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Ask An Economist

Wednesday, October 1, 2008

Rubén Hernández-Murillo is an economist in the Research division at the Federal Reserve Bank of St. Louis. In addition to his general research responsibilities, he coordinates the production of the St. Louis section of the Beige Book. He is also a member of the team that compiles the Burgundy Books, a sort of Beige Book for each of the four zones in the Eighth District. In his spare time, he writes poetry; he also collects hats. For more on Hernández-Murillo’s research, see

What is the Beige Book, and how is it useful?

The Beige Book, officially called the Summary of Commentary on Current Economic Conditions, is an anecdotal description of economic activity in each of the 12 Federal Reserve districts. To produce the Beige Book, each Federal Reserve Bank gathers information about its district through a network of business contacts across many industries, such as manufacturing, services, real estate, banking and agriculture. The contacts are promised anonymity in return for accurate, honest and current information. Staff members at one of the 12 Federal Reserve banks compile the district reports into the national summary of economic conditions. The Beige Book is released two weeks prior to every scheduled meeting of the Federal Open Market Committee. (See

Although the Federal Reserve relies, for the most part, on formal data and sophisticated statistical methods for conducting monetary policy, anecdotal information—such as that collected for the Beige Book—is also used to confirm or to help understand trends that arise from the formal data. Formal statistics, such as the series on Gross Domestic Product (GDP) and the Consumer Price Index, do not provide a perfect picture of the economy, and informal or anecdotal information yields insight into the formal statistics to help fill the gaps. For example, except for financial indicators, most formal data are released with a lag and, therefore, do not necessarily present an up-to-date picture of the economy. The anecdotal information collected from the people who are actually making day-to-day business decisions provides timely information about some of the trends in the data that may be occurring.

In my own research, I have used econometric techniques to analyze the predictive power of the Beige Book. My co-authors and I found that the Beige Book’s national summary and the district reports improve predictions of GDP and aggregate and regional employment.

At the Federal Reserve Bank of St. Louis, the Center for Regional Economics—8th District (CRE8) has taken this analysis to a new level. In March, the St. Louis Fed started publishing a quarterly summary of economic conditions for each of the District’s four zones, which are centered around St. Louis, Memphis, Louisville and Little Rock. These reports, dubbed Burgundy Books, provide the same type of anecdotal information as the Beige Book, but the analysis is broken down to give a snapshot of local economic conditions. The Burgundy Books are available on the St. Louis Fed web site at