Finance Basic To Advance Level Knowledge

Here is a great summer program for advanced undergraduate or beginning graduate student that are interested in monetary economics. Scott Sumner and I will be presenters and St. Louis Fed President Jim Bullard will be the keynote speaker. Your travel and lodging will be covered, but you need to apply by January 31.  Alternative Money University (AMU) is an academic workshop for advanced undergraduate and beginning graduate students with a particular interest in monetary economics. During three days of intensive seminars, students will learn from leading scholars in the field about subjects not typically addressed in undergraduate or graduate economics courses — including topics in monetary history, the theory and practice of monetary policy, and the workings of unconventional monetary arrangements. Between them, the subjects covered and the seminar-style of the sessions are intended to provide students with a solid foundation upon which to build their own, future contributions t...

It's Back... Over the past few months there has been increasing chatter about the need for a new framework for U.S. monetary policy. The  Peterson Institute for International Economics (PIIE), for example, recently had its Rethinking Macroeconomic Policy conference where, among other things, Ben Bernanke called for the Fed to adopt a  temporary price-level target . PIIE also launched Angel Ubide's new book   on reforming monetary policy. Similarly, at the AEA meetings there was a session titled Monetary Policy in 2018 and Beyond  where Christina Romer again made the case for a NGDP level target. Likewise, the Brookings Institute held a recent conference on whether the Fed should  abandon its 2 percent inflation target . There,  Jeff Frankel shared the arguments for a NGDP level target and Larry Summers endorsed it. Others at the conference, like San Francisco Fed President John Williams called for a price level target. I am glad this conver...

So the Federal Reserve is reporting that interest on excess reserves (IOER) payments hit $25.9 billion in 2017. This amount is more than double the dollar size of the IOER payments in 2016 as seen below.  This increase is understandable given the rise in the Fed's short-term interest rate target and the size of its balance sheet. But, as I have noted before , this is horrible optics. For the largest recipients of the IOER payments are large domestic banks and foreign banks. As seen in the figure below, they hold most of the excess reserves and therefore earn most of the IOER payments.  Put differently, the systematically-important or "too-big-to-fail" banks that were bailed out during the crisis and are still implicitly subsidized by the government as well as foreign banks are the main recipients of IOER. It gets worse. Note in the table above that the higher IOER payments are associated with declining remittances to the Treasury Department. The Fed, ...