Soft Information and Economic Activity: Evidence from the Beige Book

33 Pages Posted: 2 Sep 2010

See all articles by Shibley Sadique

Shibley Sadique

Monash University - Department of Accounting

Francis Haeuck In

Monash University - Department of Accounting; Financial Research Network (FIRN)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Paul Wachtel

New York University - Stern School of Business

Date Written: August 31, 2010

Abstract

This study employs text-analysis software to analyze the contents of the Federal Reserve Beige Book summary of national economic and business conditions, with a particular focus on the predictive content of the text. The empirical results suggest that the Beige Book’s tone changes in response to upswings in industrial production, unemployment, and overall economic conditions. The results further indicate that increases in negative Beige Book tone and decreases in positive Beige Book tone predict recessions one period in advance of their occurrence. Finally, this study shows that financial markets respond to Beige Book tone.

Keywords: Beige Book, Tone

JEL Classification: C50, E27, G12

Suggested Citation

Sadique, Shibley and In, Francis Haeuck and Veeraraghavan, Madhu and Wachtel, Paul, Soft Information and Economic Activity: Evidence from the Beige Book (August 31, 2010). Available at SSRN: https://ssrn.com/abstract=1669724 or http://dx.doi.org/10.2139/ssrn.1669724

Shibley Sadique

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia

Francis Haeuck In

Monash University - Department of Accounting ( email )

Building 11E
Clayton, Victoria 3800
Australia
+61 3 9905 1561 (Phone)
+61 3 9905 5475 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Madhu Veeraraghavan (Contact Author)

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

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