As the director of research at the New York Fed, I lead a team that intensively studies the economy. In addition to evaluating monetary policy and labor markets, our team works to better understand topics including financial market function, supply chain constraints, hybrid work, student loan delinquencies, and housing starts.
Our team, like other research groups throughout the Federal Reserve System, shares what we find with Fed policymakers on the Federal Open Market Committee (FOMC). The members of the FOMC determine the nation’s monetary policy under a narrow Congressional mandate to pursue stable prices and maximum employment.
Research teams, though, like the one here at the New York Fed, have a broader scope.
A comparison is handy. Imagine an expedition in unmapped territory with unpredictable weather. The expedition sends a scouting party ahead to survey conditions, then report back to the expedition leaders.
Any useful scouting team needs to look far and wide. That’s what Federal Reserve Bank research teams, including the New York Fed’s, do.
We work to better understand everything that could matter for the performance of the “territory” that is the American economy. To me, nothing that meets this test is off limits. My peers and I try to do as much as we can to ensure the FOMC is never caught off guard.
This is why, even as we always seek to understand standard macroeconomic and financial forces better, we also rigorously dive into the many topics that affect both.
Consider our work on differences across consumers in their balance sheets, age, and education. These differences may matter for the transmission of monetary policy and for the functioning of labor markets. Or they may turn out not to. Either way, research teams have to know. Similarly, we must work to understand how fiscal, trade, and technology-related policies change the efficacy of monetary policy.
Or consider our work on life in the workplace. This work touches on norms and customs in labor markets and beyond, because these forces have the power to change consumer and business decisions at scale in the U.S. economy. Think of the massive shift in the past half-century in women’s participation in the labor market and higher education.
Or think of demographic shifts, including fertility trends or immigration policies. Or extreme weather. Each of these forces changes the conditions the expedition may encounter, and hence our leaders’ ability to deliver on their mission.
Maybe most importantly, looking through a wide lens helps us be prepared for surprises even when we don’t have the perfect tools at hand. The Global Financial Crisis and COVID-19 pandemic are two such events. When the financial crisis hit, we did not have a model of a nationwide housing and asset-backed-security meltdown happening simultaneously. When the global pandemic hit, we did not have a model for how worldwide shutdowns would affect the economy. Yet we had available, and had long contributed to, research in areas that emphasized “frictional” labor, asset, and consumer goods markets. This work provided us a launchpad to rapidly do more tailored analyses aimed at helping our policy leaders make decisions pursuant to their mandate.
In sum, the research “scouting party” needs to be widely aware, open-minded, and looking ahead. Even when—and, in my view, precisely because—the policymakers we advise must act in the service of a much more focused set of objectives.
Kartik B. Athreya is director of research and head of the Research and Statistics Group of the Federal Reserve Bank of New York.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
