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Working Paper
Back to the Present: Learning about the Euro Area through a Now-casting Model
Modugno, Michele; Cascaldi-Garcia, Danilo; Ferreira, Thiago Revil T.; Giannone, Domenico (2021-03-30)
We build a model for simultaneously now-casting economic conditions in the euro area and its three largest member countries--Germany, France, and Italy. The model formalizes how market participants and policymakers monitor the euro area by incorporating all market moving indicators in real time. We find that area wide and country-specific data provide informative signals to now-cast the economic conditions in the euro area and member countries. The model provides accurate predictions of economic conditions in real time over a period that covers the past three recessions.
International Finance Discussion Papers , Paper 1313

Working Paper
Risks and Uncertainty in Monetary Policy
Adrian, Tobias; Giannone, Domenico; Luciani, Matteo; West, Mike (2026-09-01)
Central banks monitor macroeconomic risk through two traditions: scenario analysis, regularly used since the mid-1990s, and distributional forecasting, practiced since the late 1960s. The two are complementary but separate: scenarios provide narratives without probabilities, while predictive distributions provide probabilities with limited economic interpretation. Treating baseline forecasts and scenarios as conditional predictive densities, and distributional forecasts as reference predictive distributions, places both within a common framework and clarifies their roles. The Scenario ...
Finance and Economics Discussion Series , Paper 2026-061

Working Paper
Bank Capital and Real GDP Growth
Boyarchenko, Nina; Giannone, Domenico; Kovner, Anna (2024-09)
We find evidence that bank capital matters for the distribution of future GDP growth but not its central tendency. Growth in the aggregate bank capital ratio compresses the tails of expected GDP growth, a relationship that is particularly robust in reducing the probability of the worst GDP outcomes. These results suggest a role for regulation to mitigate financial crises, with an additional 100 basis points of bank capital reducing the probability of negative GDP growth by 10 percent at the one-year horizon, even controlling for credit growth and financial conditions, and without a ...
Working Paper , Paper 24-08

Discussion Paper
Tracking Reserve Ampleness in Real Time Using Reserve Demand Elasticity
Afonso, Gara; Giannone, Domenico; La Spada, Gabriele; Williams, John C. (2024-10-17)
As central banks shrink their balance sheets to restore price stability and phase out expansionary programs, gauging the ampleness of reserves has become a central topic to policymakers and academics alike. The reason is that the ampleness of reserves informs when to slow and then stop quantitative tightening (QT). The Federal Reserve, for example, implements monetary policy in a regime of ample reserves, whereby the quantity of reserves in the banking system needs to be large enough such that everyday changes in reserves do not cause large variations in short-term rates. The goal is ...
Liberty Street Economics , Paper 20241017

Discussion Paper
Reading the Tea Leaves of the U.S. Business Cycle—Part Two
Crump, Richard K.; Giannone, Domenico; Lucca, David O. (2020-02-12)
In our previous post, we presented evidence suggesting that labor market indicators provide the most reliable information for dating the U.S. business cycle. In this post, we further develop the case. In fact, the unemployment rate has provided an almost perfect record of distinguishing the beginning of recessions in the post-war U.S. economy. We also show that using more granular labor market data, such as by region or industry, also provides valuable information about the state of the business cycle.
Liberty Street Economics , Paper 20200212

Working Paper
Unspanned macroeconomic factors in the yield curve
Coroneo, Laura; Modugno, Michele; Giannone, Domenico (2014-07-30)
In this paper, we extract common factors from a cross-section of U.S. macro-variables and Treasury zero-coupon yields. We find that two macroeconomic factors have an important predictive content for government bond yields and excess returns. These factors are not spanned by the cross-section of yields and are well proxied by economic growth and real interest rates.
Finance and Economics Discussion Series , Paper 2014-57

Discussion Paper
Monitoring Economic Conditions during a Government Shutdown
Sbordone, Argia M.; Giannone, Domenico; Qian, Eric; Adams, Patrick (2019-02-05)
The recent partial shutdown of the federal government has disrupted publication schedules for many U.S. Census Bureau and Bureau of Economic Analysis (BEA) data releases. Most notably, the release of GDP for the fourth quarter of 2018—originally scheduled for January 30—has been postponed indefinitely. Even without the full slate of Census Bureau and BEA releases, forecasters have continued to make predictions for 2018:Q4 GDP growth; as of February 1, the New York Fed Staff Nowcast stands at 2.6 percent, the Atlanta Fed’s GDPNow stands at 2.5 percent, and the Blue Chip Financial ...
Liberty Street Economics , Paper 20190205

Discussion Paper
Economic Predictions with Big Data: The Illusion of Sparsity
Giannone, Domenico; Lenza, Michele; Primiceri, Giorgio E. (2018-05-21)
The availability of large data sets, combined with advances in the fields of statistics, machine learning, and econometrics, have generated interest in forecasting models that include many possible predictive variables. Are economic data sufficiently informative to warrant selecting a handful of the most useful predictors from this larger pool of variables? This post documents that they usually are not, based on applications in macroeconomics, microeconomics, and finance.
Liberty Street Economics , Paper 20180521

Report
Scarce, Abundant, or Ample? A Time-Varying Model of the Reserve Demand Curve
Williams, John C.; Giannone, Domenico; Afonso, Gara; La Spada, Gabriele (2022-05-01)
What level of central bank reserves satiates banks’ demand for liquidity? We estimate the slope of the reserve demand curve in the U.S. over 2010–2024 using a time-varying instrumental-variable approach at the daily frequency. When reserves exceed 12-13 percent of banks’ assets, demand for reserves is satiated and reserves are abundant; below this threshold, the curve’s slope becomes increasingly negative as reserves decline from ample to scarce. We also find that reserve demand has shifted over time, both vertically and horizontally, and identify important drivers of vertical shifts. ...
Staff Reports , Paper 1019

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