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Speech
Using Data in Monetary Policymaking: A View from the Fed
Federal Reserve Bank of Boston President & CEO Susan M. Collins shared remarks at the NABE Foundation’s 22nd Annual Economic Measurement Seminar. Her remarks focus on the importance of timely, reliable, high-quality data to assess economic and financial conditions, the outlook, and implications for appropriate monetary policy.
Journal Article
Lingering Residual Seasonality in GDP Growth
Measuring economic growth is complicated by seasonality, the regular fluctuation in economic activity that depends on the season of the year. The Bureau of Economic Analysis uses statistical techniques to remove seasonality from its estimates of GDP, and, in 2015, it took steps to improve the seasonal adjustment of data back to 2012. I show that residual seasonality in GDP growth remains even after these adjustments, has been a longer-term phenomenon, and is particularly noticeable in the 1990s. The size of this residual seasonality is economically meaningful and has the ability to change the ...
Journal Article
Behavior of a New Median PCE Measure: A Tale of Tails
We introduce two new measures of trend inflation, a median PCE inflation rate and a median PCE excluding OER inflation rate, and investigate their performance. Our analysis indicates that both perform comparably to other simple trend inflation estimators such as the trimmed-mean PCE. Furthermore, we find that the performance of the median PCE is related to skewness in the distribution of cross-sectional growth rates across categories in the PCE, and our results suggest that the Bowley skewness statistic may be useful in forecasting.
Journal Article
Residual Seasonality in GDP Growth Remains after Latest BEA Improvements
Measuring economic growth is complicated by seasonality, the regular fluctuation in economic activity that depends on the season of the year. The BEA uses statistical techniques to remove seasonality from its estimates of GDP, but some research has indicated that seasonality remains. As a result, the BEA began a three-phase plan in 2015 to improve its seasonal-adjustment techniques, and in July 2018, it completed phase 3. Our analysis indicates that even after these latest improvements by the BEA, residual seasonality in GDP growth remains. On average, this residual seasonality makes GDP ...
Journal Article
Why Are Headline PCE and Median PCE Inflations So Far Apart?
Mean (or headline) PCE inflation has typically fallen below median PCE inflation, and since 2012 the difference has been large. To understand the reasons for this trend, we investigate which components of the headline measure are contributing to the difference. We find that energy components, which frequently undergo wide price swings, and electronics, which have been steadily decreasing in price for decades, explain most of the difference between the two inflation measures. We argue that the outsized impacts of such components on headline PCE inflation reinforce the need for policymakers to ...
Journal Article
Whose Inflation Expectations Best Predict Inflation?
We examine the predictive relationship between various measures of inflation expectations and future inflation. We find that the expectations of professional economists and of businesses have tended to provide more accurate predictions of future inflation than the expectations of households and of financial market participants. However, the forecasts coming from a relatively simple and popular benchmark inflation forecasting model have historically been roughly as accurate as the expectations of businesses and professional economists.
Working Paper
A Simple Framework to Monitor Inflation
This paper proposes a simple framework to help monitor and understand movements in PCE inflation in real time. The approach is to decompose inflation using simple categorical-level regressions or systems of equations. The estimates are then used to group categories into components of PCE inflation. I review some applications of the methodology, and show how it can help explain inflation dynamics over recent episodes. The methodology shows that inflation remained low in the mid-2010s primarily because of factors unrelated to aggregate economic conditions. I also apply the methodology to ...
Working Paper
Productivity Slowdown: Reducing the Measure of Our Ignorance
Growth accounting suggests that the bulk of the post-2004 slowdown in output growth in the U.S. is attributed to a residual called TFP. In this paper we provide a tractable accounting framework with firm heterogeneity to link this residual to innovations, markup dispersion, and potential measurement errors. Theories of creative destruction offer rich testable predictions of how the quality upgrading of products, the process efficiency of different firms, and markup dispersion in the market interact and therefore constitute a key approach to shed light on the slowdown in TFP growth. Surveying ...
Working Paper
Achievement Gap Estimates and Deviations from Cardinal Comparability
This paper assesses the sensitivity of standard empirical methods for measuring group differences in achievement to violations in the cardinal comparability of achievement test scores. The paper defines a distance measure over possible weighting functions (scalings) of test scores. It then constructs worst-case bounds for the bias in the estimated achievement gap (or achievement gap change) that could result from using the observed rather than the true test scale, given that the true and observed scales are no more than a fixed distance from each other. The worst-case weighting functions have ...
Journal Article
An overview of the Survey of Consumer Expectations
The authors present an overview of the New York Fed?s Survey of Consumer Expectations, a monthly online survey of a rotating panel of household heads. The survey collects timely information on respondents? expectations and decisions on a broad variety of topics, including inflation, household finance, the labor market, and the housing market. It has three main goals: (1) measuring consumer expectations at a high frequency, (2) understanding how these expectations are formed, and (3) investigating the link between expectations and behavior. The authors discuss the origins of the survey, the ...