Dr. Econ answers many questions with a focus on monetary policy and Federal Reserve related issues. The Doctor does not do homework, give financial advice or provide research support.
Posted October 3, 2013
Dr. Econ, in your May 2013 answer, you mentioned that the unemployment rate alone may not fully capture the overall picture of labor market conditions and that policymakers look at a range of labor market indicators to make monetary policy decisions. Could you tell me about those other indicators?
Recently the Federal Open Market Committee adopted numerical thresholds for the unemployment rate and inflation to communicate the likely future policy direction to the public. Do these apply to both large-scale asset purchases and federal funds rate? What are the benefits of this approach?
Posted May 1, 2013
Indeed, in December 2012, The Federal Open Market Committee (FOMC) announced numerical thresholds for the unemployment rate and inflation that will guide future policy decisions about the federal funds rate.
Why did the Federal Reserve start paying interest on reserve balances held on deposit at the Fed? Does the Fed pay interest on required reserves, excess reserves, or both? What interest rate does the Fed pay?
Posted March 1, 2013
Dr. Econ explores the history of interest on reserves held at the Fed, its significance during the financial crisis, and its role in the Fed’s exit strategy.
Dr. Econ: How severe was the contraction in bank lending that followed the 2008 financial crisis and recession?
Posted December 6, 2012
The total decline in bank loans after their 2008:Q3 peak was the largest contraction in percentage terms during the post-World War II period. In this reply, we’ll compare bank lending trends during and after the two largest credit contractions over the past 100 years.
How did the contraction in bank lending that followed the 2008 financial crisis and recession compare with the decline in bank loans after the stock market crash in 1929 and the Great Depression of the 1930s?
Posted November 1, 2012
The decline in bank loans after their peak in the third quarter of 2008 was the largest contraction in percentage terms during the post-World War II period. Yet the decline during the Great Recession was not nearly as dramatic as the downturn that occurred during the Great Depression of the 1930s.
You have written about Fed transparency before, but I wonder if the Federal Reserve has learned any new lessons in the aftermath of the financial crisis?
Posted August 19, 2012
Dr. Econ explains how the financial crisis of 2007 and the global recession that followed have brought the issue of central bank transparency front and center.
Posted April 27, 2012
Dr. Econ discusses the Fed’s role in processing checks.
Posted April 27, 2011
Dr. Econ explains that while commodity prices rose noticeably in the late 2008 to early 2011 period, several factors mitigate their impact on headline inflation.
Posted October 1, 2010
Dr. Econ found that 48 states faced budget shortfalls in fiscal years 2009 and 2010, while 46 states continued to face budget shortfalls for the current fiscal year 2011.
Is the dramatic increase in the national unemployment rate spread equally across demographic groups or have some been hit harder than others?
Posted August 1, 2010
Dr. Econ examines whether the increase in national unemployment spread equally across demographic groups.
Posted May 1, 2010
Dr. Econ explains whether the recent buildup of bank reserves is inflationary.
I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?
Posted March 1, 2010
Dr. Econ explains whether banks increasing their excess reserve holdings is related to monetary policy
Posted January 1, 2010
Dr. Econ explains why the unemployment rate so high and whether it fully captures labor market weakness.
Posted December 1, 2009
Dr. Econ explains where to find statistics on the share of subprime mortgages to total mortgages.
Posted October 1, 2009
Dr. Econ explains where statistics on housing net worth and mortgage debt can be found.
What are some of the commonly used statistics on housing prices and housing market conditions and where can I find them?
Posted September 1, 2009
Dr. Econ explains commonly used statistics on housing prices and housing market conditions and where to find them.
How has the percentage of consumer debt compared to household income changed over the last few decades? What is driving these changes?
Posted July 1, 2009
Dr. Econ explains how has the percentage of consumer debt compared to household income changed over the last few decades and what is driving these changes
Posted June 1, 2009
Dr. Econ explains what ignited the financial crisis and how the Fed responded to it.
