economic indicator analysis
TRANSCRIPT
Economic Indicator AnalysisAnalyzing the dynamic relationships between Fed speeches, and various economic data
James RansomSeun AboderinScott Babbitt
Agenda● Project Goal and Topic● Key Terminology● Analysis
○ Economic Indicator Numbers○ Fed Fund Rate○ Greenspan, Bernanke, & Yellen
● Summary
Project Goal● Application
○ Utilize Data Science to analyze large structured/unstructured datasets
● Goal○ Compare Economic Climates under current and previous Fed Chairmans
■ Gather Federal Fund Rates■ Analyze Speeches
Janet YellenBen BernankeAlan Greenspan
Why is this important?● Wall Street Traders
○ Use speeches → listen to key indicators○ Predict the next moves
■ Fed■ Economic Indications from speeches
● Consumers ○ The lower the interest rate, the more willing
people are to borrow money to make big purchases, such as houses or cars.
Key Terminology● Fed Fund Rate● Inflation● Unemployment Rate● West Texas Intermediate● Housing Starts
Fed Fund Rate● Interest Rate at which depository institutions lend reserve balances to other depository
institutions overnights on uncollateralized basis○ ^ rate, ^ expensive to borrow○ Determines all other interest rates in US economy○ Since Housing Bubble burst → Target Rate: 0-.25%
● Federal Open Market Committee (FOMC)○ Fed’s primary monetary policymaking body○ Uses Open Market Conditions to set desired target of the rate
Inflation● Rate at which, generally speaking, prices rise → Currency falls.● Central banks attempt to limit such, and avoid deflation
○ Smooth Economy
● Fed’s Monetary Policy Goals○ Promote stable environment:
■ Moderate long-term interest rates■ Price Stability■ Max. Employment
West Texas Intermediate (WTI)● Light, sweet crude oil
○ “Sweet” = .24% sulfur○ Lower than North Sea Brent Crude
Housing Starts● Number new residential construction projects during any months● Critical indicator of economic strength
The Analysis1) Gather Monthly Important indicators Since 1/20002) Correlation and Multiple Regression Analysis
Federal Fund Rate Analysis● Data Set Information
○ Average: 1.82○ Median: 1.00○ Range: 0.07 - 6.54○ Mode: 0.09
Mining for Gold!Text mining, also referred to as text data mining, roughly equivalent to text analytics, is the process of deriving high-quality information from text. High-quality information is typically derived through the devising of patterns and trends through means such as statistical pattern learning.
Text mining: Fed transcripts, statements, Beige books, and minutes
- over 100 official fed documents related to economic outlook from January 2004 to September 2016
Key FindingsKey findings: Overall the general fed speech was similar across the board. The words “Market” and “Rate” word the most frequently used words.
“Will” and “think” were also used in high frequency