EconSouth (Second Quarter 2000)

Research Notes & News highlights recently published research as well as other news from the Federal Reserve Bank of Atlanta. For complete text of summarized articles and publications, see the links below.

Looking at social security reform in Mexico

Recent projections of a number of countries with pay-as-you-go pension systems have shown significant future actuarial imbalances. As a consequence, several of these countries, including Mexico, are engaged in redesigning their pension systems. From the U.S. perspective, Mexico’s reform is of particular interest because of the similarities of its program to some proposals for the U.S. system. The Mexican government claims that it has started a move to a fully funded system. As proof, it points out that since 1997 Mexico has adopted a privately managed defined-contribution system. However, a pension system can be privately administered without being fully funded. It is the adoption of a fully funded system that would have the most significant macroeconomic effects in an economy: an increase in domestic savings and a drop in interest rates.

In a recent article, Marco Espinosa-Vega and Tapen Sinha contend that after reviewing the new system, one cannot tell whether the government is switching to a fully funded system. They review some potential gains and losses of the change in style of the system. However, they argue that regardless of whether the reform is a change of style or substance, additional information is required to effectively assess its net gains. They conclude that Mexico is in dire need of further research to guide it through its decision of whether and how to switch to a fully funded pension system.

Economic Review
First Quarter 2000

Atlanta Fed to publish Latin American research volume

The task of balancing public sector budgets and reducing debt burdens is paramount among the economic reforms under way in Latin America. In pursuit of greater fiscal balance, policymakers have cut spending, raised taxes and relied upon revenue from privatization. This goal has become all the more pressing as governments struggle with the aftermath of the global economic crisis.

To offer a perspective on these issues, the Atlanta Fed sponsored the conference Sustainable Public Sector Finance in Latin America in November 1999. Research discussed at the conference included papers and commentaries by leading experts on the varied aspects of fiscal policy, including political constraints, administrative reform, social spending, efforts to confront fiscal imbalances, deficit finance, and international lending and capital flows.

As a follow-up to the Atlanta Fed’s conference, the bank is preparing a volume of conference proceedings. The free volume will be available in July. If you would like more information about the topics covered in this collection, visit the Atlanta Fed's Web site at You may also order the publication online.

Atlanta Fed updates currency and coin brochure

Have you ever wondered how U.S. currency is printed, how much money is in circulation or what the symbols on your cash and coins stand for? These are just some of the topics covered in the Atlanta Fed’s new Dollars and Cents brochure, which updates and replaces two discontinued brochures — Fundamental Facts about U.S. Money and Counterfeit?


After declining slightly in January, the dollar rebounded somewhat in February and remained unchanged in March versus the 15 major currencies tracked by the Atlanta Fed. During the three-month period, the dollar’s performance versus the currencies in most of the subindexes was mixed, but its net gains were strongest against currencies in the European subindex, which includes the European Monetary Union, Switzerland and the United Kingdom.

Note: For more detailed, monthly updates and historical data on the dollar index, see the Atlanta Fed's World Wide Web site at

Dollars and Cents includes all the historical information from the Fundamental Facts about U.S. Money brochure, which, since its introduction in the 1980s, has been the Atlanta Fed’s most popular publication and the most visited page on its Internet site. In addition to an updated look, Dollars and Cents features the new U.S. currency and coin designs, including the new state quarters, the golden dollar coin and the new $5 and $10 bills.

Other topics include the types of U.S. money, currency features, coin information, the circulation of money, tips for spotting counterfeit currency and rules about reproducing money. Dollars and Cents is also available on the bank’s Web site.

To order copies of this brochure (1–50 copies free), contact the Atlanta Fed’s Public Affairs Department, 104 Marietta Street, N.W., Atlanta, Georgia 30303-2713; call 404-498-8020; or use the online order form.

New video on the Federal Reserve

“Money — it certainly does make the world go around. And the reason it’s able to do so is that we trust these little pieces of paper,” says well-known radio and television commentator Charles Osgood, holding up a $20 bill. Thus begins a new video that tells the story of how the Federal Reserve System does its work.

Building on this theme of trusting our money, The Fed Today explains that the Federal Reserve System was created by an act of Congress in 1913 to establish and maintain the public’s confidence in the U.S. monetary and banking system. That mission has grown over time to include responsibility for providing a stable, healthy and growing economy.

The video also discusses the Fed’s public/private structure as a decentralized central bank, with the Board of Governors representing the public side and the 12 Federal Reserve Banks representing the private sector.

The Fed’s three main functions — setting monetary policy, supervising and regulating banks, and providing payment services for financial institutions and the government — are also addressed. The discussion of monetary policy includes a look at the Federal Open Market Committee and how it guides open market operations. The video also examines the Fed’s role in the payments system and how that system has evolved through technological advances.

The Fed Today was commissioned by the Federal Reserve System to serve as an educational tool for teachers and the general public. To order the free 15-minute video from the Atlanta Fed, call 404-498-8020.

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