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Credit-Market Sentiment and the Business Cycle

Lopez-Salido, J. David; Stein, Jeremy C.; Zakrajsek, Egon - Federal Reserve Board (Board of Governors of the … - 2015

Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t-2 is associated with a decline in economic activity in years t through t+2. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment...

Persistent link: https://www.econbiz.de/10011273704

The unreliability of credit-to-GDP ratio gaps in real-time: Implications for countercyclical capital buffers

Edge, Rochelle M.; Meisenzahl, Ralf R. - Federal Reserve Board (Board of Governors of the … - 2011

Macroeconomists have long recognized that activity-gap measures are unreliable in real time and that this can present serious difficulties for stabilization policy. This paper investigates whether the credit-to-GDP ratio gap, which has been proposed as a reference point for accumulating...

Persistent link: https://www.econbiz.de/10009292960

Idiosyncratic investment risk and business cycles

Goldberg, Jonathan E. - Federal Reserve Board (Board of Governors of the … - 2014

I show that, due to imperfect risk sharing, aggregate shocks to uncertainty about idiosyncratic return on investment generate economic contractions with elevated risk premia and a decrease in the risk-free rate. I present a tractable real business cycle model in which firms experience...

Persistent link: https://www.econbiz.de/10010784162

Endogenous business cycles and the dynamics of output, hours, and consumption

Schmitt-Grohe, Stephanie - Federal Reserve Board (Board of Governors of the … - 1998

This paper studies the business-cycle fluctuations predicted by a two-sector endogenous-business-cycle model with sector-specific external increasing returns to scale. It focuses on aspects of actual fluctuations that have been identified both as defining features of the business cycle and as...

Persistent link: https://www.econbiz.de/10005721004

Monetary policy and the information content of the yield spread

Feroli, Michael - Federal Reserve Board (Board of Governors of the … - 2004

This paper demonstrates that the ability of the yield spread to predict output fluctuations is contingent on the monetary authority's reaction function. In particular, expectations of monetary policy actions are crucial for the spread to predict output conditional on the short-rate. Furthermore,...

Persistent link: https://www.econbiz.de/10005721147

Microeconomic inventory adjustment: evidence from U.S. firm-level data

McCarthy, Jonathan; Zakrajsek, Egon - Federal Reserve Board (Board of Governors of the … - 2000

We examine inventory adjustment in the U.S. manufacturing sector using quarterly firm-level data over the period 1978-97. Our evidence indicates that the inventory investment process is nonlinear and asymmetric, results consistent with a nonconvex adjustment cost structure. The inventory...

Persistent link: https://www.econbiz.de/10005721187

An analytical approach to the welfare cost of business cycles and the benefit from activist monetary policy

Kiley, Michael T. - Federal Reserve Board (Board of Governors of the … - 2001

Typical dynamic general-equilibrium (DGE) models with stochastic productivity, consumers with state-separable (expected … quantities to productivity shocks unaltered from the solutions under expected utility, but can raise substantially the welfare … allocation continues to imply a volatile consumption stream in response to productivity shocks. These results highlight an …

Persistent link: https://www.econbiz.de/10005721223

Heterogeneous forecasts and aggregate dynamics

Bomfim, Antulio N. - Federal Reserve Board (Board of Governors of the … - 2000

Motivated by issues raised in both the finance and economics literatures, I construct a dynamic general equilibrium model where agents use differing degrees of sophistication when forecasting future economic conditions. All agents solve standard dynamic optimization problems and face strategic...

Persistent link: https://www.econbiz.de/10005721250

Endogenous price stickiness and business cycle persistence

Kiley, Michael T. - Federal Reserve Board (Board of Governors of the … - 1996

Both imperfect information and sticky prices allow nominal shocks to act as business cycle impulses, but only sticky prices propagate the real effects of nominal shocks. A simple model of imperfect information and sticky prices developed herein indicates that high rates of inflation lead to less...

Persistent link: https://www.econbiz.de/10005721266

Output gaps

Kiley, Michael T. - Federal Reserve Board (Board of Governors of the … - 2010

What is the output gap? There are many definitions in the economics literature, all of which have a long history. I discuss three alternatives: the deviation of output from its long-run stochastic trend (i.e., the "Beveridge-Nelson cycle"); the deviation of output from the level consistent with...

Persistent link: https://www.econbiz.de/10008498950