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The business economist at work: the research department of the Federal Reserve Bank of Cleveland.

The principal responsibility of the research staffs of the Federal Reserve banks is to advise their respective presidents on economic policy issues and to gain support for appropriate policies in the business, academic and policymaking communities. At the Cleveland bank, a professional research staff of twenty-one provides internal reports as well as a number of publications to make the results of research available to the interested public.

ALL OF THE Federal Reserve Banks have economic research departments. Although the size of the departments and the composition of their staffs and activities differ among the twelve banks, their principal responsibility is the same: to advise the respective presidents on a host of economic policy issues (the most important of which are monetary policy related). Proof of this importance can be found in the fact that a senior official from the research department accompanies each Reserve Bank president of the Federal Open Market Committee (FOMC) meetings.

This article describes the Research Department at the Federal Reserve Bank of Cleveland, focusing on the department's goals, structure, and operations. No effort is made to compare our Research Department with that of any other Federal Reserve bank.


The objectives of our Research Department are to provide the bank with the analytic basis for making intelligent policy choices on monetary, financial regulatory, and regional economic issues; and to gain support for the appropriate policies within the business, financial, academic, and policymaking communities. Virtually all of the department's activities, including research programs, publications, conferences, and public program efforts, are oriented towards these purposes. In addition, we provide support for the objectives of the President's Office, the Public Affairs and Bank Relations Department, and other parts of the bank. Our efforts result in a number of specific products and ongoing activities.


The Research Department is headed by a senior vice president who is also responsible for the Bank's Public Affairs and Bank Relations Department. The senior vice president and director of research is, in effect, the bank's chief economist. As one of the bank's most senior officers, the research director plays an important role in guiding the performance of the entire organization.

The day-to-day operations of the department are in the hands of an officer whose title is vice president and associate director of research. All of the department's other key personnel report directly to this individual. At year-end 1990, the department's professional economics staff totaled twenty-one, consisting of four managing officers, three research officers, and fourteen economists. Economists are at the Ph. D. level in their training. In addition, the department has another two dozen people providing various kinds of support to the economists and department management.

For several years, the Research Department has been evolving an organizational structure that enables more efficient achievement of our goals and better management of our resources. The department is now organized into five primary units: monetary/macro, applied micro/regional, financial institutions and regulation, business analysis, and a cluster of support groups. The units are designed to group together people with similar interests and responsibilities, but economists are encouraged to regard the groupings flexibly to promote joint research efforts.

Monetary/Macro Unit

The monetary/macro group is studying strategies and tactics of monetary policy, payments system issues, and international finance. In addition to the unit leader, the group has seven economists, one analyst, and two and one-half research assistants. They are making a considerable effort both to keep pace with state-of-the-art monetary theory, which seeks to integrate money with microfoundation/ macro models, and to incorporate this work into our thinking and our policy analysis and advice.

Applied Micro/Regional Unit

The applied micro/regional group is analyzing the micro aspects of some current macro issues, such as labor compensation, productivity, capacity utilization, economic development, and employment/ unemployment. One economist is studying the production function of banks. The group also examines factors that affect the Fourth Federal Reserve District's economy. Priority topics include local labor market dynamics, interregional labor and capital flows, and the regional economic effects of local government expenditures and taxation. The group leader works with three economists and two and one-half research assistants.

Financial institutions and Regulation Unit

The financial institutions and regulation group investigates deposit insurance, failure resolution policies pertaining to depository institutions, banking powers, bank capital requirements, and bank merger and acquisition policies. The unit is composed of four economists and two research assistants. In addition, two professionals handle the department's banking structure casework responsibilities. The group consults with the Bank Supervision and Regulation Department on regulatory policy issues and position papers.

Business Conditions Analysis Unit

The fourth group, business conditions analysis, monitors and analyzes economic conditions, compiles Economic Trends (discussed in more detail below), and prepares materials for FOMC briefings, Board of Directors' meetings, speeches, and so on. The group does an excellent job of keeping up with current events and of preparing written material. it can also effectively integrate "research results" developed elsewhere in the department into its own products. The group consists of three economists, one analyst, and one research assistant.

Support Groups

The department has a small group of secretaries, headed by a lead secretary (a total of three and one-half people). Because we have automated our word processing and record keeping, the number of secretaries has declined and their work responsibilities have shifted toward more administrative work. The department also has a publications unit consisting of five people who handle editing, design, typesetting, and other printing services for all of our publications and many others throughout the bank. This group is quite efficient and maintains an orderly work flow. Over the past few years, the unit has focused on implementing desktop publishing capabilities.

The department also has a research library (containing 15,000 volumes and 400 periodical titles) whose primary function is to support the economist's work. The staff consists of three library professionals and two clerical people. Recently, the library has focused its efforts on automating its services and holdings, and has culminated two years of work by instituting a new on-line catalog. In addition, the entire book collection was bar-coded for circulation of materials and inventory control. The library staff is also investigating various CD-ROM products for future use. These accomplishments make our library the first in the Federal Reserve System to have all of its functions automated.

The secretaries, publications unit, and library report to the departmental manager. Aside from managing these support groups, the manager is responsible for administering the department's budget, expense, and personnel matters.

The department also has a computer systems support group (four people) that designs and maintains our equipment, data, and software. The group is widely respected inside the bank for its knowledge, innovation, and responsible use of computer technology. The group is currently testing a prototype network to connect our PCs, UNIX workstation, library catalog, bank mainframe, and other devices.


