John Carlson |

Vice President


John Carlson, Vice President

John Carlson is a vice president in the Research Department at the Federal Reserve Bank of Cleveland. In addition to conducting economic research, he oversees the department’s publications and its support functions. His research interests include monetary policy, money demand, models of learning, and asset pricing. He has published articles in the Journal of Monetary Economics, Journal of Portfolio Management, Journal of Financial Services Research, Journal of Futures Markets, and Journal of Economics and Business.

Prior to joining the Bank in 1978, Dr. Carlson taught money and banking at Michigan State University. A native of the Cleveland area, Dr. Carlson earned a Ph.D. in economics from Michigan State University.

  • Fed Publications
  • Other Publications
Title Date Publication Author(s) Type

 

February, 2013 Federal Reserve Bank of Cleveland,working paper no. 13-01 ; Jean Burson; Ozgur Emre Ergungor; Patricia Waiwood; Working Papers
Abstract: States' unfunded pension obligations to their current and retired employees have exploded in recent years to levels that are estimated to be between $750 billion and $4.4 trillion. In theory, this massive debt should have implications for states' ability to meet their financial obligations and a measurable impact on funding costs. Yet, we find no evidence that municipal bond markets are pricing the risks to states' fiscal health arising from these large obligations.

top

 

April, 2012 Vol. 3, No. 1 ; Forefront
Abstract: As some state and local governments struggle to meet their obligations to retirees, we look into how stress on pension funds and municipal finance could have implications for the wider economy.

top

 

May, 2011 Vol. 2, No. 2 ; Owen F Humpage; Forefront
Abstract: On the contrary: Low and stable inflation is an essential ingredient for growing jobs.

top

 

2010-8 ; Joseph G Haubrich; John Lindner; Economic Commentary
Abstract: The Federal Reserve balance sheet's size and composition have changed dramatically since September 2008. Federal Reserve policymakers have expressed their support for eventually shrinking the Fed's balance sheet and returning the composition of its securities portfolio to include only U.S. Treasury issues. Through the careful study of public Federal Open Market Committee documents, this Economic Commentary concisely explains some of the FOMC's decisions concerning an appropriate sequence of policy actions.

top

 

August, 2006 Federal Reserve Bank of Cleveland, Working Paper no. 0610 ; 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.

top

 

June 2006 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

July, 2005 Federal Reserve Bank of Cleveland, Working Paper no. 0507 ; 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.

top

 

December, 2004 Federal Reserve Bank of Cleveland Working Paper no. 0411 ; 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.

top

 

March 1, 2004 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

September 1, 2003 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

February 1, 2003 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

April 1, 2002 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

April 1, 2001 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

January 15, 2001 Federal Reserve Bank of Cleveland, Economic Commentary ; Eduard A Pelz; Economic Commentary

top

 

January, 2001 Federal Reserve Bank of Cleveland, Working Paper no. 0113 ; 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.

top

 

May 1, 2000 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

October 1999 Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no. 4 ; 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.

top

 

August 15, 1999 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

January, 1999 Federal Reserve Bank of Cleveland, Working Paper no. 9917 ; 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.

top

 

June 1998 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

November 1997 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top

 

June 1997 Federal Reserve Bank of Cleveland, Economic Review, vol. 33, no. 2, pp. 2-12 ; 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).

top

 

March 1, 1997 Federal Reserve Bank of Cleveland, Economic Commentary ; 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.

top
MZM: a monetary aggregate for the 1990s?

