The convergence works in both directions: research informs the policy work and policy work generates research questions. The end result is that our economists have the ability to be both highly respected in their disciplines from a research perspective, and also to make a significant contribution to policy development and implementation. There is an excellent value proposition both for the Bank and the economists that work here, as indicated by the publication record of our economists and their contribution to policy initiatives. Let me give you some more concrete examples of what our economists have worked on or are currently working on. I will focus on three broad buckets: prudential policy and financial stability; monetary and macroeconomic policy; and microeconomic and regional economic policy. Prudential policy and financial stability New York Fed economists, inside and outside our Research Group, provided substantial assistance to the design and development of the numerous emergency lender of last resort facilities implemented during the financial crisis. This was done in conjunction with the Board of Governors, but the contributions from the New York Fed were critical because of our unique vantage point with respect to operational implementation, financial markets, and financial market infrastructures. In a different vein, New York Fed economists assisted in designing, developing, and implementing supervisory stress testing, including the annual Comprehensive and Capital Analysis and Review (CCAR) supervisory stress tests. The New York Fed’s economists perspectives and measurements on how downturns affect bank portfolio values was crucial to the design of these tests.

Our economists, working with staff in the Markets Group, have published two staff reports detailing a framework for replacing the GSEs and implementing an explicit government guarantee to protect against tail risks in residential real estate. This work has included briefings of congressional staff and congressional testimony.   Triparty repo reform. Working with the other areas of the Bank and Board of Governors staff, economists have helped to design and implement reforms that make the triparty repo market more stable and less prone to “run” risk.   Reference rate reform. New York Fed economists and members of the Markets Group are deeply involved in the FSB’s efforts to reform the reference rate setting process for LIBOR and other reference rates. Monetary policy and macroeconomic policy Economists provide invaluable input to the New York Fed President, who serves as ViceChairman of the FOMC, and to the Markets Group, which is responsible for the operational aspects of monetary policy implementation. This work has many aspects, including:   Independent macroeconomic forecasts. This includes a New York Fed DSGE model and a suite of products to analyze labor market developments.2    The development and implementation of new tools, such as the large-scale asset purchase programs, the payment of interest on excess reserves, and the development and testing of a fixed rate, full allotment reverse repurchase facility. This is done in close concert with economists at the Board of Governors.