Central Bankers:Jannet Yellen
Early Life and Education
Born in 1946 in Brooklyn, New York, Janet Yellen is currently serving as chairman of Federal Reserve and is also the first woman to hold this position. Being a bright and intelligent student right from the school days, she was elected as editor- in-chief of her school newspaper and became valedictorian by the time she graduated from school in 1963. She then went on to study economics at Brown University, where she earned her bachelor degree in Economics in 1967. Thereafter, she enrolled at Yale University for her doctorate in economics, which she completed in 1971.
Papers and Publications
Over her successful career as an ace economists, Ms. Yellen has also penned many papers and publications, most of which are co-authored with her husband, George Akerlof. Some of the paper authored by here are:
‘’Efficiency Wage Models of Unemployment’’(1984)
‘’Efficiency Wage Models of the Labor Market’’(1986)
"How Large are the Losses from Rule of Thumb Behavior in Models of the Business Cycle?(1991)
"Monetary Policy: Goals and Strategy,"(1996)
‘’Trends in Income Inequality and Policy Responses," Looking Ahead’’(1997)
Position
Post completing her PHD in 1971, she accepted her first position as Assistant Professor at Harvard University. However,her first stint with Federal Reserve came in 1976-1977 when she was appointed as economists. However, only after a year, she returned back to the academic position and became lecturer at the London School of Economics and Political Science from 1978-1980 and then at University of California, where she held her position until 1995 before being appointed to serve on Federal Reserve Board of Governors. Shen then served on White House Council of Economic Advisers from 1997 to 199 during the term of Bill Clinton.
Thereafter, in 2004, she became president and CEO of the Federal Reserve Bank of San Francisco. Ironically, she was the few economists to predict the housing crisis of 2008. In 2010, she was appointed as vice-chairman of the Federal Reserve and then chairman of the Federal Reserve in 2013 where she was nominated by the President Barack Obama.
Economic Viewpoints
A large section of economists have cited Ms. Yellen as a dove, i.e. the one who is more concerned about unemployment than inflation. In fact, in her speeches also, she has been outspoken about using her powers to reduce unemployment and has even assumed higher risk by adopting higher inflation in the US economy for many years as she increased the interest rates for the first time since her tenure in December, 2015.
Such attributes and economic ideology indicate that Ms. Yellen is a modern-day Keynesian economists who believes in using Federal Reserve powers to stabilize economic stimulus over the business cycle. She has been a prime supporter of keeping inflation to the degree of slack in the economy and has taken the risk of assuming higher than normal inflation even when US economy was on bullish run.
Fed Strategy under her reign
Phase 1: No change in the Federal Fund rates
The policy of keeping the fed fund rates close to zero percent allowed the US economy to grow substantially and the effect was visible through decreasing unemployment.
Phase 2: Increase in interest rates
On December 17th, 2015, Ms. Yellen and Federal Reserve finally approved of increasing the interest rates between 0.25 percent to 0.50 percent citing the overall improvement in the US economy as the core reason. This was for the first time in a decade that Federal Reserve Chairman had approved of increasing interest rates. However, her actions were completely justifiable and appropriate as her dovish strategy to keep interest rates close to zero percent and lower the unemployment rate, had finally achieved. In fact, she decided to increase the interest rates only after the US economy had achieved the target unemployment rate of 5% levels and a new Fed labor market index that tracks a range of data has recovered most of the ground lost during the Great Recession. On the other hand, even though the inflation rate was a little below than the target rate of 2%, however, she cited that Fed is highly confident that gradually the inflation rate will also increase to 2% target rate
Direction of US economy
The economic strategy of Federal Reserve under the leadership of Janett Yellen has allowed the US economy to follow a more balanced growth compared to pre-crisis period. While her decision to hold the federal interest rates constant in the initial years of her appointment allowed the US economy to perform reasonably well with the unemployment rate falling consistently, her recent actions of increasing the interest rates gradually signals her maturity as an economist, as not only her actions have allowed the US economy to witness economic recovery and growth on the fundamental basis, her continued focus on keeping unemployment close to the target rate of 5%, validates her nomination by President Obama, who at the time of her appointment had called her as ‘’Individual who understand Human Costs’’.
