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R. Andrew Butters - Indiana University, Kelley School of Business. Bloomington, IN, US

R. Andrew Butters R. Andrew Butters

Assistant Professor of Business Economics and Public Policy | Indiana University, Kelley School of Business

Bloomington, IN, UNITED STATES

R. Andrew Butters is an expert in the areas of industrial organization, productivity, market integration, demand and business cycles.






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R. Andrew Butters is an Assistant Professor in the Business Economics & Public Policy department at the Kelley School of Business at Indiana University. Prior to joining Kelley, he was an Associate Economist in the Economic Research department at the Federal Reserve Bank of Chicago, where he remains a visiting scholar. His research has appeared in journals, such as American Economic Journal: Microeconomics, Economic Inquiry, International Journal of Forecasting, International Journal of Central Banking and Economics Letters. He received his B.A. from the University of North Carolina at Chapel Hill, and his Ph.D. from the Kellogg School of Management at Northwestern University.

Industry Expertise (3)


Hotels and Resorts


Areas of Expertise (6)

Industrial Organization

Applied Econometrics

Demand Fluctuations

Market Integration


Business Cycles

Accomplishments (2)

Rising Star Award, International Industrial Organization Conference


Kellogg School of Management Graduate Fellowship


Education (3)

Kellog School of Management, Northwestern University: Ph.D. 2015

University of North Carolina at Chapel Hill: B.A., Economics 2007

London School of Economics: General Course, Mathematics 2007

Media Appearances (8)

How COVID-19 Is Affecting The Local Economy

Indiana Public Media  online


This week, Noon Edition will talk about how COVID-19 is affecting local economies and what to expect as the pandemic continues. Across the country, concerns about financial stability are rising as people shutter themselves in and try to remain in place to avoid contracting and spreading COVID-19.

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Manufacturing and Industrial Output Sees Worst Month Since 1946

Courthouse News Service  online


“And so I think in terms of how you should maybe take this number and think about what you might expect going forward, I think the consensus of most economists and people that track these sorts of things is that the April number is going to be worse,” Butters said in an interview.

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No college football this year? IU, other universities would face nightmare financial scenario

IndyStar  online


R. Andrew Butters, an assistant professor in the Kelley School of Business’ department of business economics and public policy, said the stimulus package recently passed by Congress is likely to be just the first of a number of such measures in the coming months. “The current stimulus package would be long outlasted” by the time any such measure might be asked for college athletics, Butters said.

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Indiana's Annual Unemployment Rate Rose Nearly 4 Percentage Points From 2019

WFYI  online


Andrew Butters, Indiana University economics professor, said it’s no secret that Indiana’s reliance on manufacturing makes it a little easier to rebound from a pandemic-caused recession. But unlike the Great Recession more than a decade ago, people are more likely to be unemployed long-term.

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What you need to know about Biden's $1.9 trillion stimulus plan

Hoosier Times  online


President Joe Biden has proposed a $1.9 trillion stimulus plan to help the country and the economy recover from the COVID-19 pandemic. It could provide a lot of money to a lot of entities, but it has to get through Congress first. Indiana University economists Kyle Anderson and Andrew Butters assessed the major components of the plan and what’s likely to make it into law.

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What does the economy need now? 4 suggestions for Biden’s coronavirus relief bill

The Conversation  online


Millions of Americans who have lost their jobs as a result of the pandemic have relied on the unemployment insurance system to pay for bills, rent and food. But that system, in terms of staffing and technology, wasn’t designed to handle the unprecedented need seen today. About 5 million people made continuing claims for jobless benefits in January. That’s down from a record 25 million in May but still near the highest the figure had ever been previously.

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U.S. trade policies likely to soften after Biden becomes president

Indianapolis Business Journal  


Having a pandemic follow so closely on the heels of the trade war has only made manufacturers more skittish about doing business with China. “The reality of it is, businesses don’t like uncertainty,” said Andrew Butters, an assistant professor of business economics and public policy at Indiana University’s Kelley School of Business.

