Date Title Category
October 4, 2007 Richmond Fed Publication Looks at the Economics of Politics

Why do pluralities commonly support policies that run contrary to the advice of economists? For several decades, public choice theory has provided the leading explanation: Voters are rationally ignorant, with special interests largely controlling the democratic process. But now, an economist at George Mason University has turned that model on its head. Voters are getting precisely what they want, says Bryan Caplan, because they are irrational. Caplan's new book has sparked considerable debate over the validity of the traditional public choice model, developed by James Buchanan, Gordon Tullock, and other members of the "Virginia school of political economy."

September 28, 2007 Richmond Fed's Economic Quarterly Examines the Relationship between Inflation and Unemployment

A slowing economy and rising inflation are typically understood to require opposite policy responses: lowering the short-term interest rate to counter slower real growth while raising the rate to tame inflation. What, then, is the relationship between growth and inflation and how is it related to monetary policy? Jeff Lacker, Richmond Fed President, and John Weinberg, Research Director and Senior Vice President, explore this question by looking at the history of the Phillips curve – the statistical relationship between inflation and unemployment.

July 20, 2007 Richmond Fed Publication Examines Academic Alternatives

Proponents of school choice argue that it would help poor-performing schools and the students who must attend them. With vouchers, parents can shop for the best schools, creating competition and improving educational outcomes. Until recently, however, there was little data to test the theory. In the cover story of the latest issue of Region Focus, Doug Campbell looks at a pioneering program in Milwaukee and concludes that while the evidence is mixed, school choice has benefited many of that city's schools and students. Soon, conversations about vouchers may be based on facts instead of opinion.

July 9, 2007 Richmond Fed's Economic Quarterly Examines Interest Payment on Banks' Reserves as an Alternative to Daylight Credit

Congress passed a law last year that allows the Federal Reserve to pay interest on balances held by depository institutions at the central bank. The implications for the demand for reserves, and by extension, monetary policy, may be significant. At present, banks face opportunity costs for holding reserves overnight at the Fed, since their funds might be able to earn interest if deployed elsewhere. During the daytime, banks weigh the tradeoff of holding as few reserves as possible with the costs of obtaining intraday credit from the Fed to meet their payment obligations. By 2011, when the new law takes effect, the incentives for these choices will be different. Since effective monetary policy may depend on predictable demand for reserves, understanding how these new incentives alter banks' decisions about reserve holdings may be useful. Richmond Fed economists Huberto Ennis and John Weinberg build a model of the demand for reserves by banks and study the potential consequences of paying interest on reserves.

June 22, 2007 Federal Reserve Bank of Richmond's 2006 Annual Report Features "Inflation and Unemployment: A Layperson's Guide to the Phillips Curve"

Today the Federal Reserve Bank of Richmond released its 2006 Annual Report, which features an examination of the relationship between economic growth and inflation, as illustrated by the history of the Phillips curve.

March 30, 2007 Richmond Fed's Economic Quarterly Reviews Milton Friedman's Legacy

Milton Friedman was arguably the most influential economist of the 20th century. He made groundbreaking scientific contributions that changed the way economists approached some of the most important questions in monetary economics and macroeconomics. He also was an ingenious policy analyst, proposing such measures as school choice and the end of the military draft in favor of a volunteer army. Finally, he had a unique ability to make economics accessible to a general audience, through his Newsweek column and countless television appearances. Richmond Fed economist Robert Hetzel, a former student of Friedman, recounts and analyzes his teacher’s numerous contributions and puts them in historical perspective.

February 28, 2007 Options on the Outs

Stock options can align employee and shareholder interests. But they aren't free to issue, despite the way firms have been allowed to report them — until now. In the cover story of the Winter 2007 issue of Region Focus, Doug Campbell explains how economic and accounting principles are finally merging with the adoption of a new financial reporting rule.

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