Beige Book Research Articles

Regional Economic Sentiment: Constructing Quantitative Estimates from the Beige Book and Testing Their Ability to Forecast Recessions

We use natural language processing methods to quantify the sentiment expressed in the Federal Reserve's anecdotal summaries of current economic conditions in the national and 12 Federal Reserve District-level economies as published eight times per year in the Beige Book since 1970. We document that both national and District-level economic sentiment tend to rise and fall with the US business cycle. But economic sentiment is extremely heterogeneous across Districts, and we find that national economic sentiment is not always the simple aggregation of District-level sentiment. We show that the heterogeneity in District-level economic sentiment can be used, over and above the information contained in national economic sentiment, to better forecast US recessions.

Using Beige Book Text Analysis to Measure Supply Chain Disruptions

Using Beige Book Text Analysis to Measure Supply Chain Disruptions

Does the Beige Book Reflect U.S. Employment and Inflation Trends?

Does the Beige Book Reflect U.S. Employment and Inflation Trends?

The Tone of the Beige Book and the Pre-FOMC Announcement Drift

We examine whether disclosed information from the Federal Reserve (Fed) affects investor expectations of monetary policy decisions and whether the disclosed information leads to the pre-Federal Open Market Committee (FOMC) announcement drift through investor expectations of monetary policy. We measure the tone of the Beige Books, speeches, and testimonies using text-mining techniques. We find that the tone of the Beige Books positively relates to federal funds rate (FFR) changes and expected FFR changes. We also find that expected FFR changes are negatively associated with stock market index returns in the 24 hours prior to FOMC announcement time. These results suggest that the Beige Book implies monetary policy changes and positively affects investor expectations. In addition, these results suggest that disclosed information from the Fed leads to pre-FOMC announcement drift though the investor expectations.

Incorporating the Beige Book into a Quantitative Index of Economic Activity

We apply customized text analytics to the written description of economic activity contained in the Beige Book (BB) in order to obtain a quantitative measure of current economic conditions. This quantitative BB measure is then incorporated into a dynamic factor index model that also contains other commonly used quantitative economic data. We find that at the time the BB is released it has information about current economic activity not contained in other quantitative data. This informational advantage is relatively short lived. By 3 weeks after their release date, ‘old’ BBs contain little additional information about economic activity not already contained in other quantitative data. Copyright © 2016 John Wiley & Sons, Ltd.

Soft information and economic activity: Evidence from the Beige Book

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. We show that the Beige Book language is a good predictor of economic turning points as it often provides an early indication of future economic activities. During economic upswings, positive tone becomes more prominent and negative tone becomes less prominent. In addition, this study is the first to document that Beige Book tone affects stock market volatility and trading volume.

The Sentiment of the Fed

Sentiment analysis is applied to the Federal Reserve's documents relating to the Federal Open Market Committee (FOMC). A new method of rating the sentiment of texts is developed through the creation of a 100 000 word sentiment dictionary, and is used to estimate the sentiment of the Beige Book and FOMC statements and minutes. Results show that, under Greenspan’s tenure, the sentiment of the Beige Book anticipated the sentiment of the FOMC minutes while, during the Bernanke era, the sentiment of the Beige Book anticipates the sentiment of the FOMC statement. This finding suggests that the Beige Book, usually made public three weeks before a FOMC meeting, may contain information useful in anticipating policy decisions.

Interpreting the Performance of Business Economists During the Great Recession

It is generally believed that the recession of 2007–09 was not foreseen by business economists. Is this perceived view accurate? We explore this issue by examining business economists’ published statements about economic conditions. We compare these qualitative forecasts with the Beige Book. We conclude that both sets of data are similar and that business economists are responsive to information about the economy and adjust their predictions quickly.

Soft Information and Economic Activity: Evidence from the Beige Book

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.

Measuring the Information Content of the Beige Book: A Mixed Data Sampling Approach

Studies of the predictive ability of the Federal Reserve's Beige Book for aggregate output and employment have proven inconclusive. This might be attributed, in part, to its irregular release schedule. We use a model that allows for data sampling at mixed frequencies to analyze the predictive power of the Beige Book. We find that the Beige Book's national summary and District reports predict GDP and aggregate employment and that most District reports provide information content for regional employment. In addition, there appears to be an asymmetry in the predictive content of the Beige Book language.

