, moreover, varies over time. hence, the fed engages in continual efforts to obtain measures of the maximum level of employment. these efforts are fundamentally grounded in the work of many labor economists around the system, but i ’ ll cite an important recent example done in minneapolis. my research director, sam schulhofer - wohl, and his co - author and former minneapolis fed economist greg kaplan closely studied the recent decline in internal migration in the united states. 3 some policymakers had expressed concern that this decline indicated that the great recession had caused a sudden increase in structural unemployment. but sam and greg ’ s research provided compelling evidence that this view was mistaken – rather, the decline in internal migration was better understood as being part of a very long - run trend. let me transit to another fed responsibility : supervision of financial institutions. the financial crisis made clear the fundamental linkage between the condition of large financial institutions and the macroeconomy. that lesson has translated into a more complete integration of economists – with expertise in banking, finance and macroeconomics – and the supervision of financial institutions. monetary policymakers continually assess systemic financial risks, and this assessment is informed in part by supervisory information. conversely, economists contribute to the supervision process by helping to build a better understanding of risks that face the financial sector. i could illustrate this systemwide effort to build more connections between economics and supervision in many ways. i ’ ll just mention two of the several lines of attack undertaken in minneapolis. minneapolis fed economist motohiro yogo and his co - author ralph koijen are studying the incentive effects of regulatory policies on insurers ’ risk - taking. their work has shed important new light on “ shadow insurance ” risks from off - balance - sheet liabilities of life insurance companies. 4 as well, my head of supervision, ron feldman, and his team are using option price data – again, as encoded in risk - neutral probabilities – as a source of information about tail risks for large financial institutions. 5 see narayana kocherlakota, “ optimal outlooks, ” presentation at conference on extracting and understanding the risk neutral probability density from options prices, new york university stern school of business, new york, n. y., sept. 20, 2013. see greg kaplan and sam schulhofer - wohl, “ interstate migration has fallen less than you think : consequences of hot deck imputation in the current population survey, ” demography 49 ( 3 ),

narayana kocherlakota : economics at the federal reserve banks opening statement by mr narayana kocherlakota, president of the federal reserve bank of minneapolis, at the panel discussion, american economic association annual meeting, philadelphia, pennsylvania, 4 january 2014. * * * i thank dave fettig and sam schulhofer - wohl for their helpful comments. i ’ d like to use this opportunity to talk about the role of economic research and economists within a reserve bank. my main theme is that, to be successful at their host of responsibilities, reserve banks need economists with a wide range of perspectives and skills. conversely, economists in a variety of fields can enjoy fulfilling and successful careers at reserve banks. i ’ ll illustrate my points by using examples from my own institution, the federal reserve bank of minneapolis. the views that i express today are my own and not necessarily those of others in the federal reserve system, including my colleagues on the federal open market committee. my first observation is that, just like economists who work at universities and colleges, many economists within reserve banks spend a great deal of time on independent research. many reserve banks – including the minneapolis federal reserve bank – have found that, especially over the longer term, this self - directed research has the power to create valuable new insights into important public policy questions. for example, back in the 1990s, harold cole and lee ohanian – then at the minneapolis fed – developed an exciting and important new way to think about the slow recovery during the great depression. 1 this work in economic history has turned out to be a valuable resource for many who are thinking about the current slow recovery. over the past four decades in minneapolis, we have found that, to be effective, independent research should follow the usual rules of academic economics. more specifically, economists must be free to pursue any question, use any available tools and arrive at any answer. the quality of those answers is ultimately measured by rigorous academic peer review, not by internal managerial judgment. so, university and reserve bank jobs are not all that different in terms of the role of independent research. what distinguishes academic jobs from reserve bank jobs for economists is how they spend their non - research time. economists with academic jobs spend most of their non - research time teaching. economists with reserve bank jobs spend most of their non - research time supporting public policy work. as i stated at the outset, my main theme today is that public policy work in a reserve bank relies on a much wider variety