| Title |
Date |
Publication |
Author(s) |
Type |
| Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy
|
August, 2006 |
Federal Reserve Bank of Cleveland, Working Paper no. 0610 |
John B Carlson; William A Branch; George W Evans; Bruce McGough; |
Working Papers |
| Abstract: This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw, and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker's preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower.
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| FOMC Communications and the Predictability of Near-Term Policy Decisions
|
June, 2006 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Ben R Craig; Patrick C Higgins; William R Melick; |
Economic Commentary |
| Abstract: In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee's decisions and expectations. Has the new apparatus improved the public's ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months.
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| Recovering Market Expectations of FOMC Rate Changes with Options on Federal Funds Futures
|
July, 2005 |
Federal Reserve Bank of Cleveland, Working Paper no. 0507 |
John B Carlson; Ben R Craig; William R Melick; |
Working Papers |
| Abstract: This paper demonstrates how options on federal funds futures, which began trading in March 2003, can be used to recover the implied probability density function (PDF) for future Federal Open Market Committee (FOMC) interest rate outcomes. The discrete nature of the choices made by the FOMC allows for a very straightforward recovery of the implied PDF using ordinary least squares (OLS) estimation. This simple recovery method stands in contrast to the relatively complicated PDF recovery techniques developed for options written on assets such as equities, foreign exchange, or commodity futures where the underlying prices are most appropriately modeled as being drawn from continuous distributions. The OLS estimation is used to recover PDFs for single FOMC meetings as well as PDFs for joint estimation of multiple FOMC meetings, and allows for the imposition of restrictions on the recovered probabilities, both within and across FOMC meetings. Finally, recovered probabilities are used to assess the impact of data releases and Fed communication on the perceived likelihood of actual policy outcomes.
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| Monetary Policy, Endogenous Inattention, and the Volatility Trade-off
|
December, 2004 |
Federal Reserve Bank of Cleveland Working Paper no. 0411 |
John B Carlson; William A Branch; George W Evans; Bruce McGough; |
Working Papers |
| Abstract: This paper addresses the output-price volatility puzzle by studying the interaction
of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs. Endogenous inattention is a Nash equilibrium in the information processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations, which decreases output volatility. If the indirect effect dominates then the usual trade-off between output and price volatility breaks down. This provides a potential explanation for the "great moderation" that began in the 1980s.
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| Mutual Funds, Fee Transparency,and Competition
|
March, 2004 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Eduard A Pelz; Erkin Y Sahinoz; |
Economic Commentary |
| Abstract: Mutual funds enable small, less experienced investors to hold diversifed portfolios of stocks and bonds at relatively low costs. Though the mutual fund market is competitive in many ways, fees can vary substantially for what are essentially identical products. This may be due to bundling of services, but it may also reflect some confusion on the part of less experienced investors, which inhibits comparative shopping among funds. Suggested reforms for improved fee disclosure seek to make fees more transparent for less informed investors and should improve competitive discipline among funds.
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| An Option for Anticipating Fed Action
|
September, 2003 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; William R Melick; Erkin Y Sahinoz; |
Economic Commentary |
| Abstract: Prognosticators pore over official FOMC releases, consult public opinion by analyzing the prices of federal funds futures contracts, and sometimes even cast a sideways glance to the size of Greenspan’s briefcase to gather clues about what the Fed might next do to interest rates. A new technique will add better information to the mix. Options contracts on fed funds futures, a new type of financial instrument introduced earlier this year, can be analyzed to gauge public expectations of future Fed actions. The real bonus is that they can detect differences of opinion when markets see more than two possible outcomes for an FOMC meeting as well as the likelihood associated with each outcome.
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| Measures of Corporate Earnings: What Number is Best?
|
February, 2003 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Erkin Y Sahinoz; |
Economic Commentary |
| Abstract: Revelations of corporate fraud in 2002 shook the public’s confidence in financial reporting and led to calls for reform. Without credible, transparent, and comparable financial information,
investors, auditors, and others cannot make decisions that are essential to the efficient functioning of the economy. But while rules can be
improved, it is not possible to achieve
a rigid standard that applies uniformly
to every company. This Commentary explains why.
