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Yalies Yellen-Hamada Put Tobin Twist Theory to Work in QE

When James Tobin joined President John F. Kennedy’s administration in 1961, the U.S. economy was struggling to recover from its third recession in seven years. As a member of Kennedy’s Council of Economic Advisers, the Yale University professor put his theoretical research on asset markets to work in fashioning a novel strategy -- nicknamed Operation Twist -- to reduce long-term interest rates.

Now, more than half a century later, two of Tobin’s Ph.D. students -- Janet Yellen, nominated to be the next chairman of the Federal Reserve, and Koichi Hamada, a special adviser to Japanese Prime Minister Shinzo Abe -- are applying some of those same concepts in their efforts to boost their respective countries’ economies.