US Monetary Policy: & Output Gap April, 217 Dr. Edward Yardeni 16-972-7683 eyardeni@ Debbie Johnson 48-663-1333 djohnson@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents 1-4 April, 217 / & Output Gap www.
2 Figure 1. FEDERAL FUNDS RATE: ACTUAL vs. TAYLOR RULE (percent) 2 2 1 Federal Funds Rate Actual (.8) (2.7) 2 1 Mar - 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 2 - Source: Federal Reserve Board and Bureau of Economic Analysis. 1 Figure 2. FEDERAL FUNDS RATE: ACTUAL MINUS TAYLOR RULE 1 - - - 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 2 - Using PCE deflator. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Federal Reserve Board and Bureau of Economic Analysis. Page 1 / April, 217 / & Output Gap www.
2 2 17 Figure 3. REAL ACTUAL & POTENTIAL GDP (billion 29 dollars, saar, ratio scale) 2 2 17 13 13 9 9 Real GDP Actual Potential 49 1 3 7 9 61 63 6 67 69 71 73 7 77 79 81 83 8 87 89 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 Source: Congressional Budget Office and Bureau of Economic Analysis. 1. Figure 4. OUTPUT GAP: REAL ACTUAL DIVIDED BY POTENTIAL GDP 1. 1. 1. 1. 1..9.9.9 49 1 3 7 9 61 63 6 67 69 71 73 7 77 79 81 83 8 87 89 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21.9 Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Congressional Budget Office and Bureau of Economic Analysis. Page 2 / April, 217 / & Output Gap www.
6. Figure. REAL POTENTIAL OUTPUT (yearly percent change) 6..... 4. 4. 4. 4. 3. 3. 3. 3. 2. 2. 2. 1. 1.. 2 4 6 8 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 2 22 24 26 28 3 Source: Congressional Budget Office. 2. 1. 1.. 7. 6.. Figure 6. REAL ACTUAL & POTENTIAL GDP (yearly percent change) Real GDP (4-quarter percent change, annual rate) (1.4) Real Potential Output (1.9) 7. 6.... 4. 4. 4. 4. 3. 3. 3. 3. 2. 2. 2. 2. 1. 1. 1. 1... 49 1 3 7 9 61 63 6 67 69 71 73 7 77 79 81 83 8 87 89 91 93 9 97 99 1 3 7 9 11 13 1 17 19 21 23 2 27 29 31.. Source: Congressional Budget Office and Bureau of Economic Analysis. Page 3 / April, 217 / & Output Gap www.
96 94 92 9 Figure 7. RESOURCE UTILIZATION RATE & OUTPUT GAP (percent) Resource Utilization Rate* Output Gap** 1. 1. 88 86 Feb 1. 84 82.9 8 78 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 2.9 * Average of all industries capacity utilization rate and employment rate, i.e., percentage of labor force that is employed. ** Real GDP divided by Potential Real GDP. Source: Congressional Budget Office, Bureau of Labor Statistics and Federal Reserve Board. 98 Figure 8. RESOURCE UTILIZATION RATE COMPONENTS (percent) 92 88 96 Mar 84 94 8 Feb 76 92 72 9 Employment Rate* Capacity Utilization Rate 68 64 88 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 2 6 * Percentage of labor force that is employed. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics and Federal Reserve Board. Page 4 / April, 217 / & Output Gap www.
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