 

June 1996 Federal Reserve Bank of Cleveland, Economic Review, vol. 32, no. 2, pp. 15-23 ; Benjamin D Keen; Economic Review

top

 

April 15, 1996 Federal Reserve Bank of Cleveland, Economic Commentary ; Benjamin D Keen; Economic Commentary

top

 

December 1995 Federal Reserve Bank of Cleveland, Economic Commentary ; Benjamin D Keen; Economic Commentary

top

 

July 1995 Federal Reserve Bank of Cleveland, Economic Commentary ; Jean M McIntire; Economic Commentary

top

 

January, 1995 Federal Reserve Bank of Cleveland, Working Paper no. 9517 ; 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.

top

 

January 1995 Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no.1 ; 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.

top

 

May 15, 1994 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

top

 

March 1994 Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 1, pp. 31-42 ; Edward J Bryden; Economic Review

top

 

January 1, 1994 Federal Reserve Bank of Cleveland, Economic Commentary ; Gregory A Bauer; Economic Commentary

top

 

August 15, 1993 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

top

 

September 15, 1992 Federal Reserve Bank of Cleveland, Economic Commentary ; Katherine A Samolyk; Economic Commentary

top

 

March 1992 Federal Reserve Bank of Cleveland, Economic Review, vol. 28, no. 1, pp. 2-10 ; Susan M Byrne; Economic Review

top

 

June 15, 1991 Federal Reserve Bank of Cleveland, Economic Commentary ; Sharon E Parrott; Economic Commentary

top

 

June 1991 Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 2, pp. 2-11 ; Economic Review

top

 

March 1, 1991 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

top

 

September 1990 Federal Reserve Bank of Cleveland, Economic Review, vol. 26, no. 3, pp. 26-35 ; William T Gavin; Katherine A Samolyk; Economic Review

top
The indicator P-Star: Just what does it indicate?

 

September 15, 1989 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary

top

 

September 15, 1989 Federal Reserve Bank of Celveland, Economic Commentary ; Economic Commentary
Abstract: An explanation of P-Star, evaluating its usefulness both as an indicator of potential inflation and as a method of assessing the Federal Reserve’s long-term goal of price stability.

top

 

July 1989 Federal Reserve Bank of Cleveland, Economic Review, vol. 25, no. 3 ; 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.

top
Money and Velocity in the 1980s

 

January 15, 1989 Federal Reserve Bank of Cleveland, Economic Commentary ; John N McElravey; Economic Commentary

top

 

January 15, 1989 Federal Reserve Bank of Cleveland, Economic Commentary ; John N McElravey; Economic Commentary
Abstract: A discussion of how financial deregulation and disinflation affect the velocities of M1 and M2, noting implications for the conduct of monetary policy.

top

 

July 1988 Federal Reserve Bank of Cleveland, Economic Review, vol. 24, no. 3 ; 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.

top

 

December 1987 Federal Reserve Bank of Cleveland, Economic Review, vol. 23, no. 4, pp. 2-12 ; 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.

top

 

September 1, 1987 Federal Reserve Bank of Cleveland, Economic Commentary ; Gerald H Anderson; Economic Commentary
Abstract: An analysis of the determination of foreign investment in U.S. financial markets and suggestions for reducing dependence on foreign savings inflow.

top

 

May 1, 1987 Federal Reserve Bank of Cleveland, Economic Commentary ; Gerald H Anderson; Economic Commentary
Abstract: The Japanese auto industry is used as a case in point to illustrate some of the ways in which firms operating in export markets cope with exchange-rate changes.

top

 

October 15, 1986 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of the extraordinary growth of domestic nonfinancial debt since 1982 and a discussion of policy issues raised by its relation to the stability of the financial system.

top

 

July 1, 1986 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of the historical and current behavior of domestic nonfinancial debt, with a discussion of B.M. Friedman’s theories and an analysis of the recent unexpected surge in debt and its policy implications.

top

 

July 1985 Federal Reserve Bank of Cleveland, Economic Review, vol. 21, no. 3 ; 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.

top

 

July 1, 1985 Federal Reserve Bank of Cleveland, Economic Commentary ; Edward J Stevens; Economic Commentary
Abstract: An examination of the federal deficit and of the possible effects of persistently high levels of federal debt on real interest rates, private investment, and the economy’s real growth.

