What Is the Shadow Open Market Committee (SOMC)?
The Shadow Open Market Committee (SOMC) is an independent organization, created by two university professors, Karl Brunner of the University of Rochester and Allan Meltzer of Carnegie-Mellon University, in 1973.
As its name implies, its original purpose was to evaluate the policy and actions of the Federal Reserve Bank's Federal Open Market Committee (FOMC), the body in the Fed responsible for deciding on monetary policy action. Over the years, the SOMC has broadened its scope to evaluate a wide range of economic policy issues. The SOMC is sometimes also referred to as the Shadow Fed.
- The Shadow Open Market Committee (SOMC) is an independent organization formed to evaluate the policy choices and actions of the Federal Reserve’s Open Market Committee.
- The SOMC's membership is drawn from academic institutions and private organizations including scholars and former policymakers.
- Since it was founded in 1973, the SOMC has broadened its scope to cover a wide range of issues, including monetary, fiscal, and international trade policies as well as regulatory oversight of the financial system.
- The Committee’s deliberations are intended to improve policy discussions among policymakers, the media, and the general public with the hope that wiser policy decisions will result.
Understanding the Shadow Open Market Committee (SOMC)
The Shadow Open Market Committee (SOMC) is comprised of members drawn from both academic institutions and private organizations. It currently has nine members (eight of whom are currently academics, some of whom also have past practical experience working in the Federal Reserve or other central banks).
The issues the Committee analyzes cover a wide range of macroeconomic and public policy-related issues, from monetary and fiscal policy to international trade and tax policy. That said, many of the position papers published by the Committee still tend to focus on monetary policy or other central bank policy considerations. The SOMC intends that its analyses and publications about policy will help inform the wider policy debate (including among journalists and the public) and thereby help improve policy.
The SOMC has formally entered into a partnership with E21, another independent economic policy research organization.
The Shadow Open Market Committee's Approach
It has a formal approach to its work: it meets regularly (on a semi-annual basis), and each meeting discusses papers that have been prepared on various policy issues by members. Following discussion of the contents of these, the SOMC releases a Policy Statement that summarizes the most important policy recommendations of the Committee.
The SOMC puts out position papers that the public can read. Based on these papers and the Committee’s deliberations, a policy statement is prepared that summarizes the most important policy recommendations of the Committee. At the March 2021 meeting, for instance, topics of discussion focused on the impact of monetary policy on the labor market, which featured distinguished speakers from top academic institutions to a former Philly Fed president.