In this essay, I explain my reasons for the following policy recommendations: (1) The Fed should continue to manage monetary policy as it has in the past, should act as the nation's lender of last resort, should fully supervise the large bank holding companies and their subsidiary banks, and should be given resolution authority over the institutions that it supervises. (2) While a council of supervisors and regulators can play a useful role in dealing with macro prudential risks, it should not replace the central role of the Federal Reserve. (3) The virtually unlimited lending powers that the Fed has recently exercised in creating credit and helping individual institutions should be restricted in duration and subjected to formal Treasury approval backed by Congressional preauthorization of funds. (4) The Fed's capital rules for commercial banks need to be strengthened by replacing the existing risk-based capital approach with a broader definition of risk and the introduction of contingent capital. (5) Subjecting mortgage lending to a broader range of Federal Reserve regulations and allowing the Fed to deal with nonbank creators of mortgage products would be better than the creation of a new consumer financial protection organization

Home bias is a perennial feature of international capital markets. We review various explanations of this puzzling phenomenon highlighting recent developments in macroeconomic modeling that incorporate international portfolio choices in standard two-country general equilibrium models. We refer to this new literature as Open Economy Financial Macroeconomics. We focus on three broad classes of explanations: (i) hedging motives in frictionless financial markets (real exchange rate and nontradable income risk), (ii) asset trade costs in international financial markets (such as transaction costs or differences in tax treatments between national and foreign assets), and (iii) informational frictions and behavioral biases. Recent theories call for new portfolio facts beyond equity home bias. We present new evidence on cross-border asset holdings across different types of assets: equities, bonds and bank lending and new micro data on institutional holdings of equity at the fund level. These data should inform macroeconomic modeling of the open economy and a growing literature of models of delegated investment

T HE NEW International Encyclopedia of the Social Sciences has already received the attention it rightly deserves. It is a worthy sequel the Encyclopedia of the Social Sciences which has, since its publication in the early 1930s, become badly outdated with respect both facts and theoretical developments in rapidly moving disciplines. The IESS is a wholly new product, not merely a revision of the earlier work. Its editors set themselves the task to make available readers throughout the world the concepts, principles, theories, methods, and empirical regularities that characterize the social sciences today (vol. 1, p. xxiii) and urged contributors include historical and descriptive material illustrate concepts and theories, rather than for its own sake. The publication coming from this effort contains 1716 articles-598 are biographical entries-bound in 17 volumes (including an extensive index) and selling for $503 a set, postpaid. (The Preface reports that the publisher was willing invest $2 million in the enterprise.) Casual perusal of the articles suggests that the editors were successful and early sales support this: an initial printing of 10,000 was sold out within five months, and the set went into a second printing of similar size. The buyers, I am told, include a large number of high schools, using Title II funds under the Federal Elementary and Secondary School Act. The purpose of this review is draw attention the non-biographical entries dealing with international economics. Sixteen articles deal directly with intemational economics, that is, with subjects that might be covered in a college course of that title. Many others, such as those on central banking, foreign aid (economic), mercantilism, spatial economics, and a number of the biographies, of course are also relevant international economics. About the same number of articles on international economcs appeared in the earlier Encyclopedia, and by rough calculation the share of international economics in the total material remained unchanged at 1.2 percent. But while in the earlier Encyclopedia 39 percent of the total coverage represented topics in economics, in the IESS this share dropped 14 percent [3, Sills, 1969, p. 1173]. No doubt this reflects not only the change in principal editorship from two economists (E.R.A. Seligman and Alvin Johnson) a sociologist (David Sills) but also the relative growth during the past generation of anthropology, sociology, statistics, and (especially) psychology. Thus international economists can take some satisfaction that the relative importance of their field within the discipline of economics seems have risen sharply; or else international economists are more prolix than their closed economy counterparts. Thirteen of the sixteen articles on international economics are grouped under three broad headings: international monetary economics is covered by R. A. Mundell