View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Data, Data, and Yet More Data
Association for University Business and Economic Research (AUBER) Annual Meeting
University of Memphis
Memphis, Tennessee
October 16, 2006
Published in the Federal Reserve Bank of St. Louis Review, March/April 2007, 89(2), pp. 85-89


’ve long had an interest in data, and I think
that this topic is a good one for this conference. The topic is also one I’ve not
addressed in a speech.
A personal recollection might be a good place
to begin. In the early 1960s, in my Ph.D. studies
at the University of Chicago, I was fortunate to be
a member of Milton Friedman’s Money Workshop.
Friedman stoked my interest in flexible exchange
rates, in an era when mainstream thinking was
focused on the advantages of fixed exchange rates
and central banks everywhere were committed
to maintaining the gold standard. Well, I should
say central banks almost everywhere, given that
Canada had a floating-rate system from 1950 to
1962. Friedman got me interested in doing my
Ph.D. dissertation on the Canadian experience
with a floating exchange rate, and later I did a
paper on nine other floating rate regimes in the
1920s. For this paper I collected daily data on
exchange rates from musty paper records at the
Board of Governors in Washington.
What was striking about the debates over
floating rates in the 1950s is that economists
were so willing to speculate about how currency
speculators would destabilize foreign exchange
markets without presenting any evidence to support those views. In this and many other areas,
careful empirical research has resolved many
disputes. Our profession has come a long way in
institutionalizing empirical approaches to resolving empirical disputes. The enterprise requires
data, and what I will discuss is some of the history of the role of the Federal Reserve Bank of
St. Louis in providing the data.

Before proceeding, I want to emphasize that
the views I express here are mine and do not
necessarily reflect official positions of the Federal
Reserve System. I thank my colleagues at the
Federal Reserve Bank of St. Louis for their comments. Robert H. Rasche, senior vice president and
director of Research, provided special assistance.

The distribution of economic data by the
Research Division of the Federal Reserve Bank
of St. Louis can be traced back at least to May
1961. At that time, Homer Jones, then director
of research, sent out a memo with three tables
attached showing rates of change of the money
supply (M1), money supply plus time deposits,
and money supply plus time deposits plus shortterm government securities. His memo indicated
that he “would be glad to hear from anyone who
thinks such time series have value, concerning
promising applications or interpretations.”
Recollections of department employees from
that time were that the mailing list was about
100 addressees.
Apparently Homer received significant positive feedback, since various statistical releases
emerged from this initial effort. Among these
were Weekly Financial Data, subsequently U.S.
Financial Data; Bank Reserves and Money, subsequently Monetary Trends; National Economic
Trends (1967) and International Economic Trends
(1978), all of which continue to this date. In April
1989, before a subscription price was imposed, the


circulation of U.S. Financial Data had reached
almost 45,000. A Business Week article published
in 1967 commented about Homer that “while most
leading monetary economists don’t buy his theories, they eagerly subscribe to his numbers.” As
an aside, as a Chicago Ph.D., I both bought the
theories and subscribed to the data publications.
By the late 1980s, according to Beryl Sprinkel
(1987, p. 6), a prominent business economist of
the time, “weekly and monthly publications of
the Research Division, which have now become
standard references for everyone from undergraduates to White House officials, were initially
Homer’s products.”
Why should a central bank distribute data as
a public service? Legend has it that Homer Jones
viewed as an important part of his mission providing the general public with timely information
about the stance of monetary policy. In this sense
he was an early proponent, perhaps the earliest
proponent, of central bank accountability and
transparency. While Homer was a dedicated
monetarist, and data on monetary aggregates
have always figured prominently in St. Louis
Fed data publications, data on other variables
prominent in the monetary policy debates at the
time, including short-term interest rates, excess
reserves, and borrowings, were included in the
data releases.
Early on, the various St. Louis Fed data publications incorporated “growth triangles,” which
tracked growth rates of monetary aggregates over
varying horizons. Accompanying graphs of the
aggregates included broken trend lines that illustrated rises and falls in growth rates. This information featured prominently in monetarist critiques
of “stop-go” and procyclical characteristics of
monetary policy during the Great Inflation period.
Does the tradition of data distribution initiated
by Homer Jones remain a valuable public service?
I certainly believe so. But I will also note that the
St. Louis Fed’s data resources are widely used
within the Federal Reserve System. This information is required for Fed research and policy
analysis; the extra cost of making the information
available also to the general public is modest.