Has the financial crisis that started in 2007 had an impact on the Federal Reserve’s ability to make monetary policy by targeting the overnight interbank federal funds interest rate?
Posted May 1, 2009
Dr. Econ explains how the financial crisis that started in 2007 has had an impact on the Federal Reserve’s ability to make monetary policy by targeting the overnight interbank federal funds interest rate.
Can you describe some of the key actions the Federal Reserve took in 2007, 2008, and early 2009 to address the crisis that first hit the financial system in August 2007?
Posted January 1, 2009
Dr. Econ describes some of the key actions the Federal Reserve took in 2007, 2008, and early 2009 to address the crisis that first hit the financial system in August 2007.
How do you interpret the Consumer Credit Report (G.19 Release) published by the Federal Reserve in the financial climate of 2008?
Posted September 1, 2008
Dr. Econ explains how to interpret the Consumer Credit Report (G.19 Release) published by the Federal Reserve in the financial climate of 2008.
When the Fed announces a new discount rate decision, who makes the decision? Do they use the same information and research that are used by the Federal Open Market Committee to set the target for the federal funds rate?
Posted August 1, 2008
Dr. Econ discusses how the Fed determines the current discount rate.
Posted March 1, 2008
Dr. Econ explains the relevance of the Phillips curve to modern economies.
Posted January 1, 2008
Dr. Econ discusses how many recessions have occurred in the U.S. economy.
Dr. Econ, can you show me a chart of personal income and net worth of U.S. households? Has the recent softness in the housing market and the economy affected personal income and household net worth?
Posted December 1, 2007
Dr. Econ shows a chart of personal income and net worth of U.S. households. This represents the recent softness in the housing market and the economy affected personal income and household net worth.
Posted November 1, 2007
Dr. Econ explains the possible causes and consequences of higher oil prices on the overall economy.
When was the Federal Deposit Insurance Corporation’s $100,000 coverage implemented and what was the deposit insurance limit in prior years?
Posted September 1, 2007
Dr. Econ explains when the Federal Deposit Insurance Corporation’s $100,000 coverage was implemented and what the deposit insurance limit was in prior years.
Posted August 1, 2007
Dr. Econ explains why did the Fed inject liquidity into the financial system in August 2007.
Why do economists tend to look at employment and not earnings when both are important? Do they ever look at both? What does it matter if employment is high if everyone is earning only the minimum wage?
Posted July 1, 2007
Dr. Econ discusses why economists tend to look at employment and not earnings.
Posted June 1, 2007
Dr. Econ explains the U.S. trade deficit and the link between it and exchange rates.
How is unemployment measured and what are different types of unemployment? Also, what are the economic disadvantages associated with high employment?
Posted May 1, 2007
Dr. Econ discusses how unemployment is measured, different types of unemployment, and economic disadvantages associated with high employment.
What are the goals and tools of U.S. monetary policy, and how do they differ from those of other central banks?
Posted April 1, 2007
Dr. Econ explains the goals and tools of U.S. monetary policy and how they differ from those of other central banks.
What are the costs and benefits of inflation targeting? Should the Fed adopt an inflation targeting monetary policy regime?
Posted March 1, 2007
Dr. Econ explains the costs and benefits of inflation targeting and answers the question of whether the Fed should adopt an inflation targeting monetary policy regime.
Posted February 1, 2007
Dr. Econ explains the difference between a recession and a depression.
How does the slowdown in the housing market affect the construction sector and other housing-dependent industries?
Posted January 1, 2007
Dr. Econ explains how the slowdown in the housing market affects the construction sector and other housing-dependent industries.
How does the slowdown in the housing market affect the construction sector and other housing-dependent industries?
Posted December 1, 2006
Dr. Econ discusses how the slowdown in the housing market affects the construction sector and other housing-dependent industries.
Are all commercial banks regulated and supervised by the Federal Reserve System, or just major commercial banks?
Posted November 1, 2006
Dr. Econ explains bank regulations and supervisions and the role of the Federal Reserve System in this process.
