Expectations and economic fluctuations: an analysis using survey data

Sylvain Leduc and Keith Sill ()

No 2010-09, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Using survey-based measures of future U.S. economic activity from the Livingston Survey and the Survey of Professional Forecasters, we study how changes in expectations, and their interaction with monetary policy, contribute to fluctuations in macroeconomic aggregates. We 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. We also find that the short-term interest rate rises in response to expectations of good times as monetary policy tightens. Our results provide quantitative evidence on the importance of expectations-driven business cycles and on the role that monetary policy plays in shaping them.

Keywords: Economic forecasting; Monetary policy; Business cycles (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Related works:
Journal Article: Expectations and Economic Fluctuations: An Analysis Using Survey Data (2013)
Working Paper: Expectations and economic fluctuations: an analysis using survey data (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2010-09

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