Monetary and Fiscal Policy
Jeffrey Parker, Reed College
Class Policy Project
The Class Project for the semester will be a simulated FOMC meeting to be undertaken in class during the second half of November. The meeting will, as such meetings do, consist of two parts: (1) a staff briefing presenting the current situation of the U.S. and world economies as they affect U.S. monetary policy, and (2) a vote to decide the federal-funds-rate target for the upcoming period and any other policy actions proposed. You will participate in both parts.
The briefing will be undertaken by seven groups with two or three students per group. (As of today, there are 19 students in the class, which means 5 groups of three and 2 groups of two.) Each group will address one of the following topics as it relates to U.S. monetary policy over the coming months and years:
- Real economic activity in the U.S.: GDP, industrial production, capacity utilization
- U.S. labor markets: employment, unemployment, wages
- Prices and inflation
- Financial sector: condition of banks and financial markets
- Exchange rates, international balances, and foreign economic conditions
- Fiscal policy and government deficit and debt
- Long-run growth: prospects for investment and productivity growth
Think about your preferences among these topics and talk with your peers about common interests. If you have a group of two or three students who want to work together send me an email no later than noon on Friday, October 7. We will keep your groups together as long as we achieve an overall equilibrium with seven groups of two or three. If you want to work together as a group of two or three. (I will not accept 6 groups of three, because that would leave someone working alone.)
Topics will be allocated by lottery in class on Friday, October 7. The first group/individual drawn may choose a topic; the second group/individual may choose among the remaining topics, etc. A single individual whose name is drawn may either choose a new topic or add into a previously drawn group of two, as long as this does not lead to an infeasible allocation of groups (i.e., someone working alone or breaking up a group of three that has not yet been drawn).
Each group will be responsible for preparing a summary document and an 8-minute presentation on your topic that will be made in class in November. The document need not be a formal paper: it can be a coherent set of notes and bullet points for your presentation.
The actual policy decision will be occur at the class following the one at which the presentations/briefing occurs. Each member of the class will act in the role of an FRB member or a regional Fed bank president. (Conveniently, there are exactly 19 of these!) Role assignments for this part of the project will be chosen later. Each student will get 2.5 minutes to advocate for a decision, followed by a vote of the 12 voting members of the FOMC.
Note that each of these sessions is likely to run a few minutes past 2:00 (but not past 2:10 or so). This should not pose any difficulties because the next class block does not begin until 2:40. However, if you have an irresolvable conflict let me know and I will make sure that you present early in the session.