Measuring the Information Content of the Beige Book: A Mixed Data Sampling Approach

Studies of the predictive ability of the Federal Reserve's Beige Book, an anecdotal measure of regional economic conditions, for aggregate output and employment have proven inconclusive. This might be attributed, in part, to the irregular release schedule of the Beige Book. In this paper, we use a model that allows for data sampling at mixed frequencies to analyze the predictive power of the Beige Book for both aggregate and regional data. We find that the Beige Book's national summary and District reports predict GDP and aggregate employment and that most District reports provide information content for regional employment. In addition, there appears to be an asymmetry in the predictive content of the Beige Book language.

Identifying Asymmetry in the Language of the Beige Book: A Mixed Data Sampling Approach

Studies of the predictive ability of the Federal Reserve's Beige Book, an anecdotal measure of regional economic conditions, for aggregate output and employment have proven inconclusive. This might be attributed, in part, to the irregular release schedule of the Beige Book. In this paper, we use a model that allows for data sampling at mixed frequencies to analyze the predictive power of the Beige Book for both aggregate and regional data. We find that the Beige Book's national summary predicts GDP and aggregate employment, but that the information content in the district reports for regional employment is mixed. In addition, there appears to be an asymmetry in the predictive content of the Beige Book language. At the national level, pessimistic language in the national summary reflects the underlying business cycle phase, while optimistic language is informative for higher frequency fluctuations. At the district level, the reverse is true; pessimistic language reflects sharp, temporary economic fluctuations.

Does the Beige Book Move Financial Markets?

About two weeks prior to each Federal Open Market Committee (FOMC) meeting, the Federal Reserve releases a description of economic activity in a document called the Beige Book. By creating a quantitative index of these qualitative reports, we examine whether the content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly intermediate‐ and long‐term rates, but not after controlling for several other macroeconomic indicators. The results are consistent with markets viewing the report as a summary indicator of economic growth but not of monetary policy moves in the near term.

Does the Beige Book Move Financial Markets?

About two weeks prior to each Federal Open Market Committee (FOMC) meeting, the Federal Reserve releases a description of economic activity in a document called the Beige Book. By creating a quantitative index of these qualitative reports, we examine whether the content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly intermediate- and long-term rates, but not after controlling for several other macroeconomic indicators. The results are consistent with markets viewing the report as a summary indicator of economic growth but not of monetary policy moves in the near term.

Simulation of FOMC Meeting: Learning About Monetary Policy by Doing

This paper explains how an in-class simulation of the FOMC meeting can effectively be used to teach various aspects of monetary policy in the U.S. economy to an upper-level monetary economics class. The class is divided into various groups which directly or indirectly participate in the FOMC meeting and in the conduct of the monetary policy. Over the semester these groups research different aspects of the U.S. economy and prepare the Green Book, the Beige Book and the Blue Book as they learn about money and how money affects the economy. They also learn how monetary policy actions of the Federal Reserve System translate into changes in money supply. By the semester end, the FOMC meets and deliberates over the information gathered by various groups, and takes a decision on the target interest rate. The groups are evaluated on the basis of the quality of their work. Group members evaluate each other for their participation, and their individual scores are then determined by combining the group evaluation and individual participation evaluation.

Does the Beige Book Move Financial Markets?

About two weeks prior to each FOMC meeting, the Federal Reserve releases a description of economic activity in a document called the Beige Book. The authors examine whether the descriptive content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly long-term rates, even after controlling for other macroeconomic data releases. Stronger Beige Book reports are positively associated with changes in equity prices during expansions but negatively during recessions.

How Well Does the Beige Book Reflect Economic Activity? Evaluating Qualitative Information Quantitatively

Eight times a year, approximately two weeks before every FOMC meeting, the Federal Reserve releases a description of economic conditions in the twelve Federal Reserve districts. Called the Beige Book, this description relies primarily on surveys and anecdotal evidence gathered by the twelve district banks. For this paper, we read and numerically scored past Beige Books in order to determine the extent to which the descriptions in these books accurately reflect current economic activity as measured by quarterly real GDP growth. We find that both in-sample and out-of-sample, the quantitative Beige Book indices do have significant predictive content for current and next quarter real GDP growth. Furthermore, the Beige Book has information about current quarter real GDP growth not present in other indicators such as the Blue Chip Consensus Forecast or time series models that use real-time data.

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district

Federal Reserve Board: Beige Book Summary of commentary on current economic conditions by Federal Reserve district