EconSouth (Second Quarter 2000)
Fed’s Regional Structure Provides
ne of the by-products of the unique structure of the Federal Reserve System is the role the 12 regional banks play in gathering grassroots economic information from their respective regions. The most familiar evidence of this effort is found in the Fed’s Beige Book, a set of summaries of current economic conditions from each region that, collectively, span the nation’s economy.
The view from the Southeast
Theoretically, it is useful to think of the Atlanta Fed’s region as an open economy that trades with the rest of the world, mostly the rest of the United States. Economists have a rich set of models and results that apply to small, open economies, but in the real world few countries can match up to the theoretically pure case. The Southeast comes close, however, because it really is an integrated part of the larger economy, and goods, capital and labor flow freely in and out of the region.
Regional trends have national implications
The surge in new housing construction that occurred at the beginning of this economic expansion boosted employment and income disproportionately in the Southeast because of this concentration. Similarly, capital investment in Southeastern plants eased materials shortages that hampered national construction in the mid-1990s. Whatever is going on in the relevant portions of district manufacturing serves as a check on the larger view of the national housing market. Another example is tourism, where national income growth and confidence in future income growth play a disproportionate role in the Southeast’s hospitality sector.
Since the Southeast region is quite large, the Atlanta Fed has branches across the region, in Miami, Jacksonville, Nashville, Birmingham and New Orleans. Each branch has its own board of directors, whose members provide economic reports that are used by the Atlanta Fed’s research department. Often, the anecdotal data gathered from directors and their business contacts precede national developments, where data are available only with a lag. For example, reports from our Jacksonville branch of tightening credit standards preceded the national “credit crunch” associated with the downturn in the early 1990s by more than a year.
Implications for monetary policy
By Thomas Cunningham, vice president of regional research for the