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From Theory to Policy: A Look at at the Fed Challenge
By Daniel Diner '14
It’s not often that a professor devotes an entire course to a single, hands-on project. It’s even less often that a class revolves around an intercollegiate competition. But last semester, eight students and an economics professor came together in this unusual way.
In the Special Topics course “Federal Reserve Challenge,” taught by Geoffrey Woglom, the Richard S. Volpert ’56 Professor of Economics, students spent the semester preparing for the annual Federal Reserve Challenge in Boston.
The Fed Challenge requires teams of undergraduates from various schools to research the state of the current macroeconomy and produce a comprehensive proposal regarding federal monetary policy. This policy proposal must be based on the team’s macroeconomic forecast and must take into account every possible factor and consequence, including biased statistics and unintended inflation. Teams have 15 minutes to present their recommendation to a panel of experts and another 15 minutes to answer questions.
For the course, Woglom recruited top students from his “Money and Economic Activity” and “Advanced Macroeconomics” courses. “I was drawn to the class,” says George Tepe ’14, “
because I loved Professor Woglom and central banking.”
The semester began with crash courses on central banking and monetary policy, with a focus on Fed operations. The students soon began to think about which economic statistics they needed to single out. They began meeting, with some guidance from Woglom, two or three times each week to discuss the current conditions of the macroeconomy. They used their research to come up with policy recommendations and, eventually, to construct a presentation.
Each student brought a different talent and perspective. March Fan ’15 says the intimate setting of the meetings accentuated their individual abilities. Alex Jiron ’15 was the “macro genius,” Fan says. Tepe became known as the resident “inflation hawk.” Duncan Morrissey ’14 had the kind of polished speaking voice that made him a natural for the smaller team that would present in front of the judges.
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Ultimately deciding that the economy required additional stimulus, the team settled on the following policy proposal: “If the unemployment rate remains above 7 percent and core inflation remains below 3 percent, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as it sees fit.”
Then the students’ focus turned from economics to performance. The smaller crew that would present in Boston rehearsed in front of and sought critiques from Amherst (and at one point, Smith) faculty.
Special help came from Assistant Professor of Theater and Dance Ronald Bashford, who teaches a two-semester course called “The Craft of Speaking.” When Bashford heard the team’s presentation, he gave them advice that would rework their entire oral approach. “These guys were very good students of economics,” Woglom says, “but making a presentation involves a wholly separate set of skills. It was a little bit scary because basically he said, ‘Start over again. Here’s what you need to do.’ But the way the students improved their presentation was absolutely awe-inspiring. The way they learned how to make an effective oral presentation was a side effect I had not anticipated.”
In November the team headed to Boston for the presentation. They received near-perfect marks on their talk, but they were defeated in the first round by the defending national champions from Harvard, and so they never made it to the finals. Still, the professor and students have no regrets. The group “worked harder than students have in most of the other classes that I’ve taught,” Woglom says. “I brought in this diverse group—from student government, athletics and international backgrounds—and thought to myself, ‘How am I going to make a team out of [them]? But it was never an issue. They worked together and came together as a team.”
Chris Friend ’14, another student in the course, hopes that Woglom will teach “Federal Reserve Challenge” in future years. “It was one of the best crash courses you could take in learning about the Federal Reserve and its inner workings,” he says.