The business economist at work: the research department of the Federal Reserve Bank of Cleveland

Business Economics, July, 1991 by Mark S. Sniderman

The principal responsibility of the research staffs of the Federal Reserve banks is to advise their respective presidents on economic policy issues and to gain support for appropriate policies in the business, academic and policymaking communities. At the Cleveland bank, a professional research staff of twenty-one provides internal reports as well as a number of publications to make the results of research available to the interested public.

ALL OF THE Federal Reserve Banks have economic research departments. Although the size of the departments and the composition of their staffs and activities differ among the twelve banks, their principal responsibility is the same: to advise the respective presidents on a host of economic policy issues (the most important of which are monetary policy related). Proof of this importance can be found in the fact that a senior official from the research department accompanies each Reserve Bank president of the Federal Open Market Committee (FOMC) meetings.

This article describes the Research Department at the Federal Reserve Bank of Cleveland, focusing on the department's goals, structure, and operations. No effort is made to compare our Research Department with that of any other Federal Reserve bank.

RESEARCH OBJECTIVES

The objectives of our Research Department are to provide the bank with the analytic basis for making intelligent policy choices on monetary, financial regulatory, and regional economic issues; and to gain support for the appropriate policies within the business, financial, academic, and policymaking communities. Virtually all of the department's activities, including research programs, publications, conferences, and public program efforts, are oriented towards these purposes. In addition, we provide support for the objectives of the President's Office, the Public Affairs and Bank Relations Department, and other parts of the bank. Our efforts result in a number of specific products and ongoing activities.

ORGANIZATION AND STAFF

The Research Department is headed by a senior vice president who is also responsible for the Bank's Public Affairs and Bank Relations Department. The senior vice president and director of research is, in effect, the bank's chief economist. As one of the bank's most senior officers, the research director plays an important role in guiding the performance of the entire organization.

The day-to-day operations of the department are in the hands of an officer whose title is vice president and associate director of research. All of the department's other key personnel report directly to this individual. At year-end 1990, the department's professional economics staff totaled twenty-one, consisting of four managing officers, three research officers, and fourteen economists. Economists are at the Ph. D. level in their training. In addition, the department has another two dozen people providing various kinds of support to the economists and department management.

For several years, the Research Department has been evolving an organizational structure that enables more efficient achievement of our goals and better management of our resources. The department is now organized into five primary units: monetary/macro, applied micro/regional, financial institutions and regulation, business analysis, and a cluster of support groups. The units are designed to group together people with similar interests and responsibilities, but economists are encouraged to regard the groupings flexibly to promote joint research efforts.

Monetary/Macro Unit

The monetary/macro group is studying strategies and tactics of monetary policy, payments system issues, and international finance. In addition to the unit leader, the group has seven economists, one analyst, and two and one-half research assistants. They are making a considerable effort both to keep pace with state-of-the-art monetary theory, which seeks to integrate money with microfoundation/ macro models, and to incorporate this work into our thinking and our policy analysis and advice.

Applied Micro/Regional Unit

The applied micro/regional group is analyzing the micro aspects of some current macro issues, such as labor compensation, productivity, capacity utilization, economic development, and employment/ unemployment. One economist is studying the production function of banks. The group also examines factors that affect the Fourth Federal Reserve District's economy. Priority topics include local labor market dynamics, interregional labor and capital flows, and the regional economic effects of local government expenditures and taxation. The group leader works with three economists and two and one-half research assistants.

Financial institutions and Regulation Unit

The financial institutions and regulation group investigates deposit insurance, failure resolution policies pertaining to depository institutions, banking powers, bank capital requirements, and bank merger and acquisition policies. The unit is composed of four economists and two research assistants. In addition, two professionals handle the department's banking structure casework responsibilities. The group consults with the Bank Supervision and Regulation Department on regulatory policy issues and position papers.