Posted October 1, 2006
The Fed makes an effort to inform and educate the public.
Posted September 1, 2006
Dr. Econ explains what steps the Federal Reserve has taken to improve transparency.
Given the relatively small size of the federal funds market, why are all short-term rates tied to the federal funds rate?
Posted August 1, 2006
Dr. Econ tells us why the short-term rates are tied to the federal funds rate, given the relatively small size of the federal funds market.
What is LIBOR and why do LIBOR interest rates move closely in line with short-term interest rates in the U.S.?
Posted July 1, 2006
Dr. Econ tells us what LIBOR is and why LIBOR interest rates move closely in line with short-term interest rates in the U.S.
Posted June 1, 2006
Dr. Econ examines why Fed officials communicate with the nation so often.
Posted May 1, 2006
Dr. Econ explains where the Federal Reserve gets money to fund its operations.
Once the Federal Open Market Committee (FOMC) determines a new short-term interest rate, when is the new rate implemented in the market? The day of the FOMC meeting?
Posted April 1, 2006
Dr. Econ explains when new interest rates set by the FOMC are implemented.
Posted March 1, 2006
Dr. Econ explains how inflation affects economies
Posted February 1, 2006
Dr. Econ explains the costs of deflation.
What kinds of research and analysis do economists at the Federal Reserve System do, what types of information do they use, and what kinds of presentations do they make?
Posted January 1, 2006
Dr. Econ explains what kind of research and analysis economists do at the Federal Reserve.
Can the Fed conduct monetary policy through the purchase and sale of stocks on the New York Stock Exchange?
Posted November 1, 2005
Dr. Econ examines whether the Fed can conduct monetary policy through the purchase and sale of stocks on the New York Stock Exchange.
Posted October 1, 2005
Dr. Econ explains differences between debt and equity markets.
Credit cards are commonly used to buy goods and services are credit card transactions or credit card debt included in demand deposits or the money supply? If not, why doesn’t the definition of the money supply include them?
Posted September 1, 2005
Dr. Econ explains why the use of credit, such as a credit card, is not considered part of the money supply.
Are 401k and IRA contributions included in the national savings rate, and if so, how is this calculated?
Posted August 1, 2005
Dr. Econ explains how the national savings rate is figured, and discusses recent trends in national savings.
Posted July 1, 2005
Dr. Econ explains who holds U.S. public debt.
Posted June 1, 2005
Dr. Econ defines the prime rate and discusses commercial and consumer loans. Also discussed is the relationship between the prime rate and the fed funds rate.
Why is there such a time lapse getting the latest report on Gross Domestic Product (GDP)? In May 2005, we are just getting the preliminary GDP report for the quarter that ended in March 2005.
Posted May 1, 2005
Dr. Econ defines the Gross Domestic Product (GDP) and explains the complicated steps necessary for its calculation. He also examines the trade-off between timeliness and accuracy, and the need for advance, preliminary and final estimates.
Posted April 1, 2005
Dr. Econ discusses monetary policy, and how it is used to stimulate and restrain the economy. Also discussed is the effect of the fed funds rate on other interest rates.
Posted March 1, 2005
Dr. Econ describes the differences between a bank and a credit union, and how each is regulated.
Posted February 1, 2005
Dr. Econ examines a common misconception about how the Fed conducts monetary policy using the money supply. He also looks at the relationship between the money and the economy.
Posted January 1, 2005
Dr. Econ defines financial markets and explains why financial institutions and markets are important to economic growth and stability.
Why do we need a central bank like the Fed when the laws of supply and demand will keep everything working perfectly?
Posted December 1, 2004
Dr. Econ discusses the important roles played by Federal Reserve System in the U.S. economy, some of which are not always visible to the public, though they directly and indirectly affect participants in many financial transactions.
How does the Federal Reserve define “loans and leases,” and how do they relate to “commercial and industrial loans”?
Posted November 1, 2004
Dr. Econ explains how loans and leases are defined and where to find information on them. He also discusses the importance of commercial and industrial loans to banking institutions and the economy.
