Throughout his time in the Upper School, Tommy Heaton ’23 developed an interest in credit cycles, the recurring economic phases of borrowing and lending. After parsing decades of minutes from the Federal Reserve’s meetings and finding patterns in recessions, he distilled his findings into a research paper that is garnering attention.
The paper "Does the U.S. Federal Reserve Consider the Credit Cycle Theory When Trying to Predict Recessions?” explores evidence that build-ups of credit can cause recessions.
In early November, his work was accepted, without revisions, for publication by the Journal for Student Research, a faculty-reviewed journal that publishes research by high school, undergraduate, and graduate students. The paper will be published in an upcoming issue.
Though the journal’s website promises aspiring authors scholarly feedback to help prepare work for publication, Tommy’s article was accepted in the first round without revisions. This is the first time he has been published.
“Assuming this theory is accurate, recessions could be eased by tempering the upswing of credit cycles,” he writes, “and they can be predicted by analyzing build-ups in credit and discovering when it is abnormally high,” he said. Recognizing this would empower the Fed to offset potential downturns.
Tommy set out to find if the Fed indeed considered the patterns in credit cycles by studying the minutes from meetings that preceded four recessions in 1990, 2001, 2007, and 2020.
He found that the Fed did not give attention to the credit cycles until after the 2007 crash, and in 2020 when the pandemic caused disruption in the economy, the Fed took pause.
“I think the Federal Reserve did not consider the credit cycle theory because they did not believe it was their responsibility,” Tommy said when discussing his paper. “However, after the Great Recession, this really did change.”
The journey behind his published work began with questions about great recessions. Tommy dove into books and articles about the subject. His interest led to more research and a mentorship with a Ph.D. student at the University of Cambridge.
As his interest in economics grew, so did his skills in research and writing. During his sophomore summer, he worked with history teacher Lindsey Rossler honing research-paper-writing skills as he studied history and social studies.
“She helped to teach me how to write an academic research paper, and I used a lot of what I learned through that process to write my second paper, which was accepted for publication,” Tommy said.
A course in A.P. economics with Frank Roche further solidified his interest in the subject and propelled him into a summer of research and writing about the Federal Reserve. Roche recognized Tommy’s passion for economics and finance from the start.
“He was very inquisitive then. In our morning meetings, which involved tracking real-time economic data and monitoring the Fed's activities, it was clear Tommy enjoyed connecting theory from our textbook to real-world economic developments,” Roche said.