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This paper presents an empirical strategy that bridges the gap between event studies and macroeconomic forecasts based on common-factor models. Event studies examine the response of financial variables to a market-sensitive "surprise" component using a narrow event window. The authors argue that these features--narrow event window and surprise component--can be easily embedded in common-factor models that study the real-time impact of macroeconomic announcements on key policy variables such as inflation or gross domestic product growth. Demonstrative applications are provided for Swiss inflation that show that (i) the communication of monetary policy announcements generates an asymmetric response for inflation forecasts, (ii) the pass-through effect of import price releases on inflation forecasts is weak, and (iii) macroeconomic releases of real and nominal variables generate nonsynchronized effects for inflation forecasts. [ABSTRACT FROM AUTHOR]

The output gap—the deviation of output from potential output—has played an important role in the conduct of monetary policy in Canada. This paper reviews the Bank of Canada's definition of potential output, as well as the use of the output gap in monetary policy. Using a real-time staff economic projection dataset from 1994 through 2005, a period during which the staff used the Quarterly Projection Model to construct economic projections, the authors investigate the relationship between shocks (data revisions or real-time projection errors) and revisions to projections of key macroeconomic variables. Of particular interest are the interactions between shocks to real gross domestic product (GDP) and inflation and revisions to the level of potential output, potential growth, the output gap, and real GDP growth. [ABSTRACT FROM AUTHOR]

This paper estimates a Bayesian vector autoregression for the U.S. economy that includes a housing sector and addresses the following questions: Can developments in the housing sector be explained on the basis of developments in real and nominal gross domestic product and interest rates? What are the effects of housing demand shocks on the economy? How does monetary policy affect the housing market? What are the implications of house price developments for the stance of monetary policy? Regarding the latter question, we implement a Céspedes et al. (2006) version of a monetary conditions index. [ABSTRACT FROM AUTHOR]

The article offers the authors' insights regarding the effects of gross domestic products (GDP)-indexed sovereign debt. They state that GDP-indexation has several benefits including its elimination of debt and income defaults, lessen the likelihood of fiscal crises for governments that experiencing a countercyclical borrowing cost, and increase indebtedness from 4% to 18% of mean income. They mention that one of its disadvantages is the moral hazard problems that it may introduce.

As the U.S. share of the world goods trade slips from its level in the 1980s and 1990s, concerns have arisen that the productivity of U.S. exporters has not been growing as fast as that of foreign firms selling similar products. However, an analysis of industrylevel trade data suggests that two other factors explain much of the drop in export share: the changing composition of the products traded internationally and the diminished share of U.S. GDP in global output. Declining relative productivity may have played a role in the early 2000s, but it has not been a large factor across industries over the longer term. Overall, there is little evidence of a broad-based decline in the nation's ability to compete in global markets. [ABSTRACT FROM AUTHOR]

A dilemma faced by forecasters is that data are not all sampled at the same frequency. Most macroeconomic data are sampled monthly (e.g., employment) or quarterly (e.g., GDP). Most financial variables (e.g., interest rates and asset prices), on the other hand, are sampled daily or even more frequently. The challenge is how to best use available data. To that end, the authors survey some common methods for dealing with mixed-frequency data. They show that, in some cases, simply averaging the higher-frequency data produces no discernible disadvantage. In other cases, however, explicitly modeling the flow of data (e.g., using mixed data sampling as in Ghysels, Santa-Clara, and Valkanov, 2004) may be more beneficial to the forecaster, especially if the forecaster is interested in constructing intra-period forecasts. [ABSTRACT FROM AUTHOR]

Discusses the link between stock market prices and future economic activities. Implications of an unexpected increase in stock prices; Predictability of stock market returns; Regression results of gross domestic product growth on excess stock market return and its components.

This article uses dynamic equilibrium input-output models to evaluate the contribution of the construction sector to the Great Recession and the expansion preceeding it. Through production interlinkages and demand complementarities, shifts in housing demand can propagate to other economic sectors and generate a large and sustained aggregate cycle. According to our model, the housing boom (2002-07) fueled more than 60 percent and 25 percent of employment and GDP growth, respectively. The decline in the construction sector (2007-10) generates a drop in total employment and output about half of that observed in the data. In sharp contrast, ignoring interlinkages or demand complementarities eliminates the contribution of the construction sector. [ABSTRACT FROM AUTHOR]

The article analysis research paper about the effects of estimated macroeconomics to the federal reserve's large-scale treasury program. It states that the authors apply a set of model to attempt setting apart the effects that the program may have on interest rates, employment rates, and real spending gross domestic product (GDP). Moreover, it notes that the Boston model suggests that it will require two years for the lagged impact to be fully actualized in the U.S. economy.

