Friday, April 15, 2016
My friend Phill Swagel gives his students the following assignment:
Imagine that you are a staff member working for a member of Congress who sits on the Joint Economic Committee (JEC). Fed Chair Janet Yellen is about to testify before the JEC and you are assigned to write a three-page memo to prepare your boss—the member of Congress. You are to focus on economics. This is not a political question and you should assume for this assignment that the member of Congress you work for is interested in economics and not politics.
The first part of this assignment is for you to provide your boss with a concise briefing on the state of the U.S. economy, focusing on the aspects of the economy that are relevant for the decision facing Chair Yellen. The second part of the assignment is for you to write a question that your boss will ask Chair Yellen, and then explain to the member of Congress the information that the question is intended to elicit from the Fed chair. You can split the three pages however you wish between the questions.
Question 1. Your member of Congress wants to understand what policy decision the Fed is likely to take next, when, why, and what will be the impact on the US economy. Your memo should answer this request for understanding. Focus on the most important macroeconomic indicators – the key data that explain the words in underline just above. The most important part of this memo is the explanation: you will want to include some key numbers from the data that you have been following all semester (and that we discuss each week), but be sure to explain what those numbers mean and why they matter. Before starting to write, I urge you to step back and think about the story and message you will convey to the member of Congress.
Question 2. Your member of Congress will have five minutes to ask questions of Chair Yellen. What is the first question your member should ask? And then explain why you suggest this question: what information do you hope to elicit from Chair Yellen and how will that help your member of Congress to better understand the Fed’s view of the economy and the meaning of that view for the Fed’s policy decision? This section should first put down the question. Then explain why this is an important question, and what information you hope to learn from it. Presumably there will be something that you and your member of Congress are not sure about in terms of the Fed’s thinking, and asking this question will help you to better understand. Again, this is a question only about economics, and not about politics.