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Working Paper
Reconsidering the Fed’s Forecasting Advantage
Owyang, Michael T.; McCracken, Michael W.; Guisinger, Amy Y. (2022-01-02)
Previous studies show the Fed has a forecast advantage over the private sector, either because it devotes more resources to forecasting or because it has an informational advantage in knowing the path of future monetary policy. We evaluate the Fed’s forecast advantage to determine how much of it results from the Fed’s knowledge of the conditioning path. We develop two tests—an instrumental variable encompassing test and a path-dependent encompassing test—to equalize the Fed’s information set with the private sector’s. We find that, generally, the Fed does not encompass the private ...
Working Papers , Paper 2022-001

Working Paper
Surveys of Professionals
Rich, Robert W.; Tracy, Joseph; Clements, Michael (2022-05-10)
This chapter provides an overview of surveys of professional forecasters, with a focus on the U.S. Survey of Professional Forecasters and the European Central Bank Survey of Professional Forecasters. A distinguishing feature of these surveys is that they collect point and density forecasts and make the data publicly available. We discuss their structure, issues involved in using the data, and the construction of measures such as disagreement and uncertainty at the aggregate and individual levels. Our review also summarizes the findings of studies exploring issues such as the alignment of ...
Working Papers , Paper 22-13

Working Paper
International Evidence on Extending Sovereign Debt Maturities
Christensen, Jens H. E.; Lopez, Jose A.; Mussche, Paul (2021-07-22)
Portfolio diversification is as important to debt management as it is to asset management. In this paper, we focus on diversification of sovereign debt issuance by examining the extension of the maximum maturity of issued debt. In particular, we examine the potential costs to the U.S. Treasury of introducing 50-year bonds as a financing option. Based on evidence from foreign government bond markets with such long-term debt, our results suggest that a 50-year Treasury bond would likely trade at an average yield that is at most 20 basis points above that of a 30-year bond. Our results based on ...
Working Paper Series , Paper 2021-19

Working Paper
Uniform Priors for Impulse Responses
Rubio-Ramirez, Juan F.; Waggoner, Daniel F.; Arias, Jonas E. (2023-09-28)
There has been a call for caution when using the conventional method for Bayesian inference in set-identified structural vector autoregressions on the grounds that the uniform prior over the set of orthogonal matrices could be nonuniform for individual impulse responses or other quantity of interest. This paper challenges this call by formally showing that, when the focus is on joint inference, the uniform prior over the set of orthogonal matrices is not only sufficient but also necessary for inference based on a uniform joint prior distribution over the identified set for the vector of ...
FRB Atlanta Working Paper , Paper 2023-13

Working Paper
Forecasts from Reduced-form Models under the Zero-Lower-Bound Constraint
Pasaogullari, Mehmet (2015-08-05)
In this paper, I consider forecasting from a reduced-form VAR under the zero lower bound (ZLB) for the short-term nominal interest rate. I develop a method that a) computes the exact moments for the first n + 1 periods when n previous periods are tracked and b) approximates moments for the periods beyond n + 1 period using techniques for truncated normal distributions and approximations a la Kim (1994). I show that the algorithm produces satisfactory results for VAR systems with moderate to high persistence even when only one previous period is tracked. For very persistent VAR systems, ...
Working Papers (Old Series) , Paper 1512

Working Paper
Robust bond risk premia
Hamilton, James D.; Bauer, Michael D. (2015-09-25)
A consensus has recently emerged that a number of variables in addition to the level, slope, and curvature of the term structure can help predict interest rates and excess bond returns. We demonstrate that the statistical tests that have been used to support this conclusion are subject to very large size distortions from a previously unrecognized problem arising from highly persistent regressors and correlation between the true predictors and lags of the dependent variable. We revisit the evidence using tests that are robust to this problem and conclude that the current consensus is wrong. ...
Working Paper Series , Paper 2015-15

Working Paper
Risk Management for Sovereign Debt Financing with Sustainability Conditions
Zenios, Stavros A.; Consiglio, Andrea; Athanasopoulou, Marialena; Moshammer, Edmund; Gavilan, Angel; Erce, Aitor (2019-06-01)
We develop a model of debt sustainability analysis with optimal financing decisions in the presence of macroeconomic, financial and fiscal uncertainty. We define a coherent measure of refinancing risk, and trade off the risks of debt stock and flow dynamics, subject to debt sustainability constraints and endogenous risk and term premia. We optimize both static and dynamic financing strategies, compare them with several simple rules and consol financing to demonstrate economically significant effects of optimal financing, and show that the stock-flow tradeoff can be critical for ...
Globalization Institute Working Papers , Paper 367

Working Paper
The stimulative effect of forward guidance
Keen, Benjamin D.; Throckmorton, Nathaniel A.; Gavin, William T.; Richter, Alexander W. (2013)
This paper examines the stimulative effect of central bank forward guidance?the promise to keep future policy rates lower than its policy rule suggests?when the short-term nominal interest rate is stuck at its zero lower bound (ZLB).We utilize a standard New Keynesian model in which forward guidance enters our model as news shocks to the monetary policy rule. Three key findings emerge: (1) Forward guidance is more stimulative at the ZLB when households believe the economic recovery will be strong. When households expect a weak recovery or initially have low confidence in the economy, forward ...
Working Papers , Paper 2013-38

Working Paper
The Impact of Monetary Policy on Asset Prices
Sack, Brian P.; Rigobon, Roberto (2002-01-23)
Estimating the response of asset prices to changes in monetary policy is complicated by the endogeneity of policy decisions and the fact that both interest rates and asset prices react to numerous other variables. This paper develops a new estimator that is based on the heteroskedasticity that exists in high frequency data. We show that the response of asset prices to changes in monetary policy can be identified based on the increase in the variance of policy shocks that occurs on days of FOMC meetings and of the Chairman's semi-annual monetary policy testimony to Congress. The identification ...
Finance and Economics Discussion Series , Paper 2002-04

Working Paper
Optimal Pooling in Taylor Rule Estimation with Multiple-Horizon Forecast Panels
Herbst, Edward P.; Page, Karen (2026-09-18)
Multiple-horizon forecast panels are increasingly used to infer perceived monetary policy rules, but inference depends on how coefficients are pooled across forecasters, dates, and horizons. We treat this pooling structure as the object of inference. In a participant-date-horizon Taylor-rule regression model, we compare pooling patterns using Bayesian marginal likelihoods, applying the framework to the Blue Chip Financial Forecasts, Survey of Professional Forecasters, and the Summary of Economic Projections. The preferred specifications place much of the systematic variation in policy-rate ...
Finance and Economics Discussion Series , Paper 2026-064

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