In-Class Explorations of Macroeconomic Data

Transcription

1 In-Class Explorations of Macroeconomic Data Dean Croushore 1 1 Economics Department University of Richmond ABE, 2014 Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

2 Outline 1 Introduction 2 How to use FRED data 3 Differences between nominal and real variables 4 Noise versus signal 5 Understanding data revisions 6 Seasonal adjustment 7 Cross-country comparisons 8 Gains from looking at disaggregated data 9 How to measure the current state of the economy 10 How hard it is to engage in monetary policy in practice Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

3 Introduction Techniques for active classroom learning on-line, having students explore macroeconomic data Use of FRED data and a number of other data sources to help students understand where to find macroeconomic data and what it means Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

4 How to use FRED data Assign each student a macroeconomic variable (list on my web site) Plotting more than one variable Doing a transformation with another variable Levels versus growth rates; FRED alternatives Annual rates Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

5 Plotting more than one variable Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

6 Doing a transformation with another variable Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

7 Levels versus growth rates; FRED alternative units Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

8 Levels versus growth rates; FRED alternative units Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

9 Annual rates Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

10 Annual rates Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

11 Differences between nominal and real variables Assign each student a NIPA variable (list on my web site) Find both nominal and real versions in FRED Plot growth rates of both Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

12 Differences between nominal and real variables Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

13 Differences between nominal and real variables Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

14 Differences between nominal and real variables Note the different inflation rates for different variables These reflect differences in relative prices Have students note highest and lowest inflation periods for each variable Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

15 Differences between nominal and real variables When is looking at nominal variable most confusing? Should we look at nominal interest rates and nominal exchange rates? Or real versions of each? Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

16 Differences between nominal and real variables Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

17 Noise versus signal Assign each student a macroeconomic variable (list on my web site) Plot annualized growth rate Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

18 Noise versus signal Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

19 Noise versus signal Reduce noise with quarterly average Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

20 Noise versus signal Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

21 Noise versus signal Reduce noise more with percent change from year ago Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

22 Noise versus signal Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

23 Noise versus signal Reduce noise even more with percent change from year ago in quarterly average Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

24 Noise versus signal Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

25 Understanding data revisions Assign each student a variable for which the Philadelphia Fed has an initial release List on my web site: Variables for looking at data revisions Data are at: Use Excel to plot annualized growth rates of quarterly data Compare first, second, third releases to today s value Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

26 Understanding data revisions Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

27 Understanding data revisions Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

28 Understanding data revisions Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

29 Understanding data revisions Discuss the size of data revisions relative to growth rate itself For most variables, data revisions are not trivial Implication: all preliminary data are subject to potentially large revisions Don t trust data until they have undergone revisions Policy implication: don t overreact to preliminary data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

30 Seasonal adjustment Assign each student a variable for which there are both seasonally adjusted and not seasonally adjusted data List coming soon on my web site: Variables for looking at seasonal adjustment Compare seasonally adjusted to not seasonally adjusted data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

31 Seasonal adjustment Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

32 Cross-country comparisons Let each student pick a country Look at Penn World Tables: Have each student calculate real output per person based on PPP Compare across countries; note huge disparities Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

33 Gains from looking at disaggregated data Though we look at macro data, sometimes we learn from lower levels of aggregation Example: Labor force participation rate (LFPR) The LFPR has declined substantially in the past decade Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

34 Gains from looking at disaggregated data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

35 Gains from looking at disaggregated data Split students into groups to explore subgroups Gender: Males vs. Female Age groups: 16-19, 20-24, 25-54, 55 and over Schooling: Less than high school, high school, some college, college graduate Is retirement of baby boomers the main cause? Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

36 Gains from looking at disaggregated data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

37 Gains from looking at disaggregated data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

38 Gains from looking at disaggregated data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

39 Gains from looking at disaggregated data Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

40 How to measure the current state of the economy Explain basic idea of factor models X i t = α i F t + ɛ t Two main measures at Chicago Fed (CFNAI) and Philadelphia Fed (ADS) Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

41 How to measure the current state of the economy CFNAI Based on 85 monthly variables Monthly factor model in real time since Jan 2001 Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

42 How to measure the current state of the economy Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

43 How to measure the current state of the economy ADS Based on 6 variables, 1 quarterly, 4 monthly, 1 weekly Daily factor model in real time since December 2008 Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

44 How to measure the current state of the economy Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

45 How to measure the current state of the economy Project for students Give each student a month since January 2001 Students track real-time evolution of one index since that date Have them plot evolution of index over time This requires them to work with Excel to manipulate data; a good hands-on experience Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

46 How to measure the current state of the economy Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

47 How hard it is to engage in monetary policy in practice At end of semester, have students play San Francisco Fed Chairman Game sffed-education.org/chairman/ You are given a scenario and must decide how to respond with monetary policy Your performance over four years determines whether you are reappointed or not Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

48 How hard it is to engage in monetary policy in practice Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

49 How hard it is to engage in monetary policy in practice Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

50 How hard it is to engage in monetary policy in practice Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

51 Summary 1 How to use FRED data 2 Differences between nominal and real variables 3 Noise versus signal 4 Understanding data revisions 5 Seasonal adjustment 6 Cross-country comparisons 7 Gains from looking at disaggregated data 8 How to measure the current state of the economy 9 How hard it is to engage in monetary policy in practice Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52

52 Summary 1 Students like exploring macroeconomic data in class 2 They need guidance from someone; they would not be able to do this on their own 3 Method is consistent with flipped classroom idea Dean Croushore In-Class Explorations of Macroeconomic Data ABE, / 52