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National monetary policy by regional design: the evolving role of the Federal Reserve banks in Federal Reserve System policy

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  • David C. Wheelock

Abstract

This paper examines the history of Federal Reserve Bank input into Federal Reserve System monetary policymaking. From the Fed's founding in 1914 through the Great Depression, the Reserve Banks held the balance of power. Dissatisfaction with the Fed's performance, however, led to a wholesale reorganization in 1935 that greatly enhanced the authority of the Federal Reserve Board, but retained a role for the Federal Banks through the membership of their presidents on the FOMC, as well as in setting the discount rate. I argue that the Fed's decentralized structure was not the principal cause of Fed errors during the Great Depression. In addition, by retaining a role for the Federal Reserve Banks, the Fed's present structure provides the System with a measure of political independence and encourages a competition of ideas within the System that enhances the quality of policymaking.

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File URL: http://research.stlouisfed.org/wp/1998/1998-010.pdf
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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 1998-010.

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Date of creation: 1999
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Publication status: Published in Regional aspects of monetary policy in Europe. J. von Hagen and> C. Waller, editors. Kluwer Academic Publishers, 1999
Handle: RePEc:fip:fedlwp:1998-010

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Related research

Keywords: Federal Reserve System - History ; Monetary policy - United States ; Federal Open Market Committee;

References

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  1. J. Bradford DeLong & Lawrence H. Summers, 1992. "Macroeconomic policy and long-run growth," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-29.
  2. Gorton, Gary, 1985. "Clearinghouses and the Origin of Central Banking in the United States," The Journal of Economic History, Cambridge University Press, vol. 45(02), pages 277-283, June.
  3. repec:fip:fedlpr:y:1994:i:mar:p:1-31 is not listed on IDEAS
  4. Leonall C. Andersen & Keith M. Carlson, 1970. "A monetarist model for economic stabilization," Review, Federal Reserve Bank of St. Louis, issue Apr, pages 7-25.
  5. Richard G. Anderson & Kenneth A. Kavajecz, 1994. "A historical perspective on the Federal Reserve's monetary aggregates: definition, construction and targeting," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 1-31.
  6. Dewald, William G, 1972. "The National Monetary Commission: A Look Back," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 4(4), pages 930-56, November.
  7. Leonall C. Andersen & Jerry L. Jordon, 1968. "Monetary and fiscal actions: a test of their relative importance in economic stabilization," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 11-23.
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Cited by:
  1. Andrew Hughes Hallett & Laura Piscitelli, 2002. "Does One Size Fit All? A currency union with asymmetric transmissions and a stability pact," International Review of Applied Economics, Taylor and Francis Journals, vol. 16(1), pages 71-96.

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  1. Federal Reserve System in Wikipedia (German)

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