Search Results
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
The weight of the evidence indicates that unconventional monetary policy (UMP) shocks had persistent effects on yields. To make this point, this paper illustrates that the most influential SVAR model of UMP effects, which implies transient effects, exhibits structural instability, sensitivity to specification and single observations that render the conclusions unreliable. Restricted SVAR models that limit asset return predictability are more stable and imply that UMP shocks were persistent. This conclusion is consistent with evidence from micro studies, surveys of professional forecasters, ...
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
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 ...
Newsletter
How Interconnected Are Cryptocurrencies and What Does This Mean for Risk Management
In the past couple of years, the market for digital currencies, commonly known as cryptocurrencies because transactions are verified using cryptography, has expanded significantly in terms of transaction volumes, market capitalization, and the number of digital currencies in existence. On January 1, 2018, the market capitalizations (market caps1) of Bitcoin and Ethereum were $226 billion and $75 billion, respectively. By May 10, 2021, Bitcoin’s market cap had reached almost $1 trillion and Ethereum’s $478 billion.In this article, I measure the market’s interconnections in term of prices ...
Briefing
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.
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
The weight of the evidence indicates that unconventional monetary policy (UMP) shocks had persistent effects on yields. To make this point, this paper illustrates that the most influential SVAR model of UMP effects, which implies transient effects, exhibits structural instability, sensitivity to specification and single observations that render the conclusions unreliable. Restricted SVAR models that limit asset return predictability are more stable and imply that UMP shocks were persistent. This conclusion is consistent with evidence from micro studies, surveys of professional forecasters, ...
Briefing
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.
Working Paper
How Persistent Are Unconventional Monetary Policy Effects?
This paper argues that one cannot precisely estimate the persistence of unconventional monetary policy (UMP) effects, especially with short samples and few observations. To make this point, we illustrate that the most influential model on the topic exhibits structural instability, and sensitivity to specification and outliers that render the conclusions unreliable. Restricted models that respect more plausible asset return predictability are more stable and imply that UMP shocks were persistent. Estimates of the dynamic effects of shocks should respect the limited predictability in asset ...
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
Identification Using Higher-Order Moments Restrictions
We exploit inequality restrictions on higher-order moments of the distribution of structural shocks to sharpen their identification. We show that these constraints can be treated as necessary conditions and used to shrink the set of admissible rotations. We illustrate the usefulness of this approach showing, by simulations, how it can dramatically improve the identification of monetary policy shocks when combined with widely used sign-restriction schemes. We then apply our methodology to two empirical questions: the effects of monetary policy shocks in the U.S. and the effects of sovereign ...