The department strongly believes that it has a responsibility to make public as much of its work as possible. To this end, we issue several publications aimed at different audiences. More than anything else, the department's products are what distinguish it from academic and corporate economics departments. Our publications must meet high academic standards, focus on topics germane to the Federal Reserve system, and communicate effectively to economists and lay persons alike.

The Economic Trends, published monthly, is a twenty-page current analysis of business and financial data, whose objective is to explain current economic developments in a setting relevant for understanding economic policy. Each issue is developed by the staff to reflect our thinking about economic conditions and monetary policy at the time of publication. The analysis is presented in both text and graphics, with a strong emphasis on visual appeal. Economic Trends aims at business, financial and academic decisionmakers. We believe this publication is relevant and very useful to its readers. We also believe that it is unique within the Federal Reserve System.

The Economic Commentary, published biweekly, is a topical treatment of economic and financial issues of interest and importance. The Commentary, which runs roughly 3,000 words, targets a literate business, financial and academic audience. The articles apply economic theory to current events or longer-term economic policy issues in an attempt to educate noneconomists in the use of economic logic.

The Economic Review, published quarterly, is a more technical treatment of the research issues addressed by the staff. It is the direct outcome of the department's basic research program and is directed toward professional economists. In spite of the level of technicality of the articles, the Review's emphasis is on the communication of economic ideas. Ideally, a labor economist, for example, would find an article on monetary policy to be both interesting and accessible. Each issue contains three articles, with no fixed page limit. Articles appearing in the Review are sent outside the bank for peer review before they are accepted for publication.

The Working Papers are technical and preliminary treatments of research topics, and often appear either in the Review or in an outside professional publication after further refinement. They are directed toward a professional audience. During the past few years, the department has been producing roughly eighteen Working Papers per year.

All of these publications are available to the public free of charge. Approximately 15,000 subscribers currently receive each issue of the Economic Trends, Economic Commentary, and Economic Review. The Working Papers are distributed to several hundred libraries and researchers. Every three years or so, we purge our mailing lists of people who no longer wish to receive this material, and we seek new readers. We have even surveyed our subscribers to understand better who they are and why they read our publications.

Occasionally, the department arranges for the publication of papers presented at conferences we sponsor. Examples are Recent Developments in Macroeconomics, published as a special edition of the Journal of Money, Credit and Banking in 1988; Perspectives on Banking Regulation, published as an issue of the Journal of Financial Services Research in 1989; Economic Restructuring of the American Midwest, published by Kluwer Academic Publishers in 1990; Structural Changes in U. S. Labor Markets; Causes and Consequences, published by M. E. Sharpe in 1991; and Price Stability, which will be published as a special edition of the Journal of Money, Credit and Banking later this year.

We also encourage placement of our research in professional journals as a means of improving our recognition, as proof of the suitability of our research environment in recruiting quality staff, and as a measure of quality control of our work. In 1990, we submitted fifteen articles to outside journals. We believe that the submissions are of high quality and most of them will eventually be published because Review articles and most Working Papers are subjected to external review. Last year fourteen previously submitted articles were accepted for publication, and another twenty articles were published.

In addition, we encourage department economists to contribute papers at academic conferences and Federal Reserve System research committee meetings. We also regularly invite outside academic economists to present their research at the bank. (Seventeen outside seminars were presented last year.) This helps to keep our staff current on research initiatives, enhances our research profile, and increases our access to and involvement in research efforts outside the bank.

Members of the department are continuously engaged in analyzing and presenting material to the bank's Board of Directors and to meetings of various groups within and outside the bank. These products are nontechnical applications of research projects or current analysis, designed for maximum communication effectiveness. Internal memoranda and presentations typically include such topics as international financial conditions, banking regulation (including deposit insurance reform), regional economic restructuring, the payments system, monetary policy, and the economic outlook.

Of course, the staff also spends time providing analyses, briefings, and informal advice to the president, especially concerning his FOMC responsibilities. We analyze current and prospective economic conditions, review pertinent monetary policy developments and activities since the previous FOMC meeting, review the policy situation and policy options, and discuss strategy and tactics for the FOMC meeting itself. Our objective is to provide the president with relevant "meeting-ready" information and advice, fit within a longer-term view of monetary policy objectives.

We help to prepare speeches and articles for the president in order to promote recognition and development outside the bank of policy issues and problems we regard as important. The Research Department works closely with Public Affairs and Bank Relations in these efforts, and also in the planning and staffing of a variety of public programs dealing with economic policy issues. We regularly review regional labor market conditions, and recommend changes to the Personnel Department for the bank's Community Salary Survey. We also provide forecasts for several items used in the bank's annual budget process. The department has been an innovator within our organization in the use of personal computing and specialized software, and regularly consults with computer users in other areas of the bank. In addition, we have provided the Bank Supervision and Regulation Department and the Financial Planning Department with analytical and technical support on several projects. The department's support staff also provides advanced editing, graphic design, typesetting, and library services to other departments in the bank.


Research departments at Federal Reserve banks have often been described as halfway houses, situated comfortably between academe and the corporate world. To some degree the characterization is apt, because while Federal Reserve research departments generally strive to adhere to academic standards in their basic research programs, they simultaneously attempt to cope with their responsibility for advising policy-makers and educating the public about changing economic conditions. As a practical matter, Federal Reserve bank research departments can be found all along the continuum.

At the Federal Reserve Bank of Cleveland, the Research Department has defined a mission, developed a product mix, and set a standard for performance that it believes is appropriate to serve its clients. Within this environment, we work at improving the quality and relevance of the products we produce.
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Author:Sniderman, Mark S.
Publication:Business Economics
Date:Jul 1, 1991
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