US economy under different Fed Chairman
Paul Volker:
Paul Volker was appointed as 12th Federal Feserve Chairman while he continued to serve under the presidency of Jimmy Carter and Ronald Reagan. Mr. Volker was elected as Fed chairman during 1979 when US economy was suffering from the period of stagflation with the inflation rate peaking at 14.8%. However, Federal Reserve Board under his leadership are credited for attacking inflation rate aggressively through series of increase in federal interest rates. Under his chairmanship, Fed increased the rates to 21.5% during 1981 and was eventually successful as inflation rate was down to 3% in 1983. However, he was widely critized for his strategy of attacking inflation aggressively that resulted in high unemployment rate. Important to note, during 1981, the unemployment rate in the United States increased to 10%, leaving the farming and construction industry devastated. He served as Federal Reserve Chairman until 1987 and was succeeded by Alan Greenspan.
Alan Greenspan:
Said to be the most disciplined and iconic Fed Chairman of all time, Alan Greenspan was the 13th Federal Reserve Chairman and served in the position for 19 years under four different presidents. Cited as ‘’The greatest central banker who ever lived’’ , Mr. Greenspan is widely credited for the growth of US economy amid the stock market debacle of 1987 and dot-com bubble crash . Unlike his predecessor, Mr. Greenspan was more focused on keeping interest rates low to fuel liquidity in the economy as and when needed, and also taking the other way around. However, he was also criticized for his view on economic bubble where he held the view of waiting the bubble to burst and then lowering the interest rates to mop-up the economy. Many economists also assert that sub-prime and housing bubble was able to inflate as Mr. Greenspan was adamant of not picking the bubble and ignoring it until it result in high inflation.
Ben Barnarke
Ben Barnarke was the 14th Chairman of the Federal Reserve and is said to be the one who had faced most turbulent times by any Fed Chairman. It was during his tenure that US economy witnessed housing crisis and the economy was put to standstill on account of increasing deflation and unemployment.
It was under his leadership that Fed announced the massive asset purchase program and bringing down the interest rate to zero percent in order to fuel economic stimulus and liquidity position. By the time he completed his term in 2014, his policies targeting deflation and unemployment had proved successful as over the period of 2009-2014, US economy witnessed consistent growth in GDP numbers, payroll employment increased by 7.5 million jobs, unemployment level fell from 10% 7% and industrial production exceeded even the pre-recessionary peaks.
Jannet Yellen
References
Alan Greenspan-Monetary myopia. n.d. 11 April 2016 <http://www.economist.com/node/5381959>.
Cassidy, John. Janet Yellen: A Keynesian Woman at the Fed. 3 April 2013. 10 April 2016 <http://www.newyorker.com/news/john-cassidy/janet-yellen-a-keynesian-woman-at-the-fed>.
Janet Yellen. Challenges Confronting Monetary Policy. 4 March 2013. 10 April 2016 <https://www.federalreserve.gov/newsevents/speech/yellen20130302a.htm>.
Janet Yellen-Biography. n.d. 10 April 2016 <http://www.biography.com/people/janet-yellen-21362135#federal-reserve-chair>.
Lange, Jason. Fed raises interest rates, citing ongoing U.S. recovery. 17 December 2015. 10 April 2016 <http://www.reuters.com/article/us-usa-fed-idUSKBN0TY2EX20151218>.
Matthews, Dylan. Seventeen academic papers of Janet Yellen’s that you need to read. 9 October 2013. 10 April 2016 <https://www.washingtonpost.com/news/wonk/wp/2013/10/09/seventeen-academic-papers-of-janet-yellens-that-you-need-to-read/>.
Prial, Dunstan. Bernanke Sums Up Achievements During Two Terms. 2014. 11 April 2016 <http://www.foxbusiness.com/politics/2014/01/03/bernanke-sums-up-achievements-during-two-terms.html>.
Russell, Karl. Why the Fed Raised Interest Rates. 17 December 2015. 10 April 2016 <http://www.nytimes.com/interactive/2015/09/12/business/economy/fed-rates-explainer.html>.
Underhill, Justin. Fed passes on rate hike, cites global risks and projects fewer rate increases in 2016. 16 March 2016. 11 April 2016 <http://finance.yahoo.com/news/fed-march-policy-142620494.html>.
Volcker Disinflation. n.d. 11 April 2016 <https://www.boundless.com/economics/textbooks/boundless-economics-textbook/monetary-policy-28/historical-federal-reserve-policies-120/volcker-disinflation-475-12571/>.
