A DEFENSE OF THE FOMC*

We defend the forecasting performance of the Federal Reserve Open Market Committee (FOMC) against the criticism of Christina and David Romer (2008, American Economic Review 98, 230–235) by assuming that the FOMC’s forecasts depict a worst‐case scenario that it uses to design decisions that are robust to misspecification of the staff’s model. We use a simple macro model and a plausible loss function to illustrate how such an interpretation of the FOMC’s forecasts can explain the findings of Romer and Romer, including the pattern of differences between FOMC forecasts and forecasts published by the staff of the Federal Reserve System in the Greenbook.     

RATIONALE FOR DISSENT: THE CASE OF FOMC MEMBERS

This paper investigates monetary policymakers' rationale for dissent to test for a hypothesized difference in policy preferences between bank presidents and members of the Board of Governors. The paper analyzes the cited reasons for dissent, the identity of the dissenter, and uses multiple regression to make inferences regarding the differences.
Examining the identity of dissenters and the given reasons for dissent yields four conclusions, (i) A broad base of bank presidents dissent for tighter policy because they want to control inflation by keeping monetary aggregates within targeted ranges. (ii) On the other hand, board members' dissent for tighter policy is dominated by one man–Henry Wallich—who apparently was disturbed by the inflationary outbreak during the late 1970s and early 1980s. (Hi) Several board members dissent for looser policy to stimulate the real economy, (iv) But only a few bank presidents, primarily from the Northeast, dissent for looser policy with the same objective.
Regression analysis supports the assertion that bank presidents dissenting for tighter policy do so to keep monetary aggregates on target in order to control inflation. The analysis confirms Wallich's focus on inflation during the late 1970s and early 1980s. It also allows for the possibility that the various board members dissenting for looser policy either have an inherent preference for looser policy or have diverse reasons for dissent.     

DID TIME INCONSISTENCY CONTRIBUTE TO THE GREAT INFLATION? EVIDENCE FROM THE FOMC TRANSCRIPTS

We use evidence from detailed records of FOMC deliberations to argue that time inconsistency theory can help explain the excessive monetary expansion that characterized Arthur Burns's tenure as Federal Reserve Chairman (1970–1978). The records suggest that the Fed perceived a Phillips curve tradeoff and political pressures that made it difficult to adopt disinflationary policies; the tendency toward excessively expansionary policy was exacerbated by the short-run planning horizon the Committee faced in each of its meetings. We argue that comparative static predictions of the time inconsistency model are consistent with the rise of inflation during the Burns years and its subsequent fall.     

Financial market effects of FOMC projections

I examine the impact of the forecasts released by the Federal Open Market Committee (FOMC) in the Summary of Economic Projections over the period of April 2011 through March 2019. I find that changes in the median FOMC federal funds rate forecast did impact asset prices, but forecasts of output and inflation did not have any effect, which may be surprising based on the literature regarding the “Fed information effect” channel. Further, the dispersion in the federal funds rate forecast does not affect asset prices though it does impact the degree of uncertainty regarding future monetary policy. Finally, I find that most of forward guidance can be summarized through the change in the median federal funds rate forecast for the end of the following year.     

The effect of FOMC statements on asset prices

Given their increased importance during recent years, FOMC (Federal Open Market Committee) statements can have a significant impact on asset prices. To capture the effect of FOMC statements on asset prices, an indicator variable is created that takes into account the information content of policy statements. Results show that both ‘interest rate surprises’ and ‘FOMC statements’ affect the mean and the volatility of asset prices. The volatility impact is tent-shaped, jumping within the policy announcement interval and declining before and after the release. FOMC statements have a much more pronounced impact on stock returns, intermediate and long-term yields, while short-term rates are largely driven by target rate decisions. We also find that the evolution of the language of the FOMC statements does matter to market participants and, in particular, the ‘forward-looking’ language adopted in mid-2003 has reduced market volatility associated with ‘interest rate surprises’ on announcement days.     

SCREENING FOMC MEMBERS FOR THEIR BIASES AND DEPENDABILITY

This paper develops conjectures regarding the process by which the President as a principal selects Federal Reserve Governors and Bank Presidents as his agents on the Federal Open Market Committee (FOMC). It first establishes that FOMC members can be grouped into sets which are marked by ease and tightness biases in voting behavior. It then identifies certain career characteristics of FOMC members which are correlated with each of these biases. The paper goes on to isolate reliable partisan subsets within the ease and tightness sets and identifies a career characteristic which is highly correlated with membership in these subsets; that characteristic is a career as an economist.     

EFFECTS ON INTEREST RATES OF IMMEDIATELY RELEASING FOMC DIRECTIVES

Prior to February 1994, the Federal Open Market Committee (FOMC) did not officially release its current Domestic Policy Directives to the public until after the next FOMC meeting, a lag of approximately 45 days. Thus, the public never knew the FOMC's latest decisions about short-run monetary policy. On 11 occasions between early 1989 and May 1993, however, the essence of the directives was "leaked" to the Wall Street Journal within one week of an FOMC meeting. This study tests Federal Reserve officials' original assertion that early release of directives would increase volatility in financial markets by creating announcement effects. The study finds some evidence of announcement effects in certain instances, but the assertion that an immediate release would "roil the markets" appears unfounded .     

Evaluating FOMC forecast ranges: an interval data approach

The Federal Open Market Committee (FOMC) of the U.S. Federal Reserve publishes the range of members’ forecasts for key macroeconomic variables, but not the distribution of forecasts within this range. To evaluate these projections, previous papers compare the midpoint of the range with the realized outcome. This paper proposes an alternative approach to forecast evaluation that takes account of the interval nature of projections. It is shown that using the conventional Mincer–Zarnowitz approach to evaluate FOMC forecasts misses important information contained in the width of the forecast interval. This additional information plays a minor role at short forecast horizons but turns out to be of sometimes crucial importance for longer-horizon forecasts. For 18-month-ahead forecasts, the variation of members’ projections contains information that is more relevant for explaining future inflation than information embodied in the midpoint. Likewise, when longer-range forecasts for real GDP growth and the unemployment rate are considered, the width of the forecast interval comprises information over and above the one given by the midpoint alone.     

