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Risk premia creeping higher
Since Halloween, financial markets seem to be getting spooked again.
Larry Kudlow writes:
Until recently, I thought the Fed could stand pat at their December 11th meeting. However, I have completely changed my mind in light of the continuing credit market turbulence.
Kudlow notes that the spread between 30-day asset-backed commercial paper and U.S. Treasuries, which spiked [...]
GDP up, recession probability down
Fret as we all might, the U.S. economy just keeps on growing.
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 3.9% annual rate in the third quarter. Housing remains in very bad shape, and subtracted a full percent from that total, just as it’s been doing for the last [...]
Inferring market expectations from changes in fed funds futures prices
I recently completed a new research paper studying how interest rates of different maturities change with market expectations of what the Fed is going to do next.
Settlement on a fed funds futures contract is based on the average effective fed funds rate over each of the calendar days of a specified month. If a month [...]
Recession probability index rises to 16.9%
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 1.3% in the first quarter of 2007, moving our recession probability index up to 16.9%. This post provides some background on how that index is constructed and what the latest move up might signify.
What sort of GDP [...]
Combining forecasts
I have been suggesting that the best statistical approach, when confronted with conflicting signals such as the employment estimates from the BLS payroll survey, the separate BLS household survey, or the huge database from the private company Automatic Data Processing, is not to selectively throw some of the data out but rather to combine the [...]
What will the Fed do next?
In talking about the Fed’s likely next move, it’s useful first to review how we got to where we currently are. The Fed now clearly understands that it overdid the stimulus in 2002-2004, and brought us uncomfortably close to a resurgence of inflation as a result. The high inflation rates for the headline CPI during [...]
2006 and the Econbrowser crystal ball
This seems like a good time to review some of the occasions over the last year when I’ve been brave (or foolish) enough to make a specific quantitative prediction.
December 8, 2005.
Only 17 more (oil) shopping days until December 31.
Let me for my part point out that there is an alternative to the positions of the [...]
Accuracy of futures prices as predictors of the fed funds rate
I’m just finishing writing a new research paper whose goal is to come up with a better measure and understanding of the lagged effect of monetary policy on the economy. One of my claims is that the public’s expectations of what the Fed is going to do next play a key role in that process. [...]
One way or the other
Something for everyone in this week’s data on housing from the Census Bureau. Pessimists will note the alarming 6% plunge during the month of September in seasonally adjusted new building permits. That one-month drop from the already low levels of August leaves them down 28% from September 2005. News this week of rising delinquencies and [...]
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