Economist and professor Janet Yellen was confirmed as the nation’s first female chair of the Board of Governors of the Federal Reserve System during a Senate vote held Monday. Dr. Yellen currently serves on the Federal Reserve as vice chair, and has been the preferred candidate for the job since President Barack Obama nominated her last October. She will assume her position Feb. 1, and succeeds current chair Ben Bernanke, who led a series of lectures on the Federal Reserve at the George Washington University in 2012.
Dr. Yellen has made history as the first woman to hold the highest position in monetary policymaking. Additionally, she has a background steeped in academic research, particularly work on the labor market. Professor of Economics Tara Sinclair spoke to George Washington Today to give her take on what Dr. Yellen’s confirmation means for women in the field, the future of the U.S. economy and students at GW entering the workforce.
Q: Dr. Yellen was confirmed easily, with a 56-26 Senate vote. Can you tell us about her accomplishments and reputation at the Federal Reserve?
A: There are a couple of characteristics that are very important: She has a respected research reputation. Among other economists, she’s well-known for understanding both policy and cutting-edge research. As times are changing in economic policy, it’s important to keep up with new analyses and to understand research coming in from academics around the globe, and she can contribute to that herself. Like Dr. Bernanke, she has a high academic standing.
She also has tons of policy experience—she was the president and CEO of the San Francisco Fed, and she served in the Clinton administration as head of the Council of Economic Advisers. She has been on the board before and serves as vice chair. She was able to maintain all of this while still doing high-quality academic research. In terms of being a qualified chair, I can’t imagine anyone being more qualified. Because she was vice chair, she saw many polices go into place. Having a person who was at the Federal Reserve from the beginning at a time when they’re talking about unwinding certain policies is really important.
Q: The economy is still in the midst of recovery, and Dr. Yellen will be taking on a huge role as chair during such a delicate time. What challenges does she face?
A: The labor market is still relatively weak, and there are a lot of questions about how much more monetary policy can do to help, particularly for the long-term unemployed. That’s not usually a particular target of monetary policy, which changes the availability and cost of money and credit with the objective of keeping inflation low and employment high.
Much of the economy is still weak due to demand-side forces. At the same time, there’s pressure to do something about extraordinarily low interest rates we’ve had for a long time. Finding a time when the Fed can increase interest rates so that the economy normalizes is going to be really important—choosing exactly the right moment in which raising interest rates will not be hugely detrimental to the recovery is tricky. Additionally, we don’t have a good sense of how long it takes for monetary policy to make an impact. Milton Friedman’s adage that monetary policy has “long and variable lag” still holds.
Q: How are her views and policies different from Dr. Bernanke's?
A: They worked well together as chair and vice chair, so this will be a fairly smooth transition. Everyone at the Federal Reserve is used to her and the way she leads, so I don’t think it will be much different with her moving positions.
One interesting thing is that people often talk about Dr. Yellen being a “dove” because she does a lot of research on labor markets, and she seems concerned about the growth aspects of monetary policy. Someone who is described as a dove wants to use loose monetary policy to keep the economy going as compared to a “hawk,” who is willing to take a hit on economic growth to keep inflation low. On the contrary, I actually think the Fed has been very clear that if they see inflation start to rise, they will take action directly—and I think she will be very much willing to do that.
Q: How do you think her official confirmation will inspire women economists and leaders in a traditionally male-driven field?
A: I always preface this by saying that Dr. Yellen should be Fed chair—she just happens to be a woman. It’s exciting to have her recognized for her qualifications. I do hope that when women in college—and even younger girls—turn on the TV and see a female chair testifying, it will have an impact. I think it’s nice just to see someone who looks like us in leadership roles.
Q: You’ve talked about Dr. Yellen’s expertise in labor market research. Can you tell us about her dedication to unemployment and how that may affect GW students looking for jobs?
A: As long as inflation stays low, the Federal Reserve has more room to focus on labor markets. That will affect future graduates of GW because coming into a stronger labor market will impact their whole career. There is research that suggests that when you come out in a weak labor market after graduating college, it has a negative impact on your entire career trajectory. It will be very important to college graduates in particular that the Federal Reserve and Dr. Yellen do everything they can to make the labor market as good as it can possibly get.