Analyzing the performance of the economy in real time is a challenge for those who must forecast macroeconomic variables such as inflation or employment. A key aspect of this challenge is evaluating the incoming flow of information contained in economic announcements. In this article, the authors develop a simple-to-read index of these announcements that they then use to construct nowcasts. The index tracks whether key economic data have come in stronger, weaker, or as expected during the current quarter relative to a baseline consensus forecast. Specifically, the data releases are weighted relative to their importance in updating forecasts of real gross domestic product growth during the current quarter. [ABSTRACT FROM AUTHOR]

This article is based on the author's Homer Jones Memorial Lecture delivered at the Federal Reserve Bank of St. Louis, April 6, 2016. [ABSTRACT FROM AUTHOR]

The Federal Reserve devotes significant resources to forecasting key economic variables such as real gross domestic product growth, employment, and inflation. The outlook for these variables also matters a great deal to businesses and financial market participants. The authors present a factor augmented Bayesian vector autoregressive forecasting model that significantly outperforms both a benchmark random walk model and a pure time-series model. They then use these factors in an ordered probit model to develop the probability distribution over a 12-month horizon. One distribution assesses the probability that inflation will exceed 2.5 percent over the next year; they term this probability a price pressure measure. This price pressure measure would provide policymakers and markets with a quantitative assessment of the probability that average inflation over the next [ABSTRACT FROM AUTHOR]

The global recession of 2008-09 led to monetary and fiscal policy responses by central banks and government authorities that were often unconventional in size and scope. A study of expansionary measures employed during the recession suggests that overall, the policies were likely effective in shaping the outlook for a recovery, as forecasters raised their expectations of inflation and GDP growth after the policies' implementation. From this perspective, the policies stimulated economic activity and prevented deflationary pressures during the financial crisis. [ABSTRACT FROM AUTHOR]

The article focuses on factors driving income inequality, which has potentially enormous welfare consequences in the U.S. It examines a broad set of facts from international data on gross domestic product (GDP) per capita as a measure of welfare across countries. It studies the recent literature in growth economics, addressing the facts on income differences across countries, and the differences in the allocation of factors of production and productivity across heterogeneous production units.

The article focuses on the alternative measures of gross domestic product (GDP) and how they affect GDP's interpretation in the U.S. It emphasizes a measure that is different from other published series and capable of addressing economic issues by estimating investment in research and development (R&D), similar intangible items and fraction of wages paid to women. It shows the significance of GDP's correlation with unemployment and inflation in making it a good measure of the country's economy.

The article discusses the importance of having inventory investment to check the performance of real gross domestic product (GDP) in the U.S. New Keynesian model is used by the executives to analyze and solve the optimal monetary policy problems in inventory stocks of the business enterprises. According to some studies, the strategic move is very effective to apply especially on the times of economic recession.

Potential output is an estimate of the level of gross domestic product attainable when the economy is operating at a high rate of resource use. A summary measure of the economy's productive capacity, potential output plays an important role in the Congressional Budget Office (CBO)'s economic forecast and projection. The author briefly describes the method the CBO uses to estimate and project potential output, outlines some of the advantages and disadvantages of that approach, and describes some of the challenges associated with estimating and projecting potential output. Chief among these is the difficulty of estimating the underlying trends in economic data series that are volatile, subject to structural change, and frequently revised. Those challenges are illustrated using examples based on recent experience with labor force growth, the Phillips curve, and labor productivity growth. [ABSTRACT FROM AUTHOR]

This study uses a state-space model to estimate the "true" unobserved measure of total output in the U.S. economy. The analysis uses the entire history (i.e., all vintages) of selected real-time data series to compute revisions and corresponding statistics for those series. The revision statistics, along with the most recent data vintage, are used in a state-space model to extract filtered estimates of the "true" series. Under certain assumptions, Monte Carlo simulations suggest this framework can improve published estimates by as much as 30 percent, lasting an average of 11 periods. Realtime experiments using a measure of real gross domestic product show improvement closer to 10 percent, lasting for 1 to 2 quarters. [ABSTRACT FROM AUTHOR]

Trend growth in the labor force is a key determinant of trends in employment and gross domestic product (GDP). Forecasts by Macroeconomic Advisers (MA) have long anticipated a marked slowing in trend growth of the labor force that would contribute to a slowing in potential GDP growth. This is reflected in MA's forecast that the aggregate rate of labor force participation will trend down, especially after 2010, largely in response to the aging of the baby boom generation, whose members are beginning to approach typical retirement ages. Expectations for a downward trajectory for the participation rate and a slowing in trend labor force growth are not unique. However, this article reports on MA research suggesting that the opposite is possible: that the slowdown in trend labor force growth could be relatively modest and that the trend in the aggregate rate of labor force participation will decline little, if at all, over the next decade. [ABSTRACT FROM AUTHOR]

The authors use a growth accounting framework to examine growth of the rapidly developing Chinese economy. Their findings support the view that, although feasible in the intermediate term, China's recent pattern of extensive growth is not sustainable in the long run. The authors believe that China will be able to sustain a growth rate of 8 to 9 percent for an extended period if it moves from extensive to intensive growth. They next compare potential growth in China with historical developments in the United States and the European Union. They discuss the differences in production structure and level of development across the three economies that may explain the countries' varied intermediate-term growth prospects. Finally, the authors provide an analysis of "green" gross domestic product and the role of natural resources in China's growth. [ABSTRACT FROM AUTHOR]

