President George Bush still has to fill a vacancy at the Federal Reserve Board (FRB) after the abrupt resignation of vice chairman Roger Ferguson. The Wall Street Journal today names Frederic Mishkin, a former senior Fed New York staffer and currently professor at New York's Columbia University, as a possible candidate for the job.
Interestingly, Mishkin's most downloaded research paper is titled "The yield curve as a predictor of US recessions" and according to the abstract
"the yield curve, specifically, the spread between the interest rates on the ten-year Treasury note and the three-month Treasury bill, is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions two to six quarters ahead."While the FRB is currently engulfed in a discussion whether to adopt an inflation target in its monetary policy, Mishkin's nomination could obviously lead to still more policy discussions. We remember that former chairman Alan Greenspan said last year that an inverted yield curve does not have to mean what it meant in the past. All past recessions were preceded by an inverted yield curve.
According to his bio (pdf) Mishkin's academic work has largely focused on monetary policy and its impact on financial markets and the aggregate economy. He is the author of "The Economics of Money, Banking and Financial Markets," the number one selling textbook in its field. In addition he is the author of more than ten other books, including "Inflation Targeting: Lessons from the International Experience" and "Money, Interest Rates, and Inflation."
Mishkin nas never served the US government in an official function. He is believed to be one of the top candidates for the post of vice chairman.
The WSJ also wrote that the Fed Philadelphia may look into hiring a Wall Street economist after the resignation of president Anthony Santomero.