The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
We propose a theory to explain why, and under what circumstances, a politician delegates policy tasks to a technocrat in an independent institution, and analyze under what conditions delegation is optimal for society. Our theory builds on Holmström's hidden effort principal-agent model. The election pressures faced by politicians, together with the absence of such pressures for technocrats, give rise to a dynamic incentive structure that formalizes two rationales for delegation, one advanced in the eighteenth century by Alexander Hamilton and the other in a 1998 work by Blinder. Delegation trades off the cost of having a possibly incompetent technocrat with a long-term job contract against the benefit of having a technocrat who (i) invests more effort into the specialized policy task and (ii) is better insulated from shifts in public opinion. A natural application of our framework leads to a new theory of central bank independence.