On Wednesday, Adam Belz of the Star Tribune wrote a piece describing what was up on Hennepin Avenue. The Minneapolis Fed had cut its ties with two economists associated with the Department of Economics at the University of Minnesota, Patrick Kehoe and Ellen McGrattan.
Why all of this attention for the research department of one Federal Reserve bank? Because the collaboration between the Minneapolis Fed and the U of M Economics Department has been fruitful for both parties and a model for other universities and Federal Reserve banks.
The Minneapolis Fed and the Economics Department began working together in the 1970s. In particular, economists such as Edward Prescott, Thomas Sargent and Christopher Sims did work that fundamentally affected macroeconomics and earned them Nobel prizes in 2004 and 2011. President Gary Stern and Director of Research Art Rolnick nurtured the relationship from the 1980s through 2009, when both men retired.