The case for making data readily available is
simple. Most macroeconomists today adhere to a
model based on the idea of a rational expectations
equilibrium. Policymakers are assumed to have
a set of goals, a conception of how the economy
works, and information about the current state
and history of the economy. The private sector
understands, to the extent possible, policymakers’
views and has access to the same information
about the state and history of the economy as
policymakers have.
An equilibrium requires a situation in which
(i) the private sector has a clear understanding of
policy goals and the policymakers’ model of the
economy and (ii) the policy model of the economy
is as accurate as economic science permits. Based
on this understanding, market behavior depends
centrally on expectations concerning monetary
policy and the effects of monetary policy on the
economy, including effects on inflation, employment, and financial stability. If the policymakers
and private market participants do not have views
that converge, no stable equilibrium is possible
because expectations as to the behavior of others
will be constantly changing.
The economy evolves in response to stochastic disturbances of all sorts. The continuous flow
of new information includes everything that
happens—weather disturbances, technological
developments, routine economic data reports,
and the like. The core of my policy model is that
market responses and policy responses to new
information are both maximizing—households
maximize utility, firms maximize profits, and
policymakers maximize their policy welfare
A critical assumption in this model is the symmetry of the information that is available to both
policymakers and private market participants. In
cases where the policymakers have an informational advantage over market participants, policy
likely will not unfold in the way that markets
expect, and the equilibrium that I have characterized here will not emerge. Hence, public access

Data, Data, and Yet More Data

to current information on the economy at low
cost is a prerequisite to good policy outcomes.

Data services provided by the Federal Reserve
Bank of St. Louis have evolved significantly from
the paper publications initiated by Homer Jones.
The initial phase of this evolution began in April
1991 when FRED®, Federal Reserve Economic
Data, was introduced as a dial-up electronic bulletin board. This service was not necessarily low
cost. For users in the St. Louis area, access was
available through a local phone call. For everyone
else, long-distance phone charges were incurred.
Nevertheless, within the first month of service,
usage was recorded from places as wide ranging
as Taipei, London, and Vancouver.1 FRED was
relatively small scale. The initial implementation
included only the data published in U.S. Financial
Data and a few other time series. Subsequently,
it was expanded to include the data published in
Monetary Trends, National Economic Trends, and
International Economic Trends. At the end of
1995, the print versions of these four statistical
publications contained short histories on approximately 200 national and international variables;
initially FRED was of comparable scope.
The next step occurred in 1996 when FRED
migrated to the World Wide Web. At that point,
403 national time series became available instantaneously to anyone who had a personal computer
with a Web browser. An additional 70 series for
the Eighth Federal Reserve District were also available. The data series were in text format and had
to be copied and pasted into the user’s PC. In July
2002, FRED became a true database and the user
was offered a wider range of options. Data can be
downloaded in either text or Excel format. Shortly
thereafter, user accounts were introduced so that

multiple data series can be downloaded into a
single Excel workbook, and data lists can be stored
for repeated downloads of updated information.
In the first six months after this version of FRED
was released, 3.8 million hits were recorded to
the web site. In a recent six-month period, FRED
received 21 million hits from over 109 countries
around the world. FRED currently contains 1,175
national time series and 1,881 regional series.
FRED data are updated on a real-time basis as
information is released from various statistical
After 45 years, Homer Jones’s modest initiative to distribute data on three variables has developed into a broad-based data resource on the
U.S. economy that is available around the globe
at the click of a mouse. Through this resource,
researchers, students, market participants, and
the general public can reach informed decisions
based on information that is comparable to the
information policymakers have.
In the past year, we have introduced a number
of additional data services. One of these, ALFRED®
(Archival Federal Reserve Economic Data), adds
a vintage (or real-time) dimension to FRED. The
ALFRED database stores revision histories of the
FRED data series. Since 1996, we have maintained
monthly or weekly archives of the FRED database.
All the information in these archives has been
populated to the ALFRED database, and the user
can access point-in-time revisions of these data.2
We have also extended the revision histories of
many series back in time using data that were
recorded in U.S. Financial Data, Monetary Trends,
and National Economic Trends. For selected
quarterly national income and product data, we
have complete revision histories back to 1959
for real data and 1947 for nominal data. Revision
histories are available on household and payroll
employment data back to 1960. A similar history
for industrial production is available back to 1927.


Eighth Note (1991, p. 1).


We do not maintain histories of daily data series in ALFRED. Interest rates and exchange rates appear at daily frequencies in FRED. In principle, these data are not revised, though occasional recording errors do slip into the initial data releases. Such reporting errors are corrected in
subsequent publications, so there is sometimes a vintage dimension to one of these series.



