NBER

Mickey D. Levy

Berenberg Capital Markets LLC
1251 Avenue of the Americas, 53rd Floor
New York, NY 10020
USA

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Berenberg Capital Markets LLC

NBER Working Papers and Publications

June 2020Incorporating Scenario Analysis into the Federal Reserve’s Policy Strategy and Communications
with Michael D. Bordo, Andrew T. Levin: w27369
The U.S. economy currently faces a truly extraordinary degree of uncertainty as a consequence of the COVID-19 pandemic. In these circumstances, the Federal Reserve could begin highlighting alternative scenarios to illustrate key risks to the economic outlook, and such scenarios could inform the Fed’s policy strategy and public communications. In this paper, we present a set of illustrative scenarios, including a baseline scenario with a rapid but incomplete recovery this year (an upward-tilting checkmark), a benign scenario in which an effective cure or vaccine becomes available and facilitates a nearly complete recovery by mid-2021, and a severely adverse scenario involving persistently high unemployment and disinflationary pressures. Insights into these scenarios can be drawn from key hi...

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