285 research outputs found

    Comments on Piazzesi and Schneider's "Bond positions, expectations, and the yield curve"

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    This working paper comments on Monika Piazzesi and Martin Schneider's "Bond Positions, Expectations, and the Yield Curve," delivered at the Fiscal Policy and Monetary/Fiscal Policy Interactions conference held at the Atlanta Fed on April 19–20, 2007.Bonds - Prices ; Consumer behavior

    Commentary on Issues on potential growth measurement and comparison: how structural is the production function approach?

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    Economic development ; Economic conditions ; Econometric models

    Posterior Predictive Analysis for Evaluating DSGE Models

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    In this paper, we develop and apply certain tools to evaluate the strengths and weaknesses of dynamic stochastic general equilibrium (DSGE) models. In particular, this paper makes three contributions: One, it argues the need for such tools to evaluate the usefulness of the these models; two, it defines these tools which take the form of prior and particularly posterior predictive analysis and provides illustrations; and three, it provides a justification for the use of these tools in the DSGE context in defense against the standard criticisms for the use of these tools.Prior and posterior predictive analysis; DSGE Model Evaluation; Monetary Policy.

    An investigation of co-movements among the growth rates of the G-7 countries

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    Early in 2000, after a decade of economic expansion, growth began to slow simultaneously in the large, advanced economies known as the Group of Seven (G-7)--Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The general slide in GDP growth fueled speculation that a period was emerging in which broad movements in the economies of the industrialized countries would be more closely linked. Proponents of this view argued that greater trade in goods and financial markets was leading to a greater synchronization of national economies. A rise in the co-movement of GDP among countries would have important implications for the making of national economic policies. Governments, for example, would need to take closer account of forecasts for conditions abroad in formulating forecasts for their domestic economies. The authors find, first, that the degree to which enhanced trade and financial linkages might be expected to increase the co-movement, or correlation, of economic growth among countries is far from clear. Then, examining the period from 1970 to the first quarter of 2002, the authors find that, indeed, the estimated correlation of growth across the G-7 has been higher in the current downturn than during the expansion of the 1990s. Rather than signaling a future of permanently higher synchronization, however, the rise is shown to be typical of business cycles over the past thirty years. Furthermore, estimates of correlation have not yet reached the peaks attained after earlier recessions. Overall, despite many changes in the international economy, the evidence does not reveal the arrival of a permanently higher correlation of growth rates among the G-7.Group of Seven countries ; Economic development

    Is inflation targeting best-practice monetary policy?

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    Monetary policy ; Inflation (Finance) ; Federal Open Market Committee

    Comparing Greenbook and Reduced Form Forecasts using a Large Realtime Dataset

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    Many recent papers have found that atheoretical forecasting methods using many predictors give better predictions for key macroeconomic variables than various small-model methods. The practical relevance of these results is open to question, however, because these papers generally use ex post revised data not available to forecasters and because no comparison is made to best actual practice. We provide some evidence on both of these points using a new large dataset of vintage data synchronized with the Fed's Greenbook forecast. This dataset consists of a large number of variables, as observed at the time of each Greenbook forecast since 1979. Thus, we can compare real-time large dataset predictions to both simple univariate methods and to the Greenbook forecast. For inflation we find that univariate methods are dominated by the best atheoretical large dataset methods and that these, in turn, are dominated by Greenbook. For GDP growth, in contrast, we find that once one takes account of Greenbook's advantage in evaluating the current state of the economy, neither large dataset methods nor the Greenbook process offers much advantage over a univariate autoregressive forecast.

    The Equilibrium Degree of Transparency and Control in Monetary Policy

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    We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard central-bank loss function than reported for a less standard loss function by Cukierman and Meltzer. Under discretion, maximum degree of control is the only equilibrium. With regard to the degree of transparency, under commitment, a sufficiently patient bank with sufficiently low average inflation bias will always choose minimum transparency. Under discretion, both minimum and maximum transparency are equilibria. We argue that discretion is the more realistic assumption for the choice of control and that commitment is more realistic for the choice of transparency. A maximum feasible degree of control with a minimum degree of transparency is then a likely outcome. The Bundesbank and the Federal Reserve System are, arguably, examples of this outcome.

    Correction to labgraph

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    Summary of papers presented at the conference "models and monetary policy: research in the tradition of Dale Henderson, Richard Porter, and Peter Tinsley"

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    On March 26 and 27, 2004, the Federal Reserve Board held a conference in Washington, D.C., on the application of economic models to the analysis of monetary policy issues. The papers presented at the conference addressed several topics that, because they are of interest to central bankers, have been a prominent feature of Federal Reserve research over the years. In particular, the papers represent research in the tradition of work carried out over the past thirty-five years at the Federal Reserve by three prominent staff economists -- Dale W. Henderson, Richard D. Porter, and Peter A. Tinsley. Thus, the conference partly served as a celebration of the contributions made by these individuals to policy-related research since the late 1960s. ; Among the specific topics addressed at the conference were the influence of uncertainty on policymaking; the design of formal rules to guide policy actions; the role of money in the transmission of monetary policy; the determination of asset prices; and econometric techniques for estimating dynamic models of the economy.Monetary policy ; Econometric models
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