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Has the Fed been a failure?

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  • Selgin, George
  • Lastrapes, William D.
  • White, Lawrence H.

Abstract

As the 100th anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation’s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment. (2) While the Fed’s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 3 ()
Pages: 569-596

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:3:p:569-596

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Federal reserve system; National banking system; Inflation; Business cycles; Banking panics; Lender of last resort; Monetary reform; Fiat money; Gold standard; Great moderation;

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Cited by:
  1. Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
  2. Hetzel, Robert L., 2012. "Central bank accountability and independence: Are they inconsistent?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 616-625.
  3. Schnabl, Gunther, 2013. "The global move into the zero interest rate and high debt trap," Working Papers 121, University of Leipzig, Faculty of Economics and Management Science.
  4. Bordo, Michael D., 2012. "Could the United States have had a better central bank? An historical counterfactual speculation," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 597-607.
  5. Boettke, Peter & Smith, Daniel, 2011. "Robust political economy and the Federal Reserve," MPRA Paper 32092, University Library of Munich, Germany.

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