Greenbook

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The Greenbook of the Federal Reserve Board of Governors (called the Greenbook for short) is a book with projections of various economic indicators for the economy of the United States produced by the Federal Reserve Board before each meeting of the Federal Open Market Committee. [1] The projections are referred to as Greenbook projections or Greenbook forecasts. [1] Many of the variables projected coincide with variables covered in the Survey of Professional Forecasters. [1]

Economy of the United States National economy

The economy of the United States is a highly developed mixed economy. It is the world's largest economy by nominal GDP and the second-largest by purchasing power parity (PPP). It also has the world's seventh-highest per capita GDP (nominal) and the eleventh-highest per capita GDP (PPP) in 2016. The US has a highly diversified, world-leading industrial sector. It is also a high-technology innovator with the second-largest industrial output in the world. The U.S. dollar is the currency most used in international transactions and is the world's foremost reserve currency, backed by its science and technology, its military, the full faith of the U.S. government to reimburse its debts, its central role in a range of international institutions since World War II, and the petrodollar system. Several countries use it as their official currency, and in many others, it is the de facto currency. Its largest trading partners are China, Canada, Mexico, Japan, Germany, South Korea, United Kingdom, France, India, and Taiwan.

The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations. This Federal Reserve committee makes key decisions about interest rates and the growth of the United States money supply.

The Survey of Professional Forecasters (SPF) is a quarterly survey of macroeconomic forecasts for the economy of the United States issued by the Federal Reserve Bank of Philadelphia. It is the oldest such survey in the United States.

Contents

Details

Prior to each meeting of the Federal Open Market Committee, projections are made about macroeconomic indicators for the economy of the United States. The meetings are held at a frequency slightly greater than one a month. These projections are recorded in "Greensheets" and all the Greensheets for a given year are compiled into the Greenbook of that year. The Greensheets are kept confidential within the committee at the time of creation. [1]

Each Greenbook is made available to the public five years after the end of the year of the Greenbook. For instance, as of April 2014, Greenbooks from 1966 to 2008 are available on the website of the Federal Reserve Bank of Philadelphia. [2]

Federal Reserve Bank of Philadelphia building in Pennsylvania, United States

The Federal Reserve Bank of Philadelphia, also known as the Philadelphia Fed and the Philly Fed – headquartered at 10 N. Independence Mall West at Arch Street, Philadelphia, Pennsylvania, with an additional entrance at N. 7th Street – is responsible for the Third District of the Federal Reserve, which covers eastern and central Pennsylvania, the nine southern counties of New Jersey, and Delaware. Its geographical territory is by far the smallest in the system, and its population base is the second-smallest. The current President of the Philadelphia Fed is Patrick T. Harker.

A Greenbook data set in Microsoft Excel format is also available on the Federal Reserve Bank of Philadelphia website. This includes only four quarterly Greenbook projections in order to maximize the correspondence and comparability with the Survey of Professional Forecasters. [3]

Microsoft Excel Spreadsheet editor, part of Microsoft Office

Microsoft Excel is a spreadsheet developed by Microsoft for Windows, macOS, Android and iOS. It features calculation, graphing tools, pivot tables, and a macro programming language called Visual Basic for Applications. It has been a very widely applied spreadsheet for these platforms, especially since version 5 in 1993, and it has replaced Lotus 1-2-3 as the industry standard for spreadsheets. Excel forms part of the Microsoft Office suite of software.

In addition to the main projections, supplementary documents describing the output gap and financial assumptions made in the projections are also available on the Federal Reserve Bank of Philadelphia website. [4]

Reception

Academic reception

Some academic publications by the Federal Reserve Board have looked at the historical track record of accuracy of the Greenbook projections as well as their output gap estimates. [5] [6] [7] [8]

The Greenbook forecast has also attracted the attention of outside academic researchers. A 2007 National Bureau of Economic Research paper by Faust and Wright finds: "For inflation we find that univariate methods are dominated by the best atheoretical large dataset methods and that these, in turn, are dominated by Greenbook. For GDP growth, in contrast, we find that once one takes account of Greenbook's advantage in evaluating the current state of the economy, neither large dataset methods nor the Greenbook process offers much advantage over a univariate autoregressive forecast." [9]

A 2014 paper by Arai in the International Journal of Forecasting finds: "Using this [Patton and Timmerman (2012) forecast adjustment] method in a real-time out-of-sample forecasting exercise, I find that it provides modest improvements in the accuracies of the forecasts for the GDP deflator and CPI, but not for other variables. The improvements are statistically significant in some cases, with magnitudes of up to 18% in root mean square prediction error." [10]

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References

  1. 1 2 3 4 "Greenbook Data Sets". Federal Reserve Bank of Philadelphia . Retrieved April 18, 2014.
  2. ↑ "PDF Data Set from the Board of Governors". Federal Reserve Bank of Philadelphia . Retrieved April 18, 2014.
  3. ↑ "Philadelphia Fed's Greenbook Data Set". Federal Reserve Bank of Philadelphia . Retrieved April 18, 2014.
  4. ↑ "Output Gap and Financial Assumptions from the Board of Governors". Federal Reserve Bank of Philadelphia . Retrieved April 18, 2014.
  5. ↑ Edge, Rochelle M.; Rudd, Jeremy B. (December 3, 2012). "Real-Time Properties of the Federal Reserve's Output Gap". Federal Reserve Board, Finance and Economics Discussion Series 2012-86. Retrieved April 18, 2014.
  6. ↑ Edge, Rochelle M.; Rudd, Jeremy B. (January 18, 2011). "How Useful are Estimated DSGE Model Forecasts?". Federal Reserve Board, Finance and Economics Discussion Series 2011-11.
  7. ↑ Tulip, Peter M. "Has Output Become More Predictable? Changes in Greenbook Forecast Accuracy" (PDF). Federal Reserve Board, Finance and Economics Discussion Series 2005-31.
  8. ↑ Edge, Rochelle M.; Kiley, Michael T.; Laforte, Jean-Philippe. "A Comparison of Forecast Performance Between Federal Reserve Staff Forecasts, Simple Reduced-Form Models, and a DSGE Model". Federal Reserve Board, Finance and Economics Discussion Series 2009-10.
  9. ↑ Faust, Jon; Wright, Jonathan H. (2009). "Comparing Greenbook and Reduced Form Forecasts Using a Large Realtime Dataset". Journal of Business & Economic Statistics. 27 (4): 468–479. doi:10.1198/jbes.2009.07214.
  10. ↑ Arai, Natsuki (January–March 2014). "Using forecast evaluation to improve the accuracy of the Greenbook forecast". International Journal of Forecasting . 30 (1): 12–19. doi:10.1016/j.ijforecast.2013.02.002.
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