struggle to understand and anticipate the results of supervisory stress tests and the accompanying stress capital buffer requirements. the simple solution here seems to be disclosure of more granular information about all of the models used in stress testing. in my view, disclosure of these models — and even subjecting the models to appropriate notice and comment processes and public feedback — would not undermine the goal of the stress tests of having a regulator - created model that is separate and distinct from the internal models used by firms. regulators would still control the contours and content of the models but would have the benefit of public feedback. if we believe in the validity and reasonableness of our model design choices, we should not shy away from public feedback. third, we should adjust the compliance framework for stress capital buffers. firms should not be forced to comply with higher capital requirements after only a few months ’ notice but should have a reasonable time frame for compliance. i would note that a longer compliance “ stress testing policy statement, ” 84 fed. reg. 6664 ( february 28, 2019 ), https : / / www. govinfo. gov / content / pkg / fr - 2019 - 02 - 28 / pdf / 2019 - 03503. pdf. board of governors of the federal reserve system, “ federal reserve board finalizes set of changes that will increase the transparency of its stress testing program for nation's largest and most complex banks, ” news release, february 5, 2019, https : / / www. federalreserve. gov / newsevents / pressreleases / bcreg20190205a. htm. - 14 runway is particularly important in a world in which testing is opaque and volatility continues to be excessive. to the extent that these more fundamental issues are addressed, this may mitigate the need for a shorter compliance window. finally, as we move forward with basel iii implementation, we need to take a careful look at whether market risk and operational risk requirements are overlapping and redundant with the “ global market shock ” and operational risk elements of stress testing and think about the calibration of these requirements in the aggregate. would these tests in tandem produce excessively calibrated capital requirements, and if so, what would the impact be on u. s. capital markets? in my view, there are strong indications that as currently formulated, the combination of these requirements would result in an excessive calibration of risk - weighted assets for market

traditional policy rules are backward looking in the sense that they use available data about inflation and output. but monetary policy needs to be forward looking, as i discussed, and there are rules that rely on forecasts of inflation and output. finally, many have advanced the view that, when times are particularly uncertain, monetary policy should react cautiously to incoming information. 21 that insight leads to rules that incorporate inertia, thereby slowing down the movement of rates over time. each of these insights has some validity, and each has important implications for the prescriptions of a policy rule. in general, the unemployment rate is more informative of the state of the business cycle than gdp because of the difficulties in estimating potential output. see charles a. fleischman and john m. roberts ( 2011 ), “ from many series, one cycle : improved estimates of the business cycle from a multivariate unobserved components model, ” finance and economics discussion series 2011 - 46 ( washington : board of governors of the federal reserve system, october ), https : / / www. federalreserve. gov / pubs / feds / 2011 / 201146 / 201146pap. pdf. see john b. taylor ( 1993 ), “ discretion versus policy rules in practice, ” carnegie - rochester conference series on public policy, vol. 39 ( december ), pp. 195 - 214. see william brainard ( 1967 ), “ uncertainty and the effectiveness of policy, ” american economic review, vol. 57 ( may ), pp. 411 - 25. in discussing the effects of uncertainty on monetary policy, blinder ( 1998, p. 11 ) notes that policymakers “ should compute the direction and magnitude of their optimal policy move... and then do less. ” see alan s. blinder ( 1998 ), central banking in theory and practice ( cambridge, mass. : mit press ). others have suggested that inertia may be a feature of making decisions by committee ; see clare lombardelli, james proudman, and james talbot ( 2005 ), “ committees versus individuals : an experimental analysis of monetary policy decision making, ” international journal of central banking, vol. 1 ( june ), pp. 181 - 205 ; and francisco ruge - murcia and alessandro riboni ( forthcoming ), “ collective versus individual decision - making : a case study of the bank of israel law, ” european economic review. - 12 figure 7 shows the prescriptions of three simple policy