A BUFFER STOCK MODEL OF THE DEMAND FOR MONEY BY THE PERSONAL SECTOR

This paper examines the forward-looking rational expectations buffer stock model of Cuthbertson and Taylor (1987) in the context of the personal sector of the UK. The buffer stock model is evaluated for both narrow and broad money definitions in the UK using the encompassing the VAR methodology of Mizon (1984). This suggests that the buffer stock model is a congruent model, and that the broad definition is the most appropriate aggregate with which to model buffering behaviour — in line with previous studies, Mizen (1992). Further analysis of the models, in the light of Hendry (1988), confirms this view.     

Forecast combination for discrete choice models: predicting FOMC monetary policy decisions

This paper provides a methodology for combining forecasts based on several discrete choice models. This is achieved primarily by combining one-step-ahead probability forecasts associated with each model. The paper applies well-established scoring rules for qualitative response models in the context of forecast combination. Log scores, quadratic scores and Epstein scores are used to evaluate the forecasting accuracy of each model and to combine the probability forecasts. In addition to producing point forecasts, the effect of sampling variation is also assessed. This methodology is applied to forecast US Federal Open Market Committee (FOMC) decisions regarding changes in the federal funds target rate. Several of the economic fundamentals influencing the FOMC’s decisions are integrated, or I(1), and are modeled in a similar fashion to Hu and Phillips (J Appl Econom 19(7):851– 867, 2004). The empirical results show that combining forecasted probabilities using scores generally outperforms both equal weight combination and forecasts based on multivariate models.     

FOMC VOTING BEHAVIOR AND ELECTORAL CYCLES: PARTISAN IDEOLOGY AND PARTISAN LOYALTY

The influence of partisan and electoral considerations on the monetary policy voting behavior of Federal Reserve Governors is investigated in the context of a model permitting the estimation of reaction functions on the basis of FOMC voting records. The results suggest that once we have controlled for the state of the economy and for the prevailing stance of monetary policy, both partisan ideologies and partisan loyalties appear to play an important role in the Governors'voting calculus.     

Effects of explicit FOMC policy-rate guidance on equities and risk measures

We quantify the impact of explicit Federal Open Market Committee (FOMC) policy-rate guidance used as an unconventional monetary-policy tool at the zero lower bound of the policy rate on US equity prices, as well as on the risk indicators of credit and CDS spreads, implied volatilities and US equity index risk reversals. We find that explicit FOMC policy-rate guidance announcements at the zero lower bound led to a significant increase in US equity prices, for an aggregate equity index as well as for US commercial bank and US nonfinancial equities. Moreover, we find that they led to a significant reduction in some credit spreads. They also led to a significant reduction in an implied volatility index for US government bonds, as well as in the absolute value of US equity risk reversals, implying a lower perceived risk attached to a large fall in the equity index.     

克鲁格曼新经济地理模型评析

克鲁格曼新经济地理学模型是以非线性动力学理论作为其产生的理论基础,将规模报酬递增和不完全竞争、固定比率的运输成本、过程的演进性以及动态模拟等研究方法引入模型,并建立了三个基础模型即中心—外围模型、历史和预期模型以及区域专业化模型。文章通过分析,以期对其新经济地理模型有一个比较全面的了解。     

由临街地价推算区片价的方法探讨

如何利用临街样点地价推算区片平均地价及基准地价始终是城镇基准地价评估的一个难点。文章利用赤峰市的实际调查数据,分别采用临街贡献率和面积加权两种方法推算区片平均地价,并采用回归分析方法探讨区片价与临街地价之间的关系,结果证明两种方法所推算的区片平均价是基本一致的,而且区片价与临街地价之间呈“反S”曲线关系。     

基于区域学习的企业竞争优势--基于1,639家中小企业问卷调查与分析

企业竞争优势不仅和企业R&D投入水平、科技人员比例等有关,而且和各种与创新活动有关的主体之间的合作与学习有关.在对1,639家企业问卷调查的基础上,建立了包括区域学习、R&D投入等因素在内的企业竞争优势评价模型.结果显示,企业竞争优势不仅取决于要素成本的高低和资金的多少,而且还取决于本地是否具有知识的吸收、转化和创新能力,企业之间的技术合作与联系,企业与大学、科研院所、市场中介组织、政府等的合作与联系对企业竞争优势的影响并不比企业R&D投入小.依据不同经济发展水平所建立起来的模型表明,区域学习对企业竞争优势的影响具有区域差异性,经济越发达的区域,企业竞争优势的提升对区域学习的依赖性越强.     

A COMOMENT CRITERION FOR THE CHOICE OF RISKY INVESTMENT BY FIRMS*

This article uses Taylor series expansions and the assumption of small risks to derive a comoment criterion that firms should maximize so that the resulting equilibrium is Pareto optimal. This is done in two models of production under uncertainty: the state‐of‐nature model in which the firms’ outputs depend on states of nature and financial markets are complete with respect to these states of nature and the probability model in which the firms’ risky outputs are modeled by their joint probabilities and financial markets span the outcome space of the firms. The comoment criterion provides a unifying framework for the two equilibrium models of production under uncertainty, has the merit of being based on information which is readily available to firms, and provides greater insight than the theoretical criterion into the risk characteristics of its profit stream that a firm should focus on when choosing its investment plan.