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New uses for new macro derivatives

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  • Justin Wolfers

Abstract

Economic forecasters often look to the performance of futures markets to help predict such economic developments as movements in the price of oil and other commodities. In addition, relatively new financial market instruments, like TIPS, help policymakers get a handle on the public's inflation expectations. ; In the last few years, derivatives markets involving bets on future economic events have emerged. In October 2002, Goldman Sachs and Deutsche Bank joined forces to form a market in what they call \\"Economic Derivatives.\\" More recently, other U.S.-based markets have been created for GDP and the international trade balance, and plans are underway for instruments on the U.S. CPI. ; This Economic Letter summarizes research by Grkaynak and Wolfers (2005), which examines how these markets work and how useful they may be for economic predictions.

Suggested Citation

  • Justin Wolfers, 2006. "New uses for new macro derivatives," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug25.
    • Handle: RePEc:fip:fedfel:y:2006:i:aug25:n:2006-21
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    References listed on IDEAS

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    1. Refet Gürkaynak & Justin Wolfers, 2005. "Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk," NBER Chapters, in: NBER International Seminar on Macroeconomics 2005, pages 11-50, National Bureau of Economic Research, Inc.
    2. Wolfers, Justin & Zitzewitz, Eric, 2006. "Interpreting Prediction Market Prices as Probabilities," IZA Discussion Papers 2092, Institute of Labor Economics (IZA).
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    Macroeconomics; Derivative securities;

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