Federal Reserve Bank of St. Louis Review
A bimonthly research journal intended for an economically informed but broad readershipfrom the undergraduate student to the PhD. In print and online.
SEPTEMBER/OCTOBER 2007 Vol. 89, No. 5
Currency Design in the United States and Abroad: Counterfeit Deterrence and Visual Accessibility
Despite the increasing use of electronic payments, currency retains an important role in the payment system of every country. In this article, the authors compare and contrast trade-offs among currency design features, including those primarily intended to deter counterfeiting and those to improve usability by the visually impaired. The authors conclude that periodic changes in the design of currency are an important aspect of counterfeit deterrence and that currency designers worldwide generally have been successful in efforts to deter counterfeiting. At the same time, currency designers have sought to be sensitive to the needs of the visually impaired. Although trade-offs among goals sometimes have forced compromises, new technologies promise banknotes that are both more difficult to counterfeit and more accessible to the visually impaired. Among the world’s currencies, U.S. banknotes are the notes most widely used outside their country of issue and thus require special consideration.
Experiments in Financial Liberalization: The Mexican Banking Sector
Since the liberalization of its trade in the mid-1980s, Mexico has pursued an aggressive globalization strategy, which today makes it the country with the most free trade agreements in the world. This liberalization strategy has also included the banking sector, particularly since 1997, when all restrictions to the entry of foreign banks were removed. The history of the banking sector in Mexico includes episodes of nationalization in 1982, privatization in 1992, and near-complete failure in 1995. Since then, however, the Mexican government has undertaken a series of bold reforms that have contributed to the modernization of its financial system. This paper documents the evolution of Mexico’s banking sector starting from its nationalization in 1982 and culminating with the increased entry of foreign banks in recent years that has driven the recovery of bank credit to the private sector.
How Well Does Employment Predict Output?
Economists, policymakers, and financial market analysts typically pay close attention to aggregate employment trends because employment is thought to be an important indicator of macroeconomic conditions. One difficulty is that there are two separate surveys of employment, which can diverge widely from one another, as the previous and current economic expansions demonstrate. The conventional wisdom is that, for assessing economic conditions, the survey that counts the number of jobs (establishment survey) is preferable to the survey that counts the number of people employed (household survey). However, results from a one-quarter-ahead forecasting exercise presented in this paper suggest that analysts should question whether employment is a useful indicator for predicting output growth.
The Effectiveness of Monetary Policy
This analysis addresses changing views of the role and effectiveness of monetary policy, inflation targeting as an “effective monetary policy,” monetary policy and short-run (output) stabilization, and problems in implementing a short-run stabilization policy.
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