The Role of the Research Staff
The Federal Reserve System is the largest employer of economists not just in the United States, but in the world. The system’s research staff has around 1,000 people, about half of whom are economists. Of these 500 economists, approximately 250 are at the Board of Governors, 100 are at the Federal Reserve Bank of New York, and the remainders are at the other Federal Reserve banks. What do all these economists do? The most important task of the Fed’s economists is to follow the incoming data on the economy from government agencies and private sector organizations and provide guidance to the policymakers on where the economy may be heading and what the impact of monetary policy actions on the economy might be. Before each FOMC meeting, the research staff at each Federal Reserve bank briefs its president and the senior management of the bank on its forecast for the U.S. economy and the issues that are likely to be discussed at the meeting. The research staff also provides briefing materials or a formal briefing on the economic outlook for the bank’s region, something that each president discusses at the FOMC meeting. Meanwhile, at the Board of Governors, economists maintain a large econometric model (a model whose equations are estimated with statistical procedures) that helps them produce their forecasts of the national economy, and they, too, brief the governors on the national economic outlook. The research staffers at the banks and the board also provide support for the bank supervisory staff, tracking developments in the banking sector and other financial markets and institutions and providing bank examiners with technical advice that they might need in the course of their examinations. Because the Board of Governors has to decide on whether to approve bank mergers, the research staff at both the board and the bank in whose district the merger is to take place prepare information on what effect the proposed merger might have on the competitive environment. To assure compliance with the Community Reinvestment Act, economists also analyze a bank’s performance in its lending activities in different communities. Because of the increased influence of developments in foreign countries on the U.S. economy, the members of the research staff, particularly at the New York Fed and the Board, produce reports on the major foreign economies. They also conduct research on developments in the foreign exchange market because of its growing importance in the monetary policy process, and to support the activities of the foreign exchange desk. Economists help support the operation of the open market desk by projecting reserve growth and the growth of the monetary aggregates. Staff economists also engage in basic research on the effects of monetary policy on output and inflation, developments in the labor markets, international trade, international capital markets, banking and other financial institutions, financial markets, and the regional economy, among other topics. This research is published widely in academic journals and in Reserve bank publications. (Federal Reserve bank reviews are a good source of supplemental material for finance students.) Another important activity of the research staff primarily at the Reserve banks is in the public education area. Staff economists are called on frequently to make presentations to the board of directors at their banks or to make speeches to the public in their district.