Expectations and economic fluctuations: an analysis using survey data
AbstractUsing survey-based measures of future U.S. economic activity from the Livingston Survey and the Survey of Professional Forecasters, we study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. We find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations: a perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation. We also find that the short-term interest rate rises in response to expectations of good times as monetary policy tightens. Our results provide quantitative evidence on the importance of expectations-driven business cycles and on the role that monetary policy plays in shaping them.
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Bibliographic InfoPaper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2010-09.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Sylvain Leduc & Keith Sill, 2010. "Expectations and economic fluctuations: an analysis using survey data," Working Papers 10-6, Federal Reserve Bank of Philadelphia.
- NEP-ALL-2010-04-17 (All new papers)
- NEP-CBA-2010-04-17 (Central Banking)
- NEP-FOR-2010-04-17 (Forecasting)
- NEP-MAC-2010-04-17 (Macroeconomics)
- NEP-MON-2010-04-17 (Monetary Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Sylvain Leduc & Zheng Liu, 2012.
"Uncertainty shocks are aggregate demand shocks,"
Working Paper Series
2012-10, Federal Reserve Bank of San Francisco.
- Beaudry, Paul & Portier, Franck, 2011.
"A Gains from Trade Perspective on Macroeconomic Fluctuations,"
CEPR Discussion Papers
8487, C.E.P.R. Discussion Papers.
- Paul Beaudry & Franck Portier, 2011. "A Gains from Trade Perspective on Macroeconomic Fluctuations," NBER Working Papers 17291, National Bureau of Economic Research, Inc.
- Beaudry, Paul & Portier, Franck, 2012. "A gains from trade perspective on macroeconomic fluctuations," ZEW Discussion Papers 12-002, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Clark, Todd E. & Davig, Troy, 2011.
"Decomposing the declining volatility of long-term inflation expectations,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 35(7), pages 981-999, July.
- Todd E. Clark & Troy Davig, 2009. "Decomposing the declining volatility of long-term inflation expectations," Research Working Paper RWP 09-05, Federal Reserve Bank of Kansas City.
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