Introduction to Forecasting
(WK Ch 1)
Economic Forecast and Analysis
Major Questions in this lecture
1. Why and what to forecast?
2. Based on What?
3. Is your forecast good or bad?
Why and what to forecast
W Bank sells $500,000 of Treasuries and uses the proceeds to fund two $200,000 mortgages and
the purchase of $100,000 of municipal bonds.
(Note: This is net. The bank merely moved $100,000 from one type of security to another.)
In five w
8.5 Agency Problems
What are agency problems and how can they be mitigated?
8.4 Moral Hazard
What is moral hazard and how can it be mitigated?
It can be mitigated by screening out high-risk members of the applicant pool.
Financial market facilitators can also become expert specialists and attain minimum efficient scale, but
financial markets are hampered by the free-rider problem.
In short, fe
9.2 Assets, Liabilities, and T-Accounts
In five words, what do banks do?
Without a word limitation, how would you describe what functions they fulfill?
Stop and Think Box
9.1 The Balance Sheet
What is a balance sheet and what are the major types of bank assets and liabilities?
Agency problems are a special form of moral hazard involving employers and employees or other
Agency problems can be mitigated by closely aligning the incentives of the agents (employees) with
of the pr
By the end of this chapter, students should be able to:
Explain what a balance sheet and a T-account are.
Explain what banks do in five words and also at length.
Describe how bankers manage their bank
Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C.
The Yield Curve and Predicting Recessions
Jonathan H. Wright
2006-07 NOTE: Staff working papers in the Finance and Econ