Expectations and Economic Fluctuations: An Analysis Using Survey Data

39 Pages Posted: 12 Mar 2010

See all articles by Sylvain Leduc

Sylvain Leduc

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Keith Sill

affiliation not provided to SSRN

Date Written: February 2010

Abstract

Using survey-based measures of future U.S. economic activity from the Livingston Survey and the Survey of Professional Forecasters, the authors study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. They find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations: a perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation. The authors also find that the short-term interest rate rises in response to expectations of good times as monetary policy tightens. Their results provide quantitative evidence on the importance of expectations-driven business cycles and on the role that monetary policy plays in shaping them.

Keywords: Expectations, survey data, economic fluctuations

Suggested Citation

Leduc, Sylvain and Sill, Keith, Expectations and Economic Fluctuations: An Analysis Using Survey Data (February 2010). FRB of Philadelphia Working Paper No. 10-6, Available at SSRN: https://ssrn.com/abstract=1568289 or http://dx.doi.org/10.2139/ssrn.1568289

Sylvain Leduc (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Keith Sill

affiliation not provided to SSRN

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