The FOMC versus the Staff, Revisited: When do Monetary Policymakers Add Value?
Date
2018
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Producer
Director
Performer
Choreographer
Costume Designer
Music
Videographer
Lighting Designer
Set Designer
Crew Member
Funder
Rehearsal Director
Concert Coordinator
Advisor
Moderator
Panelist
Alternative Title
Department
Haverford College. Department of Economics
Type
Thesis
Original Format
Running Time
File Format
Place of Publication
Date Span
Copyright Date
Award
Language
eng
Note
Table of Contents
Terms of Use
Rights Holder
Access Restrictions
Open Access
Terms of Use
Tripod URL
Identifier
Abstract
The Federal Open Market Committee (FOMC) publicly releases economic forecasts semiannually in the Monetary Policy Report. These forecasts are reflective of the members’ own judgment and the Board of Governors professional staff’s model-based projections. Romer and Romer (2008) analyze forecast data from 1979 to 2001 to show policymakers do not always add valuable information to forecasting inflation, unemployment, and growth relative to their staff. Research has remained limited to this time frame due to the 5-year data lag of the Greenbooks that contain staff forecasts. This research updates the forecast data through 2012 to analyze if the FOMC has improved upon staff forecasts and understand how policymakers’ accuracy may vary with time. Like Romer and Romer (2008), I regress macroeconomic outcomes of inflation, unemployment, and growth on staff and policymaker forecasts and augment the model by including moderator variables to test differences across time. I find FOMC forecasts outperform staff forecasts between 2002 and 2012 and that policymakers’ judgment-based forecasts add greater value to staff forecasts when economic conditions are unfavorable. I run a similar analysis using individual FOMC forecast data from 1992 to 2006 to compare projections from the Federal Reserve Bank presidents, the Board of Governors, and the staffs. I conclude that the value added from FOMC forecasts comes from policymakers’ joint skill.