Transcript Charles Steindel, Senior Vice President, Research Services

Roundtable on Federal Statistical Programs
Charles Steindel
Senior Vice President
Federal Reserve Bank of New York
September 25, 2009
All views expressed are those of the author only and not necessarily those of the
Federal Reserve Bank of New York or the Federal Reserve System
Data Flow Over the Cycle

The aggregate numbers look to have tracked the broad cyclical
contours reasonably well.

The downward revision in 2008 growth not a major event.


If the revised numbers had been in, likely a bit less “Wall Street-Main
Street” debate in early 2008.
The downward revision in GDP growth did help answer questions about
the depth of labor market weakness.
2
Gaps in the Details

Data do not clearly elucidate interactions of finance and real
economy.

Measured financial activity in the U.S. is relatively small.
 Value-added

Final sales of financial products even a bit smaller.
Most is imputed consumption and ordinary household transactions and
fees.
 Gross

of finance (plus insurance) only about 8% of GDP.
output share is comparable.
What are the mechanisms by which a disruption to this sector
leads to a major macroeconomic event?
3

Macroeconomic models suggest financial/real interactions
through channels such as the efficiency of capital allocation,
availability of funds to credit constrained sectors, etc.
 First-round
effects are magnified as asset prices move, with spillovers
over to consumer spending, tax receipts, and the like.

These effects not transparent in the usual data, except in large
swings in the capital gains/losses part of stock-flow reconciliation
tables.
4
Data Gaps in the Current Environment

Many of the FR and Treasury programs are designed to sustain
financial market functioning.
 Gauges
of success are things such as movements in spreads,
changes in volumes of issuance.
 These are hard to aggregate, and hard to tie back to the programs.
 Event studies of financial market reactions to policy announcement
and changes have been done, but linkage to real economy goals are
much more difficult to make.
5
Paths Forward

Intellectual challenges are major.

Ultimately, one would need a clear understanding of the
interactions of financial and nonfinancial activity.

Ongoing work of the statistical agencies can aid this effort.

More timely and detailed information on aspects of industry
activities (output, earnings, net interest, capital spending).

More knowledge about intermediate services provided by finance:
what does this consist of? What sector is buying what product?
6