What is “core inflation,” and why do economists use it instead of overall or general inflation to track changes in the overall price level?
Posted October 1, 2004
Dr. Econ discusses the Consumer Price Index (CPI) and what it comprises. Also examined is price fluctuation, and the volatility of food and energy prices.
I find definitions of the federal funds rate stating that it can be both above and below the discount rate. Which is correct?
Posted September 1, 2004
Dr. Econ discusses the federal funds rate as a tool of monetary policy, and how the fed funds market works.
Posted August 1, 2004
Dr. Econ explains how inflationary expectations typically arequickly-although not necessarily fully-incorporated into the nominalinterest rates observed in financial markets, and are important factorsin determining market or nominal interest rates and shifts in yieldcurves.
What is a yield curve, and how do you read them? How has the yield curve moved over the past 25 years?
Posted July 1, 2004
Dr. Econ explains how yield curves track the relationship between interest rates and the maturity of U.S. Treasury securities at a given time. He will compare several yield curves and see what information they might provide economists.
Why does the Federal Reserve consider nonfarm payroll employment to be an important economic indicator?
Posted June 1, 2004
Dr. Econ discusses various sets of data used in examining employment, how they differ and how they influence monetary policy.
What type of fiscal policy is the United States following in 2004? How does fiscal policy impact the economy?
Posted May 1, 2004
Dr. Econ compares and contrasts monetary and fiscal policy, then discusses surpluses versus deficits, and their effects on the economy.
How much currency is circulating in the economy, and how much of it is counterfeit? Is currency included in the money supply statistics?
Posted April 1, 2004
Dr. Econ describes how currency is included in measures of the money supply. He also discusses the impact of currency held overseas.
Companies are beginning to compete for workers by increasing wages. Is the Federal Reserve concerned that these wage increases will result in higher prices throughout the economy? If so, what could the Federal Reserve do to counteract this trend?
Posted March 1, 2004
Dr. Econ examines the relationship of inflation, wages, productivity, and the economy, and how monetary policy can influence each.
Posted February 1, 2004
Dr. Econ examines the value of education and how workplace competition affects and reshapes the economy.
In times of financial stress, what typically happens to the difference between interest rates on corporate bonds and U.S. Treasury bonds?
Posted January 1, 2004
Dr. Econ explains how bonds work, then proceeds to a comparison of corporate and U.S. Treasury bonds, showing how they react to risk.
Posted December 1, 2003
Dr. Econ discusses the main drivers of housing affordability: family income and mortgage rates.
Posted November 1, 2003
Dr. Econ explains the Beige Book and discusses its role in setting interest rates for monetary policy.
What is the advantage of putting your money in a Fed member bank versus a bank that is a nonmember? How do you know which banks are Fed members?
Posted October 1, 2003
Dr. Econ explains the differences between a Federal Reserve System member bank and a nonmember bank, with an eye towards how consumers might be affected.
Posted September 1, 2003
Dr. Econ discusses the unique structure, role, and responsibilities of the Federal Reserve System within the U.S. government.
Posted August 1, 2003
Dr. Econ discusses interest rates, with explanations of the real and nominal interest rates, as well as a discussion of the effects of inflation.
How has the level of consumer debt changed in recent years? Are people more in debt now than ever before? How is consumer debt tracked, and what amount of debt is considered excessive?
Posted July 1, 2003
Dr. Econ discusses why consumer debt is a concern, and examines recent trends in household debt and income.
Which organization determines whether the U.S. economy is in a recession and what indicators are used to make that determination?
Posted June 1, 2003
Dr. Econ talks about business cycles, and examines the role of the National Bureau of Economic Research (NBER) in determining recessions and expansions. Also discussed are some of the criteria used by the NBER.
Posted May 1, 2003
Dr. Econ defines deflation, discusses the risk of deflation given the 2001 recession and slower growth through the first half of 2003, and explains what the Fed can do to prevent deflation.
