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Federal reserve independence

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  • Meltzer, Allan H.

Abstract

The Federal Reserve is always called an independent agency. The term “independent” is rarely defined. The only attempt in the literature and internal records is based on Chairman Martin’s statement that “the Federal Reserve is independent with the government, not independent of the government.” Martin explained several times that independence within government meant that the Federal Reserve helped to finance government budget because they were approved by Congress and signed by the president. Financing budget deficits is the very opposite of the principle adopted when Congress approved the Federal Reserve Act in 1913. In fact, the Federal Reserve has supported Treasury operations many times. I conclude that it is far more important to have an enforceable policy rule such as the Taylor rule, but any rule must have a provision that permits the rule to be set aside.

Suggested Citation

  • Meltzer, Allan H., 2014. "Federal reserve independence," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 160-163.
    • Handle: RePEc:eee:dyncon:v:49:y:2014:i:c:p:160-163
    DOI: 10.1016/j.jedc.2014.09.006
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    References listed on IDEAS

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    1. Marvin Goodfriend, 2012. "The Elusive Promise of Independent Central Banking," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 30, pages 39-54, November.
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    Cited by:

    1. Mabbett, Deborah & Schelkle, Waltraud, 2019. "Independent or lonely? Central banking in crisis," LSE Research Online Documents on Economics 90879, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    E5; E6; Independence; Lender-of-last-resort; Monetary rule;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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