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What would Greenspan do?
The College Fed Challenge team: (seated, from left) Mills, Irvine, List; (standing, from left) Ghironi, Wiles, Murphy. Missing is Anna Zervou. Photo by Gary Wayne Gilbert
A team of five Boston College students has placed third in the annual College Fed Challenge sponsored by the Federal Reserve Bank of New York. The competition, which took place at the Federal Reserve building in Manhattan on November 10, called for teams of economics students to propose monetary policy for the Federal Reserve System, assuming the role actually filled by the Federal Open-Market Committee.
This was the first time Boston College had sent a team to the three-year-old contest, according to associate professor Robert Murphy, who, with assistant professor Fabio Ghironi, advised the team. At the competition, seniors Matt List and Barry Mills, and juniors Mark Irvine, Greg Wiles, and Anna Zervou, all economics majors or minors, made a 20-minute presentation on the current U.S. economy—including forecasts on job growth and inflation—and recommended a course of action on the federal funds interest rate (the main economic tool of the Federal Reserve). The students, who had studied the previous year's data on such factors as job creation, inflation, and productivity, as well as records of the Open-Market Committee's deliberations, recommended raising the federal funds interest rate from 1.75 to 2 percent, to counter inflationary pressures from rising oil prices. "At first we thought that we should stop raising interest rates," says Wiles. "But we looked at the data again, and thought the course the Fed is taking is probably right." That same day, the Open-Market Committee, meeting in Washington, D.C., announced a change identical to the one proposed by the students.
In the first round, the BC students presented their case to judges—mostly Fed officials and economists from the private sector and academe—in a private conference room. In the concluding round later in the day, they joined fellow finalists from Rutgers, SUNY Geneseo, and SUNY Binghamton in an auditorium before a judging panel that included Charles Steindel, a senior vice president of the New York Federal Reserve Bank, who led the questioning: What role does the Federal Reserve have in preventing asset price bubbles? What, besides the treasury yield curve, can be used to measure inflation expectations?
Rutgers and SUNY Geneseo, both past participants in the competition, placed first and second; the BC students collectively received a $2,500 award, and the economics department $5,000, for their finish. Nineteen universities participated in the competition, including Columbia, NYU, Fordham, Northeastern, and Cornell.
Paul Voosen
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