The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
We use the term structure of disagreement of professional forecasters to document a novel set of facts: (1) forecasters disagree at all horizons, including the long run; (2) the term structure of disagreement differs markedly across variables: it is downward sloping for real output growth, relatively flat for inflation, and upward sloping for the federal funds rate; (3) disagreement is time varying at all horizons, including the long run. These new facts present a challenge to benchmark models of expectation formation based on informational frictions. We show that these models require two additional ingredients to match the entire term structure of disagreement: First, agents must disentangle low-frequency shifts in the fundamentals of the economy from short-term fluctuations. Second, agents must take into account the dynamic interactions between variables when forming forecasts. While models enriched with these features capture the observed term structure of disagreement irrespective of the source of the informational friction, they fall short at explaining the time-variance of disagreement at medium- and long-term horizons. We also use the term structure of disagreement to analyze the monetary policy rule perceived by professional forecasters and show that it features a high degree of interest rate smoothing and time variation in the intercept.