This article is a primer on the great depressions methodology developed by Cole and Ohanian (1999, 2007) and Kehoe and Prescott (2002, 2007). We use growth accounting and simple dynamic general equilibrium models to study the depression that occurred in Finland in the early 1990s. We find that the sharp drop in real GDP over the period 1990-93 was driven by a combination of a drop in total factor productivity (TFP) during 1990-92 and of increases in taxes on labor and consumption and increases in government consumption during 1989-94, which drove down hours worked in Finland. We attempt to endogenize the drop in TFP in variants of the model with an investment sector and with terms-of-trade shocks but are unsuccessful. [ABSTRACT FROM AUTHOR]

While homeland security is widely seen as an important national objective, the costs of this effort are not well understood. An analysis of public and private expenditures on homeland security shows that overall spending rose by $44 billion between 2001 and 2005--a clear increase but one that represents a gain of only ¼ of 1 percent as a share of U.S. GDP. Private sector expenditures increased very modestly in dollar terms and remained unchanged as a fraction of the sector's GDP. [ABSTRACT FROM AUTHOR]

In the aftermath of the disruptions caused by hurricanes Katrina and Rita, natural gas prices rose to record-high levels. Because natural gas is an important energy source for the U.S. economy, there was widespread concern that these high prices might cause a significant slowing in the economy--especially among those manufacturing industries that heavily consume natural gas. The analysis presented in this article suggests that output is responsive to natural gas prices in some manufacturing sectors. Although perhaps significant, this result must be balanced against the finding that, when the analysis is extended to the macroeconomy (real gross domestic product growth), increases in crude oil prices significantly predict real gross domestic product growth, but natural gas prices do not. [ABSTRACT FROM AUTHOR]

Oil shocks exert influence on macroeconomic activity through various channels, many of which imply a symmetric effect. However, the effect can also be asymmetric. In particular, sharp oil price changes--either increases or decreases--may reduce aggregate output temporarily because they delay business investment by raising uncertainty or induce costly sectoral resource reallocation. Consistent with these asymmetric-effect hypotheses, the authors find that a volatility measure constructed using daily crude oil futures prices has a negative and significant effect on future gross domestic product (GDP) growth over the period 1984-2004. Moreover, the effect becomes more significant after oil price changes are also included in the regression to control for the symmetric effect. The evidence here provides economic rationales for Hamilton's (2003) nonlinear oil shock measure: It captures overall effects, both symmetric and asymmetric, of oil price shocks on output. [ABSTRACT FROM AUTHOR]

Investigates the value of the negative effect of an oil price increase on real gross domestic product growth. Overview of the changes in oil prices and net oil price increases; Empirical aggregate consumer spending equations; Discussion on oil price effect channels and reduced-form empirical evidence.

Focuses on Tech-Pulse Index as an indicator to assess the activity in the U. S. technology sector. Conference Board indicators used in the index; Growth in real gross domestic product in the U. S. economy; Technological innovations that boost the technology sector.

Evaluates the contribution of high-technology investment spending to trends in investment and overall economic growth in the U.S. in the 1990s. Output and investment growth rates and contributions of investment to gross domestic product (GDP) growth for national income and product accounts data; Contributions of growth of GDP; Growth rates of major components of equipment and software investment. INSET: MEASURING QUALITY IMPROVEMENT WITH HEDONICS.

Investigates the behavior of expenditures on industrial equipment and computer software of companies in the United States (U.S.) from 1995 to 2001. Contribution of equipment expenditures on the gross domestic product of the U.S.; Factors underlying the behavior of equipment expenditures; Effect of equity values and relative prices on equipment and software expenditure growth.

Examines the long-run correlations between money growth, inflation rate and real output. Definitions of money; Correlation coefficients for money growth and inflation and for money growth and real output growth based on data from 1960 to 1990 in 110 countries; Summary of several studies on the relationship between money growth and inflation.

Presents information on a study which examined the estimation of national income and output in Switzerland during 1914 to 1947. Possible methods that could be used in the estimation; Available macroeconomic indicators for gross domestic product (GDP); Time series of estimates for annual GDP proposed.

Examines the growth of United States' gross domestic product (GDP) from the period of 1984-1998 in relation with the state of its economic development. Types of changes in the economic environment; Decline in the volatility of GDP growth; Conclusions.

Presents data on the investment share and gross domestic product growth and argues that the key prediction of the AK theory is consistent with the data when versions of the model and the data are compared appropriately. Link between investment rates and growth rates; Reevaluation on the AK theory; Conclusions.

Analyzes the accuracy of the yield curve spread between long- and short-term interest rates in the prediction of gross domestic product (GDP) growth. Characterization of the joint behavior of output growth and the spread; Analysis of the predictive content of the spread; Examination of possible nonlinearities in the relationship; Relation of the predictive content of the spread with the stance of monetary policy.

Examines the relationship between real exchange rates and ratios of real gross domestic product. Models of exchange rates; Methodology and results of the study; Conclusions.