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Shifting Mandates: The Federal Reserve's First Centennial

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  • Carmen M. Reinhart
  • Kenneth S. Rogoff

Abstract

The mandate of the Federal Reserve has evolved considerably over its hundred-year history. From an initial focus in 1913 on financial stability, to fiscