. and other financial markets are attuned to a number of prominent downside global risks, which include brexit, a sharp slowdown in global growth prospects, and trade tensions. even though the fed has been and is committed to a dual mandate to achieve maximum employment and price stability, in today ’ s world, u. s. policymakers can hardly ignore these risks, 2 / 4 bis central bankers'speeches and three of our most recent fomc statements have highlighted concerns about global economic and financial developments. in addition, in our policy statements, as well as in other communications, we have indicated that, in the presence of these risks and with inflation pressures muted, we can afford to be patient and data dependent as we assess in future meetings what adjustments in our policy rate might be necessary to sustain growth, employment, and price stability in the u. s. economy. references board of governors of the federal reserve system ( 2018 ). “ the recent rise in oil prices ( pdf ), ” monetary policy report. washington : board of governors, july 13. bodenstein, martin, christopher j. erceg, and luca guerrieri ( 2009 ). “ the effects of foreign shocks when interest rates are at zero ( pdf ), ” international finance discussion papers 983. washington : board of governors of the federal reserve system, october. clarida, richard h. ( 2012 ). “ the euro crisis and the u. s. economy, ” interview by christopher alessi, council on foreign relations, washington, d. c., may 25. dell ’ ariccia, giovanni, jeronimo zettelmeyer, and isabel schnabel ( 2002 ). “ moral hazard and international crisis lending : a test, ” imf working paper wp / 02 / 181. washington : international monetary fund, october. duca, john v., david m. gould, and lori l. taylor ( 1998 ). “ what does the asian crisis mean for the u. s. economy? ( pdf ) ” federal reserve bank of dallas, southwest economy, march / april, pp. 1 - 7. economist ( 2015 ). “ the causes and consequences of china ’ s market crash, ” market turmoil, economist, april 24. ferrara, laurent, and charles - emmanuel teuf ( 2018 ). “ international environment and u. s. monetary policy : a textual analysis, ” banque de france, eco note

now. but apart from the real graybeards, the three principals and i, most of you were probably in grade school when this work actually started. let me recall a few stories from the old days. the main motivator at the board in those days was frank de leeuw. for all who knew frank, he was one of the most “ market undervalued ” economists of all time. all the young people at the fed then felt he walked on water. frank formed a team of economists here - tinsley, hendershott, al tella, and me among others - and an academic team featuring the late franco modigliani from mit and the late albert ando from penn. bob rasche, now research director at the st. louis fed, and harold shapiro, later to be my university president at michigan, were also junior professors at penn and part of the team. jerry enzler, whom many of you remember fondly, as i do, was somewhere in transition, starting as a penn graduate student and moving to the board staff, where he too stayed many years. the model we put together in those days has been enshrined in publications and i won ’ t describe it much. it probably had about the coverage of the present day frbus, and it had many of the then exotic channels of monetary policy. there was a consumption - wealth effect working through equity values and housing values, and both of those prices were endogenous. at one point, franco got one of his graduate students, a lively kid named larry meyer, to do his thesis on this link. there was a foreign sector, but exchange rates were exogenous because we had pegged rates back then. there was also a credit - rationing channel based largely on the work of another franco graduate student, dwight jaffee, who is now an authority on government - sponsored enterprises at berkeley. what we didn ’ t have in those days was forward - looking expectations behavior. in qualitative terms we all knew the difference between adaptive and rational expectations, but nobody knew how to estimate rational expectations equations. this is one area where technical work over the years has made a large difference, and i gather that several people in the room, especially peter tinsley, have been responsible. in more immediate terms, the aspect of the model that still recalls frustration was that whenever we ran dynamic full - model simulations, the simulations would blow up. i can ’