discussion Series , Paper 2023-036

Newsletter
Will the Covid-19 pandemic lead to job reallocation and persistent unemployment?
David, Joel M. (2020-08-05)
The Covid-19 pandemic has had an enormous impact on the U.S. economy. Nowhere are the effects more dramatic than in the labor market: In a span of just two months, the unemployment rate increased from 3.5% in February 2020—a low not seen since the late 1960s—to 14.7% in April—a high not seen since the Great Depression—before falling modestly in May and June. How persistent are these effects likely to be? Will the labor market recover quickly once pandemic-related restrictions are fully lifted, or will unemployment remain at elevated levels further into the future?
Chicago Fed Letter , Issue 444 , Pages 6

Working Paper
Forecasting the Economic Effects of AI
Karger, Ezra; Kuusela, Otto; Abaluck, Jason; Bryan, Kevin; Halperin, Basil; Jones, Todd; Murphy, Connacher; Trammell, Phil; Reynolds, Matt; Mayland, Dan; Viswanathan, Ria; Mittal, Ananaya; Ceppas de Castro, Rebecca; Rosenberg, Josh; Tetlock, Philip (2026-03)
We elicit forecasts of how AI will affect the U.S. economy, comparing the beliefs of five groups: academic economists, employees at AI companies, policy researchers focused on AI, highly accurate forecasters, and the general public. The median respondent in each group expects substantial advances in AI capabilities by 2030, small declines in labor force participation consistent with demographic shifts, and an annual GDP growth rate of 2.5%, which exceeds both the typical medium-run (2.0%) and long-run (1.7%) baseline forecasts from government agencies and private-sector forecasters. ...
Working Paper Series , Paper WP 2026-07

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