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

FRB of St. Louis Working Paper No. 2007-010A

31 Pages Posted: 9 Mar 2007

See all articles by Michelle T. Armesto

Michelle T. Armesto

Federal Reserve Bank of St. Louis - Research Division

Ruben Hernandez-Murillo

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Jeremy Piger

University of Oregon - Department of Economics

Date Written: March 2007

Abstract

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.

Keywords: data sampling frequency, textual analysis, diction, Beige Book

JEL Classification: C50, E27, R11

Suggested Citation

Armesto, Michelle T. and Hernandez-Murillo, Ruben and Owyang, Michael T. and Piger, Jeremy M., Identifying Asymmetry in the Language of the Beige Book: A Mixed Data Sampling Approach (March 2007). FRB of St. Louis Working Paper No. 2007-010A, Available at SSRN: https://ssrn.com/abstract=968683 or http://dx.doi.org/10.2139/ssrn.968683

Michelle T. Armesto

Federal Reserve Bank of St. Louis - Research Division

411 Locust St
Saint Louis, MO 63011
United States

Ruben Hernandez-Murillo

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Michael T. Owyang (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Jeremy M. Piger

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

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