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, 2013. "Expectations and Economic Fluctuations: An Analysis Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1352-1367, October.
- Sylvain Leduc & Keith Sill, 2010. "Expectations and economic fluctuations: an analysis using survey data," Working Papers 10-6, Federal Reserve Bank of Philadelphia.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- 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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- Beaudry, Paul & Portier, Franck, 2011.
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"Improving the reliability of real-time Hodrick-Prescott filtering using survey forecasts,"
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- Jaqueson K. Galimberti & Marcelo L. Moura, 2014. "Improving the Reliability of Real-time Hodrick-Prescott Filtering Using Survey Forecasts," KOF Working papers 14-360, KOF Swiss Economic Institute, ETH Zurich.
- Lambertini, Luisa & Mendicino, Caterina & Punzi, Maria Teresa, 2013. "Expectation-driven cycles in the housing market: Evidence from survey data," Journal of Financial Stability, Elsevier, vol. 9(4), pages 518-529.
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