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
Date Written: March 2007
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: Suggested Citation