How well does the Beige Book reflect economic activity? Evaluating qualitative information quantitatively

Eight times a year, approximately two weeks before every FOMC meeting, the Federal Reserve releases a description of economic conditions in the twelve Federal Reserve districts. Called the Beige Book, this description relies primarily on surveys and anecdotal evidence gathered by the twelve district banks. In this paper, we read and numerically scored past Beige Books in order to determine the extent to which the descriptions in these books accurately reflect current economic activity as measured by quarterly real GDP growth. We find that both in-sample and out-sample, the quantitative Beige Book indices do have significant predictive content for current and next quarter real GDP growth. Furthermore, the Beige Book has information about current quarter real GDP growth not present in other indicators such as the Blue Chip Consensus Forecast or time series models that use real-time data.Economic policy ; Federal Open Market Committee ; Monetary policy

Asymmetric information and the role of FED watching

Federal Open Market Committee ; Monetary policy - United States

Augmented information in a theory of ambiguity, credibility and inflation

Monetary policy - United States ; Money supply

Evaluating the Eleventh District's Beige Book

In this study, Nathan Balke and Mine Yucel ask whether the Eleventh Federal Reserve District's Beige Book description contains timely information about economic activity within the District. They examine whether the Beige Book description tracks current Texas real gross state product (GSP) growth and current Texas employment growth. They also study whether the Beige Book has information about growth not present in other regional indicators that would have been available to analysts at the time of the Beige Book's release. They find that both the Beige Book summary and the average across sectors reflect Texas GSP and employment growth very well. These two measures of the Beige Book also have predictive content for one quarter ahead GSP growth. Balke and Yucel also find that the Eleventh District's Beige Book has information content for Texas economic activity over and above other state economic indicators such as Texas employment growth, personal income, or sectoral employment growth. Because the Beige Book is released at least one month earlier than employment data and at least two years before GSP data, its timeliness makes it a good tool for current regional economic analysis.Employment (Economic theory) ; Unemployment ; Economic indicators

The algebra of price stability

Prices

The dynamics of recoveries

Business cycles ; Inventories

The Estimation of Prewar GNP: Methodology and New Evidence

The paper develops new methodology for the estimation of prewar GNP, taps previously unused data sources, and develops new estimates for the periods 1869-08 and 1869-28. Primary among the new data sources are direct measures of output in the transportation, communications, and construction sectors, and estimates of the consumer price index. New measures of real GNP, nominal GNP, and the GNP deflator are developed. The new estimates of real GNP are as volatile on average over the business cycle as the traditional Kuznets-Kendrick aeries but dampen the amplitude of some cycles while raising the amplitude of others. The new estimates of the GNP deflator are distinctly less volatile than the traditional series and in fact no more volatile than in the postwar period.

Credit and economic activity: shocks or propagation mechanism?

Credit

The Estimation of Prewar GNP Volatility, 1869-1938

New evidence is provided to assess the recent controversy regarding the volatility of real economic activity before 1929 relative to the period since World War II. Some recent work claims that the longstanding stylized fact of greater prewar volatility is "spurious". In contrast, this paper reconfirms the greater amplitude of business fluctuations prior to the Great Depression. The basic technique is the regression method, which estimates equations for real GNP during 1909-38, with one or more explanatory variables for components of GNP, and then uses the estimated coefficients to "backcast" real GNP or the period 1869-1908. The paper contains an extensive examination of the sensitivity of these regression indexes to alternative dependent variables, sample periods, detrending methods, and the inclusion of alternative explanatory variables. Particular attention is paid to the conflicting evidence regarding the amplitude of cycles in construction activity between 1870 and 1890. The resulting prewar/postwar volatility ratios, for 1869-1928 as compared to 1950-1980, range from 1.43 to 2.16. The paper concludes by suggesting that this range of volatility ratios is more likely to understate than overstate the prewar/postwar volatility ratio.