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Working Paper
Is There News in Inventories?

This paper identifies total factor productivity (TFP) news shocks using standard VAR methodology and documents a new stylized fact: in response to news about future increases in TFP, inventories rise and comove positively with other major macroeconomic aggregates. The authors show that the standard theoretical model used to capture the effects of news shocks cannot replicate this fact when extended to include inventories. To explain the empirical inventory behavior, they develop a framework that relies on the presence of knowledge capital accumulated through a learning-by-doing process. The ...
Working Paper , Paper 20-03

How Likely Is a Return to the Zero Lower Bound?

The likelihood of returning to near-zero interest rates is relevant to policymakers in considering the path of future interest rates. At the zero lower bound, the Fed can no longer lower rates and thus can respond to a contraction only through alternative policy measures, such as quantitative easing. Recent research at the Richmond Fed has used repeated simulations of the U.S. economy to estimate the probability of such an occurrence over the next ten years. The estimated probability of returning to the zero lower bound one or more times during this period is approximately one chance in four.
Richmond Fed Economic Brief , Issue September

Working Paper
Efficient VAR Discretization

The standard approach to discretizing VARs uses tensor grids. However, when the VAR components exhibit significant unconditional correlations or when there are more than a few variables, this approach creates large inefficiencies because some discretized states will be visited with only vanishingly small probability. I propose pruning these low-probability states, thereby constructing an efficient grid. I investigate how much an efficient grid improves accuracy in the context of an AR(2) model and a small-scale New Keynesian model featuring four shocks. In both contexts, the efficient grid ...
Working Paper , Paper 20-06

Working Paper
FRED-SD: A Real-Time Database for State-Level Data with Forecasting Applications

We construct a real-time dataset (FRED-SD) with vintage data for the U.S. states that can be used to forecast both state-level and national-level variables. Our dataset includes approximately 28 variables per state, including labor market, production, and housing variables. We conduct two sets of real-time forecasting exercises. The first forecasts state-level labor-market variables using five different models and different levels of industrially-disaggregated data. The second forecasts a national-level variable exploiting the cross-section of state data. The state-forecasting experiments ...
Working Papers , Paper 2020-031

Journal Article
Computer Models at the Fed

Modeling the U.S. economy on computers has come a long way since the 1950s. It's still a work in progress
Econ Focus , Issue 2Q , Pages 3-5

Working Paper
How Persistent Are Unconventional Monetary Policy Effects?

Event studies show that the Federal Reserve?s announcements of forward guidance and large Scale asset purchases had large and desired effects on asset prices but they do not tell us how long such effects last. Wright (2012) used a structural vector autoregression (SVAR) to argue that unconventional policies have very transient effects on bond yields, with half-lives of 3 to 6 months. The present paper shows, however, that the SVAR is very possibly misspecified, structurally unstable, forecasts very poorly and therefore delivers spurious inference. In addition, the implied in-sample return ...
Working Papers , Paper 2014-4

Monetary Policy across Space and Time

Many major macroeconomic events have occurred across multiple countries. This Economic Brief looks at similarities and differences among the euro area, the United Kingdom, and the United States and finds that macroeconomic variables tend to become more interconnected during periods of financial distress. Movements in monetary policy are highly correlated across all three regions. In addition, inflation and unemployment become less responsive to monetary policy shocks over time.
Richmond Fed Economic Brief , Issue August



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