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| Why the Optimism?
|
April, 2002 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
| Abstract: In spite of the recent recession, hopes for the new economy have been little daunted. Surprisingly robust productivity growth during the recent downturn provides compelling new evidence that something truly fundamental is going on. This Commentary argues that advances in information technology, and their diffusion through the economy, justify our optimism. Higher productivity growth is not an ephemeral phenomenon but one likely to persist for some time into the future, perhaps even accelerating further.
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| Why Is the Dividend Yield So Low?
|
April, 2001 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
| Abstract: The dividend yield on stocks has dropped sharply over the last decade. Is its drop a consequence of irrational exuberance? This Commentary assesses alternative explanations for the diminished dividend yield.
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| A Retrospective on the Stock Market in 2000
|
January, 2001 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Eduard A Pelz; |
Economic Commentary |
top |
| Will the valuation ratios revert to their historical means? Some evidence from breakpoint tests
|
January, 2001 |
Federal Reserve Bank of Cleveland, Working Paper no. 0113 |
John B Carlson; Eduard A Pelz; Mark E Wohar; |
Working Papers |
| Abstract: If valuation ratios return to their historical means any time soon, then equity prices must fall substantially, or earnings and dividends must accelerate sharply, or some combination of these events must occur. Historical patterns over the past century suggest that stock prices will fall to align valuation ratios with their means. Of course, the means of the valuation ratios could have changed. To assess the likelihood of such changes, the authors employ breakpoint tests, which allow for multiple breakpoints at unknown break dates. The authors also review alternative explanations for changes in the ratios. They conclude that although no single explanation may be convincing by itself, taken in toto with empirical evidence of structural change, the preponderance of evidence suggests that the mean of the dividend-price ratio is now somewhere between 1% and 2%, probably nearer to 1%. They also conclude that the mean price-to-earnings ratio is now somewhere between 20 and 25, perhaps even higher.
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| Investor Expectations and Fundamentals: Disappointment Ahead?
|
May, 2000 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Eduard A Pelz; |
Economic Commentary |
| Abstract: The average annual return of the S&P 500 since 1994 has exceeded 25 percent. Confidence is high and investors are looking forward to continued above-average returns. The authors of this Economic Commentary attempt to reconcile investors’ expectations with a decline in the equity premium, using a standard approach to stock-price valuation.
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| Effects of Movements in Equities Prices on M2 Demand
|
October, 1999 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no. 4 |
John B Carlson; Jeffrey C Schwarz; |
Economic Review |
| Abstract: Large swings in stock prices are sometimes associated with a redirection of household savings flows. Such changes can lead to transitory increases in M2 as investors temporarily "park" funds in depository assets while they determine the funds' ultimate destination. The authors find that, although stock price changes are statistically significant as an explanation for M2 growth, they do not account for much of M2's recent strength.
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| The Recent Ascent in Stock Prices: How Exuberant Are You?
|
August, 1999 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
| Abstract: Soaring stock prices continue to pit those who claim that investors are paying too much against those who believe stocks are worth even more. Prices of stocks are determined by people’s perceptions of worth, which are themselves based on expectations for the future Although we cannot be sure whether the market is over- or undervalued, we can clarify the factors that determine stock prices and discover the assumptions underlying our expectations. Assessing the consistency of these assumptions may help keep our exuberance in check.
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| Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates
|
January, 1999 |
Federal Reserve Bank of Cleveland, Working Paper no. 9917 |
John B Carlson; Dennis L Hoffman; Benjamin D Keen; Robert H Rasche; |
Working Papers |
| Abstract: There is strong evidence of a stable "money demand" relationship for MZM and M2 through the 1990s. Though the M2 relationship breaks down somewhere around 1990, evidence has been accumulating that the disturbance is well characterized as a permanent upward shift in M2 velocity that began around 1990 and was largely over by 1994. This paper's results support the hypothesis that households permanently reallocated a portion of their wealth from time deposits to mutual funds. This reallocation may have been induced by depository restructuring, but it could also be explained by appropriately measured opportunity cost.
