Janet Yellen Speaks at a Teachers Town Hall Meeting; The Gender Gap in Economics and the Leaky Pipeline Problem

So, this critical role of central banks as a lender of last resort, it's something that never got any attention when I taught money and banking and I would make sure that it does in the future. And if you don't mind my plugging some work that I think very highly of by my predecessor in this job, Ben Bernanke gave a series of lectures on the financial crisis and on these topics at George Washington.

He gave a series of four lectures on financial crises and central banking and they're on our website along with the materials that he used and they're a wonderful resource if you were to teach it. If you don't mind my taking just another second on this question, I'd like to just turn briefly to the treatment of monetary policy and unconventional policy.

A lot has changed since, as I said, I taught money and banking prior of the crisis. As you know, in recent years many advanced countries have faced situations where they cut overnight short-term interest rates effectively to zero or encountered what we call the zero lower bound and found that they still had weak economies, often with inflation falling below inflation targets and felt the need to provide more stimulus than they were able to achieve through using this conventional tool of the overnight interest rate. I think when I was teaching this topic, in the early years of my teaching, this is the situation that had occurred in the Great Depression and there used to be a box in money and banking text that described this. Over the years that I taught, the box got smaller and smaller. It turned into a footnote and then it disappeared.

I suppose before our own financial crisis, there was another country that encountered this situation. Japan suffered from deflation and by the early 2000s they had cut their overnight interest rate to zero and we're confronting this problem. In some ways from our point of view, it's fortunate that that situation gave us a chance to think about what might be done in such a situation. Was there more that Japan could do? What could they do?

And so, some academic thought went into that at a time when nobody ever thought the United States is going to be in this situation. But, of course, we found ourselves in exactly that situation following the financial crisis. In December of 2008, we cut our benchmark overnight interest rate to a range of 0 to 25 basis points effectively the zero lower bound. I think we never would have imagined at the time that we would keep it there for seven years, but it stayed there for seven years and we felt that we needed to do more.

And I think it's important for students because these were unusual things and they're somewhat controversial things to understand the logic of what we--and it's not just we, we see the European Central Bank, the Bank of England, the Bank of Japan adopting the same kinds of unconventional policies the Federal Reserve used. But one thing we did was to buy longer-term assets, in our case, Treasuries and agency securities with the idea that even if short-term yields are at zero, longer-term assets may have yields that are well above zero when we can push those yields down, which I think we succeeded in doing. And also we provided what's called forward guidance on the likely path of short-term interest rates. Market participants seem to think interest rates would be going up pretty quickly, maybe they thought the economy would recover faster than it did and we provided guidance that in our view interest rates would essentially, overnight rates, stay low for a long time. We did that in a variety of ways, also to push down longer-term rates.

So I would certainly include discussion of that. And, unfortunately, economists are coming to the conclusion now we've had throughout most advanced nations the levels of both long- and short-term interest rates have generally been moving down. And people are now realizing that there are structural reasons for that and it's a situation that may prevail in the future. So we may be operating in a world of generally low interest rates and a problem with that is the economies are hit by negative shocks if the level of interest rates is low to start with, it means that central banks don't have all that much scope to respond by using standard overnight interest rate.

A lot of thought now is going into the question of what can be done to address such a situation and I would want to include that. My final word on this is that usually money and banking courses would discuss operational aspects of monetary policy. In our case, the Federal Reserve Bank of New York conducts operational aspects of implementing policy. And that has changed quite dramatically — how we conduct policy. Given the fact that our balance sheet is much larger than it was before the crisis as a consequence of having bought these longer term assets, we're now conducting monetary policy using different tools in different ways and I would want to describe that as well. Thank you.

AMY HENNESSY. And now for a question from a teacher in the Minneapolis District; Why aren't there more women economists, like you, and more overall diversity within the economics profession and how do we change that?

CHAIR YELLEN. So that's, that’s a fantastic question and a lot of thought in this building throughout the Federal Reserve System and in the economics profession is going into trying to understand that. And I certainly, from my own standpoint, would love to see more women and minorities entering economics.

I think the problem begins in college or even earlier than that. Women are hugely underrepresented in economics jobs, in faculty positions, in universities. They're underrepresented in PhD programs, and they're also underrepresented in college majors. Nationwide, about 30 percent of economics majors are female and it's also the case that some racial and ethnic minority groups are also hugely underrepresented. From the standpoint of women, this gender gap in economics actually gets more severe as you go to higher stages in the profession and that's a phenomenon sometimes known as the leaky pipeline problem. And so, I guess a good question is, a question you ask is: What -- why does the situation exist. And I think the first thing that might come to mind is you have is economics is a profession that's technical and mathematical and maybe women are less attracted to such fields. But I actually don't think that's the answer. Women are not generally underrepresented in science, technology, engineering, the STEM fields. STEM majors tend to be, you know, roughly half female and even in pure math that's less male dominated in economics. You might say, "Well, it's matters that economists study," maybe they're less appealing to women. But that doesn't seem reasonable to me either. I don't think there's much to that. I mean, core topics in economics concern things like health, the environment, poverty, labor markets, discrimination, the family. I think these are topics that appeal to women and not only to men. So I don't feel it's the substance. Role models may be an issue. Students are less likely to encounter women economists, as instructors, and in the real world in economics professions and that may be part of it. So another factor that might be significant is--and this is something that’s been looked at in seeing that as this leaky pipeline problem, women advance through the profession, they tend to--women have worse experiences at every level than men do. Implicit bias may play a role. For example, there's research that shows that women receives significantly less credit co-authoring papers. Many papers in economics are co-authored and women seem to receive significantly less professional credit for co-authoring papers, especially when the co-author is a man in contrast to men. And so I think the answers are not clear. It's something that I do hope will change over time and it may even make a difference in the way public policy is conducted. There have been studies that suggest that there tend to be significantly different opinions on important public policy topics like health insurance or the minimum wage between men and women. And diversity, gender diversity in the profession, and I'm sure this is true of racial and ethnic diversity as well, could make a difference to the public policies that are formulated.

I would say that something I think is encouraging is that recently the Sloan Foundation funded a project called the Undergraduate Women in Economics Challenge. It's being led by a woman by the name of Claudia Goldin who is a distinguished labor economist at Harvard and the objective is to try to devise and then test out different interventions to see if they can succeed in attracting more women into the field. There is a very interesting recent article on the status of women in the economics profession that was written by an economist at Swarthmore College Amanda Bayer and Cece Rouse who's at Princeton. And Amanda has actually been advising us here in our research divisions on diversity and inclusion practices. And I would just say from our standpoint here at the Board, we're very much trying to increase our outreach to high schools and colleges in order to encourage a broader array of students to consider the economics profession. And we're thinking about our hiring practices and how we can improve those as well.

Editor's Note: You can read the rest of the question section at the site:

https://www.federalreserve.gov/mediacenter/files/teacher-town-hall-2017-transcript.pdf

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Janet Yellen Speaks at a Teachers Town Hall Meeting; The Gender Gap in Economics and the Leaky Pipeline Problem

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