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Real World Analysis of Economic Data REAL WORLD ANALYSIS OF ECONOMIC DATA Econ-GB.2347 Peter D'Antonio Email: [email protected] Phone: (516) 993-5990 Office hours: Tuesday, 5 - 6 pm or by appointment Class time: Tuesday, 6 - 9 pm Course Overview Objective: This course is designed for business professionals whose interactions require a working understanding of the state of the economy. Students will learn how to put the wide array of economic data into a coherent framework to make judgments about business activity and markets. We will cover each of the major data releases – including GDP, employment and unemployment, consumer spending, inflation and business surveys – discussing what makes them important to markets and the outlook. Other topics include business cycles, economic modeling, monetary and fiscal policy, and forecasting. Upon completion of this course, students will have the tools to understand and interpret data, and to dispel some common misconceptions. Prerequisite: Students should have taken at least one Macroeconomics course and be familiar with the basic building blocks of the economy. Organization: Each class will include a discussion of the topic listed in the course schedule, as well as an analysis of the latest economic data releases and how they fit into the overall economic outlook. The class will also focus on how markets interpret and respond to new information. Grades will reflect a midterm (20%), a final exam (35%), homework (15%), a final paper (15%), and class participation (15%). Tests will cover class material and required readings. Office hours will be held during the hour just prior to each class. Other appointments can be arranged by email. Readings: The required readings are articles and transcripts of speeches that go to the heart of each session topic. These readings are listed in the course schedule and should be read before class. Links to these readings will be posted in the Lessons section of NYU Classes. In addition, students will be expected to read the Wall Street Journal or the New York Times Business Section to keep abreast of economic developments. They should feel free to ask questions and raise issues from the news during class. Assignments: Students will be given four homework assignments during the semester, dealing with different aspects of the most important economic releases. The objective of these assignments will be to familiarize students with the data, especially how they are collected and compiled, how they fit into the overall economic outlook, and what market impact they normally have. These assignments will be posted on NYU Classes. Students may confer with each other on these assignments, but each individual must submit his/her own work. All assignments are due at the start of class. In addition, students will be asked to pick an indicator to study in depth and write a final paper about it. They will then present a (brief) synopsis of the indicator to the class. Important Dates March 22 Midterm May 3 Final Course Schedule: Week 1 – February 9 Introduction and overview of the course The goals of economic analysis and what it tells us about markets. The need to fuse actual economic data with the theory to build a real-world economic framework. Introduce the four approaches to GDP accounting that form the basis for organizing data releases. Data focus: GDP Week 2 – February 16 Discussion of data collection Where data come from and how they are put together Focus on pitfalls of data use and how they are addressed Characteristics of data and the usefulness to markets Data focus: Retail Sales Reading: Fleming, Michael J. and Eli M. Remolona, “What Moves the Bond Market,” Journal of Economic Literature, Vol. 3, December 1997. Week 3 – February 23 Expenditure approach to GDP Discuss elements of demand: consumption, investment, government, and trade Look at swing factors and assess what the data say about the underlying path of growth Data focus: Consumption Reading: D'Antonio, Peter, “Four Approaches to GDP Accounting," handout. Week 4 – March 1 Employment, income, and production approaches to GDP How these approaches are calculated and how the information is used Data focus: Employment Homework #1 due Readings: Yellen, Janet L., "Labor Market Dynamics and Monetary Policy," speech at the Federal Reserve Bank of Kansas City Economic Symposium, August 22, 2014. Bernanke, Ben S., “Recent Developments in the Labor Market,” speech at National Association for Business Economics Annual Conference, March 26, 2012. Week 5 – March 8 Business cycle dynamics How the economy (and the data) move through expansions and contractions Focus on imbalances and corrections Role of exogenous shocks and policy Data focus: Housing – the root of the latest downturn Reading: Foote, Christopher L. et al, “Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis,” Federal Reserve Bank of Boston Public Policy Discussion Paper Series, No. 12-2, April 2012. Week 6 – March 22 Business cycles continued Understanding why recessions begin How recoveries emerge from the depths of recession The difference between cyclical and structural forces Data focus: What’s going on in the labor market? Homework #2 due Midterm: In class – 60 minutes Week 7 – March 29 Tools of the trade How and why we use models to monitor the business cycle Benchmarking the business cycle with full employment Economic imbalances and bubbles Reading: Hatzius, Jan, et al., “Financial Conditions Indexes: A Fresh Look After the Financial Crisis,” Monetary Policy Forum, April 2010. Week 8 – April 5 Monetary policy The different policy options and their market impacts Importance of communication and Fed independence Guest speaker to talk about the financial industry, market reactions to bubbles, and careers Readings: Williams, John C., “Unconventional Monetary Policy: Lessons from the Past Three Years,” Federal Reserve Bank of San Francisco Economic Letter, October 3, 2011. Plosser, Charles I., “The Importance of a Regional and Independent Federal Reserve,” Federal Reserve Bank of Philadelphia Annual Report, 2009. Week 9 – April 12 Monetary policy Policy rules Unconventional policies Data focus: Taylor rule Homework #3 due Readings: Yellen, Janet L., "Normalizing Monetary Policy: Prospects and Perspectives," speech at the Federal Reserve Bank of San Francisco Research Conference, March 27, 2015. Bernanke, Ben S., “Monetary Policy Since the Onset of Crisis,” speech at the Federal Reserve Bank of Kansas City Economic Symposium, August 31, 2012. Week 10 – April 19 Inflation and price stability Determinants of inflation Shocks and relative prices Importance of expectations as a stabilizing force Readings: Bernanke, Ben S., “Outstanding Issues in the Analysis of Inflation,” speech at the Federal Reserve Bank of Boston Annual Economic Conference, June 9, 2008. Kohn, Donald L., “Lessons for Central Bankers from a Phillips Curve Framework,” speech at Federal Reserve Bank of Boston Annual Economic Conference, June 11, 2008. Week 11 – April 26 Fiscal policy Fiscal policy multipliers Temporary vs permanent tax changes, marginal tax rates, incentives Data focus: Trade Readings: Yellen, Janet L., “Monetary Policy and Financial Stability,” 2014 Michel Camdessus Central Banking Lecture, IMF, July 2, 2014. Stein, Jeremy C., “Overheating in the Credit Markets: Origins, Measurement, and Policy Responses,” speech at Federal Reserve Bank of St. Louis symposium, February 7, 2013. Final paper due Week 12 – May 3 Final exam: In class – 120 minutes .
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