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| Productivity measures and the "new economy"
|
June, 1998 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Mark E Schweitzer; |
Economic Commentary |
| Abstract: The U.S. economy's recent extraordinary performance has led some to claim that trend output growth is accelerating to a much higher rate than any we have experienced in a quarter century; they also maintain that the signs of productivity's acceleration have been masked by measurement problems. The authors, however, find scant evidence to support such claims.
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| Accelerating Money Growth: Is M2 Telling Us Something?
|
November, 1997 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
| Abstract: In the late 1970s and early 1980s, the FOMC built its fight against inflation around monetary targeting. The monetary aggregates' role in the policymaking process was downgraded in the early 1990s, when M2's velocity began to rise much more quickly than past experience would have predicted. Although evidence is accumulating that M2 has now stabilized into a pattern more consistent with its historical performance, the data are too limited to recommend a resumption of monetary targeting. But ignoring the sharp acceleration in M2 over the last year and a half would be equally unwise.
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| The recent ascent of stock prices: can it be explained by earnings growth or other fundamentals?
|
June, 1997 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 33, no. 2, pp. 2-12 |
John B Carlson; Kevin H Sargent; |
Economic Review |
| Abstract: An analysis of the current relationship between stock prices, dividends, earnings, and returns, aimed at examining the causes of the recent stock market surge. It reveals that the market's level cannot be explained by any single fundamental element of standard stock valuation models, but rather manifests optimism about future dividend growth (based on the present record growth in earnings) and a lower expected return (reflecting a diminished risk premium for holding equity).
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| Maintaining a Low Inflation Environment
|
March, 1997 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
| Abstract: An examination of monetary policy actions before and after 1982, illustrating that prompt federal funds rate increases aimed at maintaining a low inflation environment are associated with subsequent robust economic growth, not with weak growth, as is commonly thought.
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| MZM: a monetary aggregate for the 1990s?
|
June, 1996 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 32, no. 2, pp. 15-23 |
John B Carlson; Benjamin D Keen; |
Economic Review |
top |
| Where is all the U.S. currency hiding?
|
April, 1996 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Benjamin D Keen; |
Economic Commentary |
top |
| M2 growth in 1995: a return to normalcy?
|
December, 1995 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Benjamin D Keen; |
Economic Commentary |
top |
| Monetary policy and the federal funds futures market
|
July, 1995 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Jean M McIntire; |
Economic Commentary |
top |
| Some Monte Carlo results on nonparametric changepoint tests
|
January, 1995 |
Federal Reserve Bank of Cleveland, Working Paper no. 9517 |
John B Carlson; Edward J Bryden; Ben R Craig; |
Working Papers |
| Abstract: For long periods since 1982, core inflation has behaved as if it were generated by a process with a fixed mean and serially independent error term. Nonparametric changepoint tests proposed by Pettitt (1979) and Lombard (1987) suggest that since 1982, changes in core inflation have been infrequent and rather abrupt. However, little is known about the small-sample properties, the power of the tests, or the robustness of changepoint tests when a series is not i.i.d. This paper uses Monte Carlo analysis to investigate the probabilities of false positive tests under alternative assumptions about the time-series properties of the underlying process.
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| Federal Funds Futures as an Indicator of Future Monetary Policy: A Primer
|
January, 1995 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no.1 |
John B Carlson; Jean M McIntire; James B Thomson; |
Economic Review |
| Abstract: Unlike most futures contracts, which are drawn on commodities or financial instruments whose price or yield is determined in competitive markets, the federal funds futures rate is essentially determined by a deliberative decision of the Federal Open Market Committee (FOMC). As such, the fed funds futures market is a place where one can place a bet as to what future monetary policy will be. The FOMC can thus assess in fairly precise terms what markets expect it to do. In this paper, the authors examine the predictive accuracy of the fed funds futures market and consider some policy implications. They find that accuracy clearly improves in the two-month period leading up to the contract's expiration and that the largest prediction errors occur around policy turning points.