top

 

May 1, 1985 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An examination of the federal deficit and a discussion of how an increasing debt burden could cause a serious threat to long-term U.S. economic growth.

top

 

May 21, 1984 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: A description of the Federal Reserve monetary policy framework, with a suggestion that a multiyear nominal income target be viewed as a practical extension of current policy procedures.

top

 

May 31, 1982 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: An essay on the effect that seasonal money supply fluctations have on the measurement of M1 and on Federal Reserve money supply management, with a discussion of the X-11 adjustment method and suggestions for improving it.

top

 

April 5, 1982 Federal Reserve Bank of Cleveland, Economic Commentary ; Economic Commentary
Abstract: A description of cash management methods, covering collection, disbursement, and investment techniques. Topics include lock boxes, wire transfers, depository transfer checks, controlled disbursement, zero balancing, money-market instruments, and sweeping arrangements.

top

 

September 7, 1981 Federal Reserve Bank of Cleveland, Economic Commentary ; Kim J Kowalewski; Economic Commentary
Abstract: The thrift industry primarily serves as an intermediary between people who wish to save in relatively liquid deposits and people who wish to borrow mortgage funds. When short-term interest rates are higher than long-term rates, as they have been in 1981, many depositors withdraw funds from their savings accounts to buy higher-yielding assets. If net deposit outflows are large enough, then some thrifts may exhaust their liquidity and be forced to sell mortgage assets at a loss; if the loss is large enough, some thrifts could be forced out of business.

top

 

March 3, 1980 Federal Reserve Bank of Cleveland, Economic Commentary ; Theresa Gwazdauskas; Economic Commentary
Abstract: For a number of decades, economists have questioned traditional distinctions between money and other liquid assets and between commercial banks and other financial intermediaries. Over time these distinctions have become increasingly blurred. Yet there are fundamental differences in regulatory treatment of commercial banks and other financial intermediaries.

top
Title Date Publication Author(s) Type
Monetary Policy, Endogenous Inattention, and the Volatility Trade-Off

 

January, 2009 The Economic Journal, 119, pp 1-35 (forthcoming) ; William A Branch; George W Evans; Bruce McGough; Journal Article
Abstract: This paper considers 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.

top
Recovering Market Expectations of FOMC Rate Changes with Options on Federal Funds Futures

 

December 2005 The Journal of Futures Markets, vol. 25, no. 12, pp. 1203-44 ; Ben R Craig; William R Melick; Journal Article

top
Will Valuation Ratios Revert to Historical Means?

 

July 1, 2002 The Journal of Portfolio Management, vol. 28, no. 4, 2002, pp. 23-35 ; Eduard A Pelz; Mark E Wohar; Journal Article

top
Results of a Study of the Stability of Cointegrating Relations Comprised of Broad Monetary Aggregates

 

October 1, 2000 Journal of Monetary Economics, vol. 46, no. 2, October 2000, pp. 345-83 ; Dennis L Hoffman; Benjamin D Keen; Robert H Rasche; Journal Article

top
Structural Uncertainty and Breakpoint Tests: An Application to Equilibrium Velocity

 

2000 Journal of Economics and Business, vol. 52, no. 1-2, Jan.-April 2000, pp. 101-15 ; Ben R Craig; Jeffrey C Schwarz; Journal Article

top
Money, Monetary Policy, and Central Banking

 

2000 Journal of Financial Services Research, vol. 18, no. 2/3, 2000, pp. 241-253 ; Jerry L Jordan; Journal Article

top
Money and Velocity in the 1980s

 

1991 In: Financial Institutions and Markets: A Reader, 1991, pp. 12-15 Miami: Kolb ; John N McElravey; Article in Book

top
Debt Growth and the Financial System

 

1989 In: Reforming Money and Finance: Institutions and Markets in Flux, 1989, pp. 103-08 Armonk, N.Y. and London: Sharpe ; Article in Book

top