Why do not the goals of the Federal Reserve include helping a region of the country that is in a recession?
Posted April 1, 2003
Dr. Econ examines the monetary policy instruments available to the FOMC, and the role of the Federal Reserve Banks in shaping monetary policy.
Posted March 1, 2003
Dr. Econ shows you how you can use publicly available data to learn about the market’s opinion of future FOMC federal funds rate decisions.
Posted February 1, 2003
Dr. Econ examines potential dilemmas faced by college students including shrinking education budgets, reduced household income, and increased competition for jobs.
Posted January 1, 2003
Learn about the history of monetary policy and find out why the FOMC changed its approach to monetary policy in the early 1980s.
Posted December 1, 2002
While there are some similarities between the 2001 recession and the Great Depression, there are also several key differences between the two business cycles.
What is the difference between private and social costs, and how do they relate to pollution and production?
Posted November 1, 2002
First, definitions of private costs, external costs, and social costs. Next, an examination of the impact external costs can have on prices, production, resource allocation, and competition.
Posted October 1, 2002
Dr. Econ discusses how inflation is defined and measured, the types and causes of inflation, and who measures inflation.
Does the Federal Reserve System hold stocks or other commonly traded equities like the Bank of Japan recently started doing?
Posted September 1, 2002
The Federal Reserve System does not hold corporate stocks, but it does hold government securities. In 2001 government securities accounted for a significant share of Federal Reserve System’s $654 billion in assets. The Federal Reserve’s securities portfolio is composed of securities issued by the United States government or government agencies.
Posted August 1, 2002
The discount rate is the interest rate the Federal Reserve Banks set onsecured overnight loans to depository institutions. The Federal ReserveBank of New York’s discount rate was 1.00 percent from August 1937 toJanuary 1948. A new Fed proposal may change how the discount rate isset.
I heard an investment analyst say that the Fed had increased the money supply, and that would lead to economic growth. What indicators would tell me about the money supply and Fed monetary policy?
Posted July 1, 2002
The Federal Reserve Board publishes information on a variety of interest rates and monetary aggregates that you might find useful. Let me recommend some sources for you to keep up to date on Fed policy actions, interest rate and money supply statistics, and other online publications.
Posted June 1, 2002
The Discount Rate is the interest rate the Federal Reserve Banks charge depository institutions on overnight loans. The primary conventional mortgage rate is a market-determined interest rate for long-term residential mortgage loans. How do these two interest rates behave over time?
Posted May 1, 2002
Business cycles are the “ups and downs” in economic activity, defined in terms of periods of expansion or recession. During expansions, the economy, measured by indicators like jobs, production, and sales, is growing–in real terms, after excluding the effects of inflation. Recessions are periods when the economy is shrinking or contracting.
Posted April 1, 2002
This answer illustrates some ways in which the U.S. banking system is similar (providing banking and financial services) to the banking systems in other industrialized countries and other ways (banking regulation, structure of the industry, powers of banks to engage in securities and insurance activities) in which it differs from them.
Posted March 1, 2002
Both monetary and fiscal policy may be used to influence the performance of the economy in the short run.
Posted February 1, 2002
Why Americans are in the aggregate saving far less (or consuming much more) as a percentage of disposable personal income than they did overmost of the past 40 years.
Why did the Federal Reserve System lower the federal funds and discount rates below 2 percent in 2001?
Posted January 1, 2002
Discussion of the Fed’s monetary policy to counteract the slowing economy by lowering interest rates in the federal funds market and at the discount window. The 2001 decisions resulted in the lowest federal funds rate since 1961 and the lowest discount rate since 1948.
Does a central bank have more information about the economy than the government, and, If so, what type of information?
Posted December 1, 2001
Discusses the role of the Federal Reserve as a generator of economicinformation for use by government agencies, businesses, academics,and the public through statistics and surveys, as well as various other Fed publications.
Posted November 1, 2001
Discusses how reserve requirements held as vault cash or deposits at regional Federal Reserve banks aid in the conduct of open market operations.