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| Assessing progress toward price stability: looking forward and looking backward
|
May, 1994 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| On disinflation since 1982: an application of change-point tests
|
March, 1994 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 1, pp. 31-42 |
John B Carlson; Edward J Bryden; |
Economic Review |
top |
| Monetary policy and inflation: 1993 in perspective
|
January, 1994 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Gregory A Bauer; |
Economic Commentary |
top |
| Assessing Real Interest Rates
|
August, 1993 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| The M2 slowdown and depository intermediation: implications for monetary policy
|
September, 1992 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Katherine A Samolyk; |
Economic Commentary |
top |
| Recent behavior of velocity: alternative measures of money
|
March, 1992 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 28, no. 1, pp. 2-10 |
John B Carlson; Susan M Byrne; |
Economic Review |
top |
| Understanding the recent behavior of M2
|
June, 1991 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Sharon E Parrott; |
Economic Commentary |
top |
| The demand for M2, opportunity cost, and financial change
|
June, 1991 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 2, pp. 2-11 |
John B Carlson; |
Economic Review |
top |
| Deregulation, Money, and The Economy
|
March, 1991 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| The short-run dynamics of long-run inflation policy
|
September, 1990 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 26, no. 3, pp. 26-35 |
John B Carlson; William T Gavin; Katherine A Samolyk; |
Economic Review |
top |
| The indicator P-Star: Just what does it indicate?
|
September, 1989 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| The Stability of Money Demand, Its Interest Sensitivity and Some Implications for money as a policy guide
|
July, 1989 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 25, no. 3 |
John B Carlson; |
Economic Review |
| Abstract: An examination of recent empirical research on money demand, which states that the interest elasticity of money demand is greater than most economists previously thought. The author discusses the policy implications of this research for both the M1 and M2 measures.
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| Money and Velocity in the 1980s
|
January, 1989 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; John N McElravey; |
Economic Commentary |
top |
| Rules Versus Discretion: Making a Monetary Rule Operational
|
July, 1988 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 24, no. 3 |
John B Carlson; |
Economic Review |
| Abstract: A history and analysis of the debate about whether monetary policy should be conducted by rules known in advance to all or by policymaker discretion.
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| Learning, rationality, the stability of equilibrium and macroeconomics
|
December, 1987 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 23, no. 4, pp. 2-12 |
John B Carlson; |
Economic Review |
| Abstract: The issue of how agents learn to form rational expectations has received increasing attention lately. The approach taken in many papers treats model stability as a problem in learning. In reviewing this literature, the author examines carefully the assumptions about individual behavior required for learning to form rational expectations. The meaning of rationality in a macroeconomy characterized by highly decentralized markets is also discussed.
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| U.S. Dependence on Foreign Saving
|
September, 1987 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Gerald H Anderson; |
Economic Commentary |
top |
| Does dollar depreciation matter: the case of auto imports from Japan
|
May, 1987 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Gerald H Anderson; |
Economic Commentary |
top |
| Debt Growth and The Financial System
|
October, 1986 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| Domestic Nonfinancial Debt: After three years of monitoring
|
July, 1986 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| The Dynamics of Federal Debt
|
July, 1985 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; Edward J Stevens; |
Economic Commentary |
top |
| The National Debt: A Secular Perspective
|
July, 1985 |
Federal Reserve Bank of Cleveland, Economic Review, vol. 21, no. 3 |
John B Carlson; Edward J Stevens; |
Economic Review |
| Abstract: An examination of the various factors that have determined the level and growth of the federal debt over the past 40 years, with some perspective on future levels of federal debt.
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| The Debt Burden: What you don't see
|
May, 1985 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| Nominal Income Targeting
|
May, 1984 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| The Problem of Seasonally Adjusted Money
|
May, 1982 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
| Methods of Cash Management
|
April, 1982 |
Federal Reserve Bank of Cleveland, Economic Commentary |
John B Carlson; |
Economic Commentary |
top |