Preserving such information is crucial to
understanding historical monetary policy. For
example, Orphanides (2001, p. 964) shows “that
real-time policy recommendations differ considerably from those obtained with ex-post revised
data. Further, estimated policy reaction functions
based on ex-post revised data provide misleading
descriptions of historical policy and obscure the
behavior suggested by information available to the
Federal Reserve in real time.” Orphanides concludes that “reliance on the information actually
available to policy makers in real time is essential for the analysis of monetary policy rules.”
Such vintage information also is essential for
analysis of conditions at subnational levels. For
example, in January 2005 the Bureau of Labor
Statistics estimated that nonfarm employment in
the St. Louis MSA had increased by 38.8 thousand
between December 2003 and December 2004.
This increase was widely cited as evidence that
the MSA had returned to strong employment
growth after four years of negative job growth.
However, these data from the Current Employment
Statistics were not benchmarked to more comprehensive labor market information that is available
only with a lag.3 The current estimate of nonfarm
employment growth in the St. Louis MSA for this
period, after several revisions, is only 11.6 thousand, less than 30 percent of the increase originally
Another data initiative that we launched several years ago is FRASER®—the Federal Reserve
Archival System for Economic Research. The
objective of this initiative is to digitize and distribute the monetary and economic record of the
U.S. economy. FRASER is a repository of image
files of important historical documents and serial
publications. At present we have posted the entire
history of The Economic Report of the President,
Economic Indicators, and Business Conditions
Digest. We have also posted images of most issues
of the Survey of Current Business from 1925
through 1990 and are working on filling in images
of the remaining volumes. The collection also

Wall and Wheeler (2005).


See, for example, Poole (2005).


includes Banking and Monetary Statistics and the
Annual Statistical Digests published by the Board
of Governors, as well as the Business Statistics
supplements to the Survey of Current Business
published by the Department of Commerce. We
are currently working, in a joint project with the
Board of Governors, to create digital images of
the entire history of the Federal Reserve Bulletin.
Finally, we are posting images of historical statistical releases that we have collected in the process
of extending the vintage histories in ALFRED
back in time. These images should allow scholars,
analysts, and students of economic history to
reconstruct vintage data on many series in addition to those we are maintaining on ALFRED.

As just indicated, the scope of the archival
information in FRASER extends beyond numeric
data. Ready access to a wide variety of information
is essential for transparency and accountability
of monetary authorities and the public’s full
understanding of policy actions. Since 1994, the
Federal Reserve System and the FOMC have
improved the scope and timeliness of information
releases. I have discussed this progress in previous
speeches.4 Currently, the FOMC releases a press
statement at the conclusion of each scheduled
meeting and three weeks later follows up with
the release of minutes of the meeting. The press
release and the minutes of the meetings record
the vote on the policy action. The policy statement and minutes give the public a clear understanding of the action taken and insight into the
rationale for the action.
Contrast the current situation with the one in
1979. At that time, actions by the Board of
Governors on discount rate changes were reported
promptly, but there was no press release subsequent to an FOMC policy action and FOMC meet-

Data, Data, and Yet More Data

ing minutes were released with a 90-day delay.
On September 19, 1979, the Board of Governors
voted by the narrow margin of four to three to
approve a ½-percentage-point increase in the
discount rate, with all three dissents against the
increase. This information generated the public
perception that Fed officials were sharply divided
and, therefore, that the Fed was not prepared to
act decisively against inflation. John Berry (1979,
p. A1), a knowledgeable reporter at the Washington
Post, observed that “the split vote, with its clear
signal that from the Fed’s own point of view interest rates are at or close to their peak for this business cycle, might forestall any more increases in
market interest rates.” However, the interpretation
of the “clear signal” was erroneous. On that same
day, the FOMC had voted eight to four to raise the
range for the intended funds rate to 11¼ to 11¾
percent. More importantly, three of the four dissents were in favor of a more forceful action to
restrain inflation (see Lindsey, Orphanides, and
Rasche, 2005, pp. 195-96). Neither the FOMC’s
action, the dissents, nor the rationale for the dissents were revealed to the public under the disclosure policies then in effect. The result was to
destabilize markets, with commodity markets, in
particular, exhibiting extreme volatility.

Berry, John. “Fed Lists Discount Rate to Peak of 11%
on Close Vote.” Washington Post, September 19,
1979, p. A1.
Business Week. “Maverick in the Fed System.”
November 18, 1967.
Eighth Note. “Introducing FRED.” Federal Reserve
Bank of St. Louis, May/June 1991, p. 1.
Orphanides, Athanasios. “Monetary Policy Rules
Based on Real-Time Data.” American Economic
Review, September 2001, 91(4), pp. 964.
Poole, William. “FOMC Transparency.” Federal
Reserve Bank of St. Louis Review, January/February
2005, 87(1), pp. 1-9.
Sprinkel, Beryl W. “Confronting Monetary Policy
Dilemmas: The Legacy of Homer Jones.” Federal
Reserve Bank of St. Louis Review, March 1987,
69(3), p. 6.
Wall, Howard J. and Wheeler, Christopher H.
“St. Louis Employment in 2004: A Tale of Two
Surveys.” CRE8 Occasional Report No. 2005-1,
Federal Reserve Bank of St. Louis, February 2005.

The tradition of data services was well established when I arrived in St. Louis in 1998, and I
must say that I am proud that leadership in the
Bank’s Research Division has extended that tradition. Data are the lifeblood of empirical research
in economics and of policy analysis. Our rational
expectations conception of how the macroeconomy works requires that the markets and general
public understand what the Fed is doing and
why. Of all the things on which we spend money
in the Federal Reserve, surely the return on our
data services is among the highest.