Christian Garciga

Most consistent estimators are what Müller (2007) terms “highly fragile”: prone to total breakdown in the presence of a handful of unusual data points. This compromises inference. Robust estimation is a (seldom-used) solution, but commonly used methods have drawbacks. In this paper, building on methods that are relatively unknown in economics, we provide a new tool for robust estimates of mean and covariance, useful both for robust estimation and for detection of unusual data points. It is relatively fast and useful for large data sets. Our performance testing indicates that our baseline method performs on par with, or better than, two of the currently best available methods, and that it works well on benchmark data sets. We also demonstrate that the issues we discuss are not merely hypothetical, by re-examining a prominent economic study and demonstrating its central results are driven by a set of unusual points.

Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates—particularly consumption and GDP less inventories and trade—together with these simple time-series models have historically generated more accurate forecasts than a canonical AR(2) benchmark. This has been especially true during recessions, although we document modest gains during expansions as well.

Business executives’ inflation expectations rose in 2021-2022 and then declined in early 2023, according to the Survey of Firms’ Inflation Expectations (SoFIE).

Monetary policymakers often use simple monetary policy rules, like the Taylor rule, as an input into their decision-making. However, there are many different simple rules, and there is no agreement on a single “best” rule. We look at the federal funds rates coming from seven simple rules and three economic forecasts to investigate the range of results that can be produced. While there are some commonalities, we document that the differences in the federal funds rates suggested by the rules can be quite pronounced.

SoFIE provides quarterly readings on inflation expectations among top business executives in a nationally representative sample.