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How Biden might stimulate the sputtering US economy: 4 questions answered

The Conversation  


Editor’s note: President-elect Joe Biden has said fixing the economy will be one of his administration’s top priorities when he takes office in January. R. Andrew Butters, assistant professor of business economics and public policy at Indiana University and a visiting scholar at the Federal Reserve Bank of Chicago, explains the challenges Biden will face and what kind of stimulus the U.S. will need.

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Articles (15)

Demand Volatility, Adjustment Costs, and Productivity: An Examination of Capacity Utilization in Hotels and Airlines

American Economic Journal: Microeconomics (Forthcoming)

2019 Measures of productivity reveal large differences across producers even within narrowly defined industries. Traditional measures of productivity, however, will associate differences in demand volatility to differences in productivity when adjusting factors of production is costly.

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Why Don't Retail Prices Vary Seasonally with Demand?

Kelley School of Business Research Paper No. 19-21

2019 A growing literature suggests that uniform pricing in the face of large demand fluctuations represents a substantial deviation from profit maximization -- a puzzle for economists. We show that this need not be the case, through an investigation of quantity and pricing fluctuations at seasonal frequencies.

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On Demand Uncertainty in the Newsvendor Model

Kelley School of Business Research Paper, Forthcoming

2019 I provide three comparative statics involving the level of demand uncertainty for the newsvendor model, two of which lead to robust predictions. I show that for distributions of demand that are greater in the dispersive order, both the expected (censored) sales and share of inventory sold fall.

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The Extent of the Market and Integration Through Factor Markets: Evidence from Wholesale Electricity

Kelley School of Business Research Paper No. 17-50

2017 We document the influence of factor markets in determining the extent of the market, by appealing to the Mundell Hypothesis that trade in goods markets and factor markets are substitutes. We confirm this influence using the U.S. wholesale market for electric power.

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Forecasting Economic Activity with Mixed Frequency Bayesian Vars

CRB of Chicago Working Papers

2016 Mixed frequency Bayesian vector autoregressions (MF-BVARs) allow forecasters to incorporate a large number of mixed frequency indicators into forecasts of economic activity. This paper evaluates the forecast performance of MF-BVARs relative to surveys of professional forecasters and investigates the influence of certain specification choices on this performance. We leverage a novel real-time dataset to conduct an out-of-sample forecasting exercise for U.S. real gross domestic product (GDP). MF-BVARs are shown to provide an attractive alternative to surveys of professional forecasters for forecasting GDP growth. However, certain specification choices such as model size and prior selection can affect their relative performance.

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Diagnosing the Financial System: Financial Conditions and Financial Stress


2012 We approach the task of monitoring financial stability within a framework that balances the costs and benefits of identifying future crisis-like conditions based on past U.S. financial crises. Our results indicate that the National Financial Conditions Index (NFCI) produced by the Federal Reserve Bank of Chicago is a highly predictive and robust indicator of financial stress at leading horizons of up to one year, with measures of leverage playing a crucial role in signaling financial imbalances. At longer forecast horizons, we propose an alternative sub-index of the NFCI that captures the relationship between non-financial leverage, financial stress, and economic activity.

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Monitoring Financial Stability: A Financial Conditions Index Approach

Economic Perspectives

2011 Monitoring financial stability requires an understanding of both how traditional and evolving financial markets relate to each other and how they relate to economic conditions. This article describes two new indexes of financial conditions that aim to quantify these relationships.

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Gathering Insights on the Forest from the Trees: A New Metric for Financial Conditions

The Federal Reserve Bank of Chicago

2010 By incorporating the Harvey accumulator into the large approximate dynamic factor framework of Doz et al. (2006), we are able to construct a coincident index of financial conditions from a large unbalanced panel of mixed frequency financial indicators. We relate our financial conditions index, or FCI, to the concept of a "financial crisis" using Markov-switching techniques. After demonstrating the ability of the index to capture "crisis" periods in U.S. financial history, we present several policy-geared threshold rules for the FCI using Receiver Operator Characteristics (ROC) curve analysis.