Posted October 1, 2001
Reference to an article that provides a thorough analysis of the Federal Reserve’s response to the attacks, the economic outlook over the short-run,and the longer-term prospects for the economy.
Posted September 1, 2001
Discusses the capital requirements set by the 1988 Capital Accord that are met through two capital tiers in order to enhance the safety and soundness of capital in the international banking system.
Posted August 1, 2001
Explanation of how reserve requirement ratio changes affect the money stock.
Posted July 1, 2001
Discusses the role of banks as key components of the financial system and how bank assets and liabilities help channel funds from savers toborrowers in a more efficient manner.
What are the money and foreign exchange markets? What forces influence supply and demand in these markets?
Posted June 1, 2001
General explanation of money markets and foreign exchange markets, as well as some of the principal factors that influence money market rates and foreign exchange rates.
First, why haven’t the boundaries of the 12 Federal Reserve Districts been adjusted to reflect changes in population or economic growth? Second, do the western states receive similar central banking and research services from the Federal Reserve, as do other areas of the country where Reserve Banks serve smaller geographic areas and populations?
Posted May 1, 2001
Brief reference to Fed history, as well as a discussion of Fed district boundaries and Fed district comparison.
What are the rationales for using a fixed money supply rule, rules employing feedback mechanisms, or allowing policy makers discretion when setting monetary policy?
Posted April 1, 2001
Discussion focusing on the rules of monetary policy, including the Taylor Rule, feedback mechanisms, and the discretion of policymakers in the art of monetary policy.
What will happen to the Fed if the national debt is paid off? Could the Fed buy precious paintings in the open market, instead of using Treasury debt to implement monetary policy?
Posted March 1, 2001
Discussion regarding changes that might occur in implementing monetary policy without treasury debt. Also examines how payingoff the national debt would affect the Fed securities portfolio.
Posted February 1, 2001
Explanation of bull markets and bear markets in relation to stock market indexes, such as the Dow Jones Industrial Average.
Posted January 1, 2001
Discussion of the relationships between Social security and surplus, and social security and trust fund.
Posted December 1, 2000
Explanation of T-bills, treasury auctions, and t-bill interestrate movements.
Why did the national debt in the hands of the public increase from approximately $700 billion to over $2,400 billion during the 1980s?
Posted November 1, 2000
Explanation for the increase in national debt in the 1980s, in which increases in government spending and decreases in tax receipts were significant contributing factors.
Posted October 1, 2000
Discusses some of the key components in calculating national wealth (i.e. U.S. assets) and conducting cross-country comparisons. Mentions the importance including measures of wealth to provide a standard measure for comparison, such as distribution of wealth based on family net worth.
Posted September 1, 2000
Discusses how commercial and industrial loans enable business borrowing, and how bank loans to business supply funds for a wide range of business purposes, including inventory financing and investments in equipment.
Posted August 1, 2000
Describes some of the changes that would result from payingoff national debt for key figures, such as the Federal Reserve, the financial markets and institutions, and for other holders of government debt. Also presents some key financial statistics, such as changes that would result in Treasury securities and gross public debt.
Posted July 1, 2000
Why study economics? This discussion explains why we needeconomists and the study of financial and regional economic issues to make sense of our complex environment.
Posted June 1, 2000
Considers how changes in credit standards and asset quality affect credit cycles.
Posted May 1, 2000
Discusses some of the primary responsibilities of bank regulatorsin ensuring the safety and soundness of financial institutions, as well as the changes to bank regulation and supervision brought about by the Gramm-Leach-Bliley Act of 1999.
Are recent Fed actions and monetary targets appropriate for our technology- and information-based economy?
Posted April 1, 2000
Considers the relationship between monetary policy & technology in the information-based economy and distinguishes between the success of monetary targets in the old and new economy.
Discuss the definitions and means of calculating national income, personal income, and disposable personal income
Posted March 1, 2000
A discussion of the definitions and means of calculating nationalincome, personal income, and disposable personal income.
