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Federal Reserve Leaders Teach MBA Class at the WSB

by Rob Kelly Wednesday, April 22, 2015

Dean Corbae, professor of finance, is delivering on the Wisconsin School of Business’s commitment to student-centered learning. This semester, Corbae partnered with five top macroeconomists from the Federal Reserve Banking System to deliver their comprehensive, in-depth knowledge directly to MBA students as part of his class.

These guest lectures are part of the Wisconsin MBA course “Economics for Managers” that Corbae co-teaches with Don Hausch, associate dean for evening and executive MBA programs. Each guest lecturer assigns readings linked to the course’s overall learning objectives, providing insights on monetary policy, interest rates, inflation, and the effects monetary policies ultimately have on labor, foreign exchange, and financial markets.

“The lectures provide a unique perspective that no other MBA program has established so far, to my knowledge,” Corbae says. “If you want to run a business, you need to think about how to finance that business, and interest rates affect those financing costs. These guys understand how interest rates are determined.”

Dave Altig, Federal Reserve Bank of Atlanta, UW-Madison, Wisconsin School of Business, MBA

Dave Altig, executive vice president and director of research at the Federal Reserve Bank of Atlanta, delivers a lecture in the Wisconsin MBA class "Economics for Managers."

“Having the Fed officials present economics to us is really something you can tell your friends and family about,” says Christopher Van Mullem (MBA ’16). “These are real people giving real insights into how our government sets our monetary policy. The speakers completely changed my view of the Fed. Rather than delivering expected ‘canned’ lectures, the Fed speakers actually delivered a discourse that challenged us to understand both the pros and cons of various economic approaches. This kind of learning is learning at the very highest level.” 

In the first guest lecture, Dave Altig, executive vice president and director of research at the Federal Reserve Bank of Atlanta, provided an overview of the Federal Reserve’s institutional setting and a framework for thinking about how policy decisions—specifically, influencing short-term interest rates—relate to key macroeconomic variables. He also discussed the short-term outlook for the U.S. economy and how it might influence Federal Reserve policy.

Altig explained that the Federal Open Market Committee meets eight times a year to discuss what measures, if any, should be taken to address inflation and output gaps—the difference between the actual output of the economy and its potential.

“These economists have direct experience with the Federal Open Market Committee meetings where Ben Bernanke and Janet Yellen sit and make policy that affects the world economy,” Corbae says. “They know better than anyone how monetary policy affects interest rates and world economic activity.”

wisconsin MBA Fed uw-madison wisconsin school of business

Wisconsin MBA students not only listened to Altig speak, but also asked insightful questions about monetary policy.

This first lecture provided an overview of the Fed and financial markets. The following guest lectures that occur later in the course build on the first one:

  • Troy Davig, senior vice president and director of research at the Federal Reserve Bank of Kansas City, will discuss fiscal efforts to stabilize economic activity in the United States, fiscal issues in the Eurozone, and what Fed policies mean for the supply of government debt in the coming decades.

  • Gadi Barlevy, senior economist and research advisor at the Federal Reserve Bank of Chicago, will discuss supply-side and demand-side theories that explain real economic fluctuations and use data on labor markets and inflation to try to distinguish between these views in understanding macroeconomic developments.

  • Mark Spiegel, vice president and director of Pacific Basin Studies International Research at the Federal Reserve Bank of San Francisco, will talk about the role played by the “global savings glut” in the run-up to the financial crisis. He will also discuss the current account surpluses run by China and other Asian economies and the implications of these trends for foreign exchange rates.

  • James McAndrews, executive vice president and director of research at the Federal Reserve Bank of New York, will review the role of housing finance in the United States, focus on the informational and incentive frictions that contributed to the growth of subprime mortgage credit, and review how the collapse of that market contributed to the financial crisis.

After delivering a lecture, each Fed economist challenges student teams to articulate a particular position on an issue the Fed is wrestling with. Then the Fed economist evaluates the creativity and logic of the teams’ positions. The goal is to provide students with a framework to understand how Fed policy affects short-term interest rates, which in turn affect bond, stock, foreign exchange, and housing markets.

“The evaluation process is like the reality show The Apprentice,” says Corbae. “MBA teams compete by providing the Federal Reserve executive a logical argument for or against taking measures to address an important real-world economic problem.” 

Learn more about the Wisconsin MBA.