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What is the Relationship between Large Deficits and Inflation in Industrialized Countries?

Economic Perspectives

2010 Examining industrialized countries, the authors find that large deficits are not associated with higher inflation contemporaneously, nor are they associated with the emergence of higher inflation in subsequent years. This finding suggests that countries that can afford large deficits have built solid reputations and institutions supporting a sound monetary policy and the reversion to a stable fiscal regime.

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On demand uncertainty in the newsvendor model


R.Andrew Butters


I provide three comparative statics involving the level of demand uncertainty for the newsvendor model, two of which lead to robust predictions. I show that for distributions of demand that are greater in the dispersive order, both the expected (censored) sales and share of inventory sold fall. These monotone comparative statics occur despite the lack of one for the (optimal) inventory choice.

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The extent of the market and integration through factor markets: evidence from wholesale electricity


R. Andrew Butters, Daniel F. Spulber


Abstract We document the influence of factor markets in determining the extent of the market, appealing to the Mundell hypothesis that trade in goods and factor markets are substitutes. We confirm this influence using the U.S. wholesale market for electric power. Although the Eastern, Western, and Texas regions cannot trade electricity, inputs such as natural gas move freely across these regions. Through a set of price transmission ratios, and a supply model for natural gas, we find regional electricity shocks do propagate across regions. We conclude output markets institutionally in autarky achieve modest degrees of economic integration through factor markets. (JEL C32, L94, Q41)

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A New “Big Data” Index of U.S. Economic Activity

The Federal Reserve Bank of Chicago

Scott A. Brave , R. Andrew Butters , David Kelley


Introduction and summary Central banks around the globe are commonly charged with the responsibility of producing timely predictions of the current state of the economy in the course of conducting monetary policy. This task is often difficult given the substantial publication lags in comprehensive measures of economic activity, such as U.S. real gross domestic product (GDP). Accordingly, a large literature has developed methods that utilize the broad set of available high-frequency (typically monthly) economic indicators to track changes in economic activity in real time. In this article, we employ recent advances in this literature to produce a new “big data” index of U.S. economic activity that can be used to track U.S. business and inflation cycles in real time and estimate monthly real GDP growth.

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Looking Down the Road with ALEX: Forecasting U.S. GDP

The Federal Reserve Bank of Chicago

Scott A. Brave , R. Andrew Butters , Michael Fogarty


In this article, we examine the recovery from the recession that began with the onset of the Covid-19 pandemic in the U.S. To do so, we present and discuss for the first time the results from a mixed-frequency Bayesian vector autoregressive model called ALEX. This model uses 107 monthly and quarterly indicators of economic activity to forecast the near-term path of U.S. real gross domestic product (GDP).

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Using the Eye of the Storm to Predict the Wave of Covid-19 UI Claims (REVISED April 2020)

The Federal Reserve Bank of Chicago

Daniel Aaronson , Scott A. Brave , R. Andrew Butters , Daniel Sacks , Boyoung Seo


We leverage an event-study research design focused on the seven costliest hurricanes to hit the US mainland since 2004 to identify the elasticity of unemployment insurance filings with respect to search intensity. Applying our elasticity estimate to the state-level Google Trends indexes for the topic “unemployment,” we show that out-of-sample forecasts made ahead of the official data releases for March 21 and 28 predicted to a large degree the extent of the Covid-19 related surge in the demand for unemployment insurance.

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The perils of working with Big Data and a SMALL framework you can use to avoid them (REVISED March 2, 2021)

The Federal Reserve Bank of Chicago

Scott A. Brave , R. Andrew Butters , Michael Fogarty


The use of “Big Data” to explain fluctuations in the broader economy or guide the business decisions of a firm is now so commonplace that in some instances it has even begun to rival more traditional government statistics and business analytics. Big data sources can very often provide advantages when compared to these more traditional data sources, but with these advantages also comes the potential for pitfalls.

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