The New York Fed’s unique role in the Federal Reserve System enables economists to take part in important policy projects. A description of our research functions’ policy work suggests the wide range of our responsibilities and the breadth of expertise that we bring to them.

Capital Markets works closely with the Bank’s Trading Desk on market monitoring, policy implementation, and Treasury financing issues, and advises senior Bank management on market developments and the information content of financial market prices. Recent work includes analyses of dealer positioning and leverage and their relationship to market behavior, assessments of liquidity in fixed-income markets, and studies of inflationary expectations embedded in financial market prices.

The New York Fed stands at the crossroads of policymaking and important academic research. It offers economists a unique chance to conduct research on key policy issues as well as to broaden their own research interests through policy work. Wilbert van der Klaauw, Brown Microeconomic and Regional Studies Function

The Financial Intermediation staff conducts research and policy-oriented analysis on a wide range of issues relating to financial intermediation and financial markets, including the behavior and health of financial institutions, innovations in financial markets, and the development of appropriate supervisory tools and techniques. Economists in the function examine these issues from both a macroeconomic and microeconomic perspective, with a focus on the performance and stability of financial markets and core institutions. Recently, they have studied the impact of bank failures on the local economy, the effectiveness of market discipline of financial institutions, hedge funds and systemic risk, the industrial organization of U.S. banking, the interaction between banking and commerce, credit derivatives and other financial innovation topics, the pricing of catastrophe insurance and the organizational composition of the insurance industry, and risk management and corporate governance issues.

International Research monitors developments in the global economy that affect the United States, tracking the performance of industrialized countries and developments in U.S. external imbalances. The staff has recently analyzed the sustainability of U.S. current account deficits, international capital flows and financial developments, the micro- and macroeconomic effects of U.S. exchange rate movements, and the impact of globalization on product, labor, and financial markets and its implications for monetary policy.

In Macroeconomic and Monetary Studies, economists monitor and analyze current national economic, fiscal, and monetary conditions; provide forecasts of GDP growth and inflation; and advise senior Bank management on monetary policy. Recently, they have studied rising home prices and their possible implications for the economy; the impact of higher oil prices on economic growth, inflation, and monetary policy; the measurement of risks to GDP growth and inflation; the effect of economic and financial market data on future inflation expectations; and the interaction of financial markets and monetary policy.

Economists in Microeconomic and Regional Studies track developments in four areas of specific interest for monetary policy: the labor market; cities and regions, with an emphasis on the Second Federal Reserve District; the public sector; and industries of particular interest, such as the information technology sector. Economists in the function have recently conducted analyses of inflation experiences and expectations, the information content of the Federal Reserve’s business surveys, and the fiscal status of state and local governments.

Money and Payments Studies researches and analyzes domestic and international payments issues, with the goals of increasing efficiency, lowering costs, and reducing risks associated with payments and securities settlement. Recent work includes research on large-value payments, examination of fraud risks in retail payments, and analysis of alternative strategies for mitigating risk in payments.

The Interplay of Research and Policy

Academic research and policy analysis can give rise to great synergies at the New York Fed. Many of our economists conduct research on policy-related topics; others find that their policy work suggests new lines of inquiry for their research.

For example, Michael Fleming’s research on the microstructure of the U.S. Treasury securities market—appearing in the Journal of Finance and elsewhere—was precipitated by policy interest in overseas trading of Treasury securities and an opportunity to work in the Bank area responsible for this activity.

Martin Lettau, Sydney Ludvigson, and Charles Steindel, writing in our Economic Policy Review, examined the consumption response to changes in consumer wealth. Their study was motivated by policy concerns about the spending effects of the stock market boom in the second half of the 1990s.

James McAndrews’ theoretical research on incentives in payments systems—appearing in the Journal of Money, Credit, and Banking—has been used to analyze the likely effects of changes to payments system design.

New economists in the Research Group have many opportunities to pursue other connections between research and policy work. In doing so, they will find that the more experienced members of the Group are available to mentor them and to help identify synergies between their academic interests and policy responsibilities.

To learn more about joining the Research Group: www.newyorkfed.org/careers/phd.html. By conviction and action, the Federal Reserve Bank of New York is an equal opportunity employer.