From the Editor

In This Issue

It was not really planned this way, but this issue has an especially heavy emphasis on banking and finance. It leads off with Harvey Rosenblum's NABE presidential address on what his career as a central banker has taught him about fighting inflation, concluding that there is much that we still do not understand and that anecdotal evidence and gut instincts are still as important as formal modeling.

This year, the Adam Smith Award was shared by three distinguished researchers and policy advocates who are members of the U.S. Shadow Financial Regulatory Committee. This group of academic economists, lawyers, and former bank regulators is dedicated to market-based banking policies -- independent of either banking or regulatory interests. George Kaufman discusses the conditions in which good policy advice can prevail and the constraints on politicians' adopting it. Although response is often discouraging, crises --such as the U.S. savings and loan crisis of the 1980s - provide opportunities for independent voices to be heard and sound policy to be enacted. Edward J. Kane discusses what other countries can learn from the savings and loan crisis and its policy response. He emphasizes how, unless financial regulation is carefully structured, there are incentives for regulators --as well as those they regulate -- to engage in risky behavior and indicates the structural remedies for this situation. George J. Benston questions why banking should be regulated any more than other markets and concludes that it should not, with two important exceptions: meeting requirements for adequate capital and examinations to make sure that those requirements are being met.

John B. Taylor, the Under Secretary for International Affairs of the U.S. Treasury, addressed the NABE Annual Meeting on the Bush Administration's international economic agenda. From the outset, the agenda focused on enhancing free trade and strengthening developing and emerging economies. While these objectives continue to be pursued, unanticipated efforts have been necessary to cope with the consequences of 9/11, including attacking terrorist finances and rebuilding Afghanistan.

One of the Bush Administration's international initiatives, together with the IMF, has been to make responses to sovereign financial crises more predictable and less reliant on official financial assistance. However, aspects of U.S. Treasury and IMF policy that imply the development of the equivalent of a bankruptcy workout process are controversial. Arturo C. Porzecanski presents the case that the current proposals are not likely to be effective and proposes that the most effective policy would be to make future financial assistance more limited and less discretionary.

Since the introduction of U.S. Treasury inflation-protected securities (TIPS) in 1997, the spread between them and conventional issues of similar maturity has been used as a real-time measure of inflation. Albert E. DePrince, Jr. takes the next step to explore whether TIPS of different maturities can be used to infer the term structure of inflationary expectations, finding that it is possible but that caution is necessary.

Economics at Work

In order to improve the flow of "Economics at Work" articles, Peter Jaquette has agreed to edit this feature on a regular basis. Peter is the Manager of Economic Analysis at the Weyerhaeuser Company and past Director of NABE. I would like to thank Peter for taking this on and look forward to his making this popular feature an important part of Business Economics once again.

Editorial Board

I am pleased to announce that Parul Jain has agreed to serve on the Editorial Board. Parul is the Director of Investment Research & Portfolio Strategy of TIAA-CREF. Also, she is currently serving as Vice President of the New York Association of Business Economics.