government book SYSTEM

Federal Reserve System

Federal Reserve System

Introduction

The government book scheme is not only the subject of study by American monetary economists it is also a major sponsor of their research. The Fed (the Board of Governors plus the twelve regional book Banks) engaged about 495 full-time staff economists in 2002. Thead covering year it committed more than 120 premier learned economists as advisors and travelling to scholars, and conducted some 30 conferences that conveyed 300-plus academics to the podium alongside its own employees economists. It released more than 230 items in its own research periodicals. Judging by the abstracts amassed by the December 2002 issue of the e-JEL, some 74 per hundred of the items on monetary principle published by US-based economists in US-edited journals appear in Fed-published journals or are co-authored by Fed employees economists. Over the past five years, slightly more than 30 percent of the articles by US-based economists published in the Journal of Monetary Economics had at least one Fed-based coauthor. Sthinly more than 80 percent had at smallest one co-author with a Fed affiliation (current or prior Fed paid work including travelling to scholar appointments) listed in an online vita. The corresponding percentages for the Journal of cash borrowing and Banking were 39 percent and 75 percent. The editorial planks (editors and associate editors) of these journals are even more very strongly weighted with Fed-affiliated economists (9 of 11, and 40 of 46, respectively).

Edward J. Kane (1980) has observed that Fed officials naturally promote the kind of staff research that they consider useful, particularly the better quantification of monetary policy linkages. Such research, he noted, tends to regard the Fed as a social-welfare optimizer. We might add that it takes current institutional arrangements for granted. Kane (1993, 290) has likewise noted that “by manipulating the size of staff and the activities for which they are rewarded or penalized, Fed officials help to shape the agenda of contemporary economic research on monetary policy.” Robert D. Auerbach (1985, 52), in an account of political influences on Fed policy-making, has commented that “censorship is present in a important piece of the government Reserve research agencies' publications. Therefore, this voluminous study, circulated at little or no charge, should not be disguised as the work of an independent believe tank.” Eugenia Toma and assess Toma (1985) have argued that the Board of Governors utilised budgetary allocations to penalize two book Banks (St. Louis and Minneapolis) whose study agencies were relatively critical of the Fed's policy-making.

MAKE OR BUY?

The Federal Reserve System faces a “make or buy” decision with respect to economic research: “make” it in-house or “buy” it from outside economists. In perform the Fed does some of each. The Fed's “making” of research comprises (1) employment of staff economists, and (2) in-house publishing of books, periodicals, and working papers. To avoid double-counting, expenses allocated to the second category would exclude the salaries of the staff economists who have written for the ...