Board of Governors of the Federal Reserve System

Figure 1. Citigroup Economic Surprise Index

Figure 1 is a line graph depicting daily observations of the Citigroup Economic Surprise Index, which is plotted in blue. The x-axis ranges from 2005 to 2020 in two-year increments. The y-axis ranges from -200 to 300 in increments of 100. A light gray horizontal line denotes zero. Between 2005 and 2020, the Citigroup Economic Surprise Index fluctuated around zero, rarely reaching values above 100 or below -100. At the beginning of 2020, it plunged below -100 and then spiked to an all-time high of nearly 300, before falling to the mid-100s in fall 2020.

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Figure 2. Nominal Treasury Yields

Figure 2 is a line graph depicting daily observations of the 2-year and 10-year nominal Treasury yields, and the 5-year, 5-year forward rate, from January to October 2020. The y-axis ranges from 0 to 2.5 in 0.5 percent increments. The 2-year yield is plotted in black. It is approximately flat at about 1.5 percent during January and February, then plunges to about 0.25 by the beginning of April, and remains flat at about 0.15 through October. The 10-year yield is plotted in red. It falls from about 2 percent in January 2020 to about 0.75 percent in March before spiking to about 1 percent, remaining between 0.5 and 0.75 through October. The 5-year, 5-year forward rate is plotted in blue. It follows a similar trajectory as the 10-year yield at a higher level. It falls from about 2 percent in January to about 0.75 percent in March, before spiking to about 1.25 percent at the end of March and remaining flat at about 1 percent between April and October. Throughout 2020, the 2-year yield (black line) has remained below the 10-year yield (red line) and the 5-year, 5-year forward rate (blue line).

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Figure 3. Implied Federal Funds Rate

Figure 3 is a line graph depicting federal funds rate paths implied by overnight index swaps for March 31, 2020, June 30, 2020, and September 30, 2020. The x-axis ranges from March 2020 to October 2023. The y-axis ranges from -0.4 to 0.4 in increments of 0.2. All paths extend three years ahead. The implied federal funds rate path for March 31, 2020 is plotted in black. It is approximately flat between 0.07 and 0.11 until March 2022, when it steadily increases to 0.27 in March 2023. The implied federal funds rate path for June 30, 2020 is plotted in red. It slopes down slightly from about 0.07 to -0.03 in March 2022, then slopes up to about 0.06 in June 2023. The implied federal funds rate for September 30, 2020 is plotted in blue. It slopes down from about 0.08 in September 2020 to about 0 in June 2020, then slopes up to about 0.12 in September 2020. All three paths have similar initial values; for the remaining time period, the black line falls above the red and blue line, and the red line falls below the black and blue lines.

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Figure 4. Survey Dispersion of Economic Indicators

Figure 4 depicts survey dispersion of nonfarm payrolls (left panel), unemployment insurance weekly claims (middle panel), and consumer price index (right panel) between 1993 and 2020. Monthly observations of nonfarm payroll survey dispersion are plotted in black. The y-axis ranges from 1 to 10^12 on a logarithmic scale. Between 1993 and the beginning of 2020, it fluctuates in a small range around 10^3 before spiking to about 10^12 in early 2020 and falling to about 10^5 in mid-2020. Weekly observations of unemployment insurance initial claims survey dispersion is plotted in red. The y-axis ranges from 1 to 10^8 on a logarithmic scale. Between 1993 and the beginning of 2020, it fluctuated around 10^2, sometimes spiking to about 10^4. At the beginning of 2020, it spiked to about 10^7 before falling to about 10^3 in mid-2020. Monthly observations of survey dispersion of the consumer price index are plotted in blue. The y-axis ranges from 0 to 0.14. Between 1993 and 2000, it remained close to zero before spiking to about 0.06 in 2005. Between 2008 and 2010, it spiked more frequently, including up to about 0.12. Between 2012 and early 2020, it remained between zero and 0.04 until spiking to 0.04 in early 2020 before falling close to zero in mid-2020.

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Figure 5. Event Study Regression Residuals

Figure 5 depicts residuals from a standard event study (left panel) and an event study using dispersion-adjusted surprises (right panel) for 1993 to 2020. Monthly observations of the standard event study residuals are plotted in black, in the left panel. Dotted horizontal lines denote -1.96 and 1.96, and a gray shaded bar denotes observations from 2020. The standard event study residuals fluctuate almost entirely between the dotted lines between 1993 and 2020. At the beginning of 2020, it plunges to about -100, and then rebounds to zero in mid-2020. Monthly observations for the dispersion-adjusted event study are plotted in black, in the right panel. Dispersion-adjusted residuals fluctuate around zero between 1993 and 2020, spiking outside of the dotted lines occasionally between 1993 and 2004. All observations in 2020 are very close to zero.

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