As Director of Research for the New York Fed for the past seven years, Jamie McAndrews has been responsible for the Bank’s financial and economic policy research, as well as the collection of data and statistics from financial institutions. On the eve of his retirement on June 30, Jamie shared his perspective on how the Research and Statistics Group has changed with Andrew Haughwout, a senior vice president in the Group.
Q: You joined the New York Fed’s Research and Statistics Group as an economist in 1997. Has the kind of work that the economists undertake changed much since then?
A: The Research and Statistics Group’s overall profile and the direction of the work of its economists—to perform analysis on real and financial developments to inform monetary and supervisory policies and their implementation—have not changed. Within the group, the Statistics function’s work has seen considerable changes as it has vastly expanded its data collection on behalf of the Fed’s supervision, monetary policy, and other missions.
What has changed is the emphasis of our work and tools that are used in our analysis. In response to the financial crisis, we have developed new data sources, developed new models, and expanded our sightlines into the economy. In our FRBNY Consumer Credit Panel and Survey of Consumer Expectations, for example, we gather terrific new information on consumers and the state of their indebtedness and their views about a variety of future outcomes. We also have access to far more data purchased from vendors. These data allow us to use more detailed and well-adapted quantitative models to monitor and explain current developments, and to forecast with greater insight.
A more subtle change is that the quality of newly graduated Ph.D. economists has gotten better and better over time; here again, a noticeable change occurred after the financial crisis. Starting in 2009 the economists we interviewed for possible jobs here were better prepared than ever, developing new and unique sources of data, asking great questions about financial institutions, and displaying extraordinary curiosity about the links between finance and economics. Having this new group of junior economists join the Bank has improved our research environment a great deal.
Q: A larger amount of the policy work done by economists is now in the public domain. Was that the result of a conscious choice?
A: It has always been our objective to be as transparent as possible, without compromising the quality of the analysis and advice we deliver to our Bank’s president and other senior officials. We have been able to make many things public on a regular basis. For example, we regularly publish our Quarterly Report on Household Debt and Credit, and it has proven to be very popular and valuable to the public. There have been a lot of recent additions: we began releasing our forecast in 2011 with an evaluation of our performance over the period leading up to the Great Recession. We now release our forecast once a year. We have recently explained our monetary policy process, and regularly publish analysis such as our work on Treasury Term Premia, the Survey of Consumer Expectations I mentioned earlier, our Dynamic Stochastic General Equilibrium (DSGE) model, a package of charts on the U.S. economy that we call the U.S. Economy in a Snapshot, a decomposition of the factors influencing the price of oil, and a statistical model that estimates current and next-quarter GDP—the Nowcast.
Our Liberty Street Economics blog is also a big advance in the amount of information we publish regularly.
I think that what has enabled us to publish so much more is the advent of electronic publishing and the development of a wide range of quantitative models. As a consequence, we produce more policy analysis than we have in the past and we now have the ability to share this work with the public.
Q: The blog has played a big role here as well, I guess. Was that its intended purpose?
A: Yes, the Liberty Street Economics blog has been a great way for economists to share research results and insights, as well as to provide policy analysis that, in the past, might never have been published. A lot of policy analysis consists of an investigation of some interesting development in the economy, and is not particularly sensitive, but neither is it necessarily breaking new methodological ground in the economics profession. Because of that, it might not be appropriate for a peer-reviewed journal. Furthermore, it might be of interest currently, but become stale as time passes and new issues arise. The blog has proven to be a great place to share analysis that is current and insightful.
Q: Some of the new products that the Group’s economists work on have not been made public to the same degree, right?
A: That’s right. In some cases, where we use data that are not in the public domain, or where we might be analyzing sensitive issues related to individual firms, we must keep our analysis confidential. In many such cases we’ve published papers that explain our methodology—for example, we’ve published papers explaining the methodology of our forecasts, the CLASS model, a blog post on our policy process (mentioned above), and others describing how we monitor financial stability and many other aspects of our policy analysis.
Q: You seem to be saying that what economists do hasn’t changed, but that the way that they do it has changed a lot. Is that right?
A: Yes, I think so. There has been a revolution in the profession and we at the New York Fed strive to be in the vanguard of that revolution in the world of central banking. Economics has become more quantitative, with a greater use of data and especially large datasets (big data). This is true in research, but we also apply the same techniques in our policy analysis. For example, supervision has become much more quantitative. CCAR is one case in point. And Research and Statistics plays a big role in creating, not just analyzing, data.
Q: It sounds like you’re referring there to the Data and Statistics function. How has its role changed and how does it connect with Research?
A: Yes, the former Statistics function is now the Data and Statistics function, reflecting the addition of a new entity, the Data Capabilities Office (DCO). The DCO is working bankwide to improve the way that the Bank manages data—how it acquires or creates, catalogues, retrieves, shares and controls, manipulates, and understands data. That is a big challenge for us, and one we are understandably excited about. In addition, the Statistics side of the function has increased the amount of information that it collects by one or probably two orders of magnitude. New collections from financial institutions require their own unique industry expertise and knowledge. Examples include our new money markets data collection, the FR2420, the data used to support CCAR, the Y-14, and many others. Post-crisis we’ve come to realize that data is so central to our business model and ability to monitor financial institutions and the economy that we need a group with combined expertise in both data collection and data management, hence the Data and Statistics function.
Q: What else has changed?
A: A couple of other developments that are worth noting: First, all of our colleagues are better informed and collaborating with even broader networks. So we work extensively with colleagues across the Bank, at the Board of Governors, within the Federal Reserve System, and in central banks around the world. They give us a lot of ideas to pursue and feedback on our work. It is great to be connected to such a wide set of dedicated and well-informed people. Second, the Research and Statistics Group has become a highly desirable destination for college graduates wishing to serve as Research Analysts and later to enter graduate school, especially in economics. As a consequence, our RAs seem to get better and better—in each of the last two years, three of our current RAs have been awarded National Science Foundation fellowships for graduate study in economics (out of only 30 awarded annually nationwide). That is just one indication of how lucky we are to attract such talented graduates. Finally, the academic community of economists has become more aware and interested in the work we do here at the New York Fed. So we’ve deepened our interaction with academic economists through visits (our four most recent Resident Scholars have been Chris Sims, Peter Diamond, Rob Townsend, and Vish Viswanathan) and our advisory groups. Again, it is a great opportunity to collaborate with such accomplished scholars.
Q: How do you see the model evolving over the coming years?
A: I think that we’ll continue to see more and more emphasis on quantitative work that makes use of the growing availability of data of all sorts. That is such a powerful trend that I don’t see any end to it. Just as important, I think that economics education is improving, and that we’ll have better informed and smarter colleagues joining the Bank over time. Finally, I think our nation’s problems, from escaping the zero lower bound to maintaining financial stability, are exceedingly challenging, and will keep us occupied for a long while. This Bank will continue to be a great source of analysis for insights into these problems and their possible solutions.
The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.
Jamie McAndrews is an executive vice president and the director of research at the Federal Reserve Bank of New York.
How to cite this blog post:
Jamie McAndrews, interview by Andrew Haughwout, “Hey, Economist! How Is the Research and Statistics Group Changing?” Federal Reserve Bank of New York Liberty Street Economics (blog), June 24, 2016, http://libertystreeteconomics.newyorkfed.org/2016/06/hey-economist-how-is-the-research-and-statistics-group-changing.html.
Hi, Jamie, We will miss you in the Fed, but I am confident that we will still gain insights from the body of work that you and your group has produced and that you will continue to produce wherever your new adventures take you. All the best, Loretta J. Mester