Posted February 1, 2000
Referencing the history of monetary policy, (i.e. the Treasury Accord),this discussion focuses on why independent central banks, such as the Federal Reserve are more successful at reaching price stability through inflation and interest rate control than central banks acting under the direction of the treasury or the government.
Posted January 1, 2000
Discussion surrounding GDP growth rate comparisons and the implications for divergent standards of living. Emphasizes the importance of normalizing the statistics used in an international comparison of growth rates by incorporating the effects of population growth.
Posted December 1, 1999
The first part of this three-part Dr. Econ discusses why investmentbanks establish a syndicate in new securities offerings. The secondand third sections address the implications of the Employee Retirement Income Security Act of 1974 (ERISA) and the role of insurance companiesas major bondholders in the financial markets.
Posted November 1, 1999
While no single indicator is used, several leading indicators,such as Gross Domestic Product (GDP), inflation, and totalnonfarm payroll employment help the Federal Reserve monitorhow successful it is in attaining its goals.
Posted October 1, 1999
Discusses the implications of an imbalance between imports& exports including changes to the foreign exchange rate, currency devaluation, and dollar depreciation
Posted September 1, 1999
Discusses the distinction between deflation and disinflation,as well as some of the principle causes of deflation.
Posted August 1, 1999
Discussion of factors that have affected economic knowledge of, and the strength of business cycles, including changing job composition, the creation of the Federal Reserve, as well as the shift in production from a manufacturing economy to a service economy.
Posted July 1, 1999
Discussion surrounds the role of business cycles, and the risk & return of international stock markets in building a diversified portfolio for investing.
Posted February 1, 1999
Discusses the adjustment costs associated with rising inflation, as well as the fallacy in assuming a positive correlation between inflation & output.
Posted January 1, 1999
In the 1910s, the discount rate variance among the regional banks was large because capital did not flow as easily fromone region to another. Today, however, the single national discount rate among Fed Districts reflects a unity in national credit markets.
The Economist magazine these days is concerned that 1. Americans have created “asset inflation” through their continuing purchase of equities and 2. Americans are spending more than they’re saving. I must assume that equities are not considered “savings” by economists, though laymen will consider them so. How come?
Posted December 1, 1998
Discussion concerning what constitutes saving or investment with regard to equities, particularly during a period of “asset inflation” in the stock market.
How would Russian use of the dollar as a medium of exchange along with the ruble affect U.S. monetary policy?
Posted November 1, 1998
The proposal to go to a dollar-based economy in order to alleviate the Russian currency crisis would not greatly impact U.S. monetary policy. However, because the use of the dollar as a medium of exchange with the ruble would increase the quantity of U.S. currency in circulation, the establishment of a currency board would help lessen any effects on the U.S. monetary base and help facilitate the conduct of monetary policy.
Posted July 1, 1998
The usefulness of commodity prices as a leading indicator of general price inflation is questionable because they are dependent upon the type of demand shift that occurs, for example, economy-wide demand shocks (i.e. oil shock of the 1970s)or shifts in the relative demand for commodities and goods.
Posted June 1, 1998
Discusses the relationship between inflation and distortions in economic decisions, which can have adverse effects on long-term economic growth by creating additional costs such as an inflation risk premium, and in the case of high rates of inflation, an inflation tax.
Posted May 1, 1998
Because overall economic activity has been robust, demand for M2 has risen. However, due to deregulation and innovation, M2 and the monetary aggregates in general play only a minor role in the formulation of monetary policy.
Posted April 1, 1998
Details some of the factors that led to the East Asian currencycrisis and how some countries tried to fight off attacks ontheir currencies in order to avoid currency depreciation.
Posted March 1, 1998
One of the few rules referenced in designing and implementing monetary policy, the Taylor Rule provides recommendations for setting real-short term interest rates according to factors such as actual inflation vs. targeted inflation and the level of full employment. In all, it guides policy to help a central bank achieve both its short-run goals for stabilizing the economy and its long-run goals for keeping inflation low.