Incorporating Scenario Analysis into the Federal Reserve's Policy Strategy and Communications
The report examines the uncertainty facing the U.S. economy due to COVID-19 and suggests the Federal Reserve should use scenario analysis to guide policy strategy and public communications.
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| Quick Facts | |
|---|---|
| Report location: | source |
| Language: | English |
| Publisher: | CATO Institute |
| Publication date: | June 1, 2020 |
| Authors: | Andrew Levin, Michael Bordo, Mickey Levy |
| Time horizon: | 2022 |
| Geographic focus: | United_States |
| Page count: | 35 |
Methods
The research method involved analyzing the current economic situation, formulating illustrative scenarios, and drawing insights from historical economic episodes. The authors then identified challenges the Federal Reserve may face under different scenarios.
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Key Insights
The report discusses the high uncertainty in the U.S. economy from COVID-19, advocating for the Federal Reserve to use scenario analysis to inform policy and communication. It presents scenarios including a rapid recovery, a benign scenario with a vaccine leading to recovery by mid-2021, and a severe adverse scenario with persistent high unemployment and deflationary pressures. The report draws insights from historical episodes like the Spanish flu and the Great Depression, concluding with key challenges for the Federal Reserve's monetary policy and emergency credit facilities.
(Generated with the help of GPT-4)
Additional Viewpoints
Categories: 2020 publication year | 2020s time horizon | 2022 time horizon | English publication language | United States geographic scope | covid | deflationary pressures | federal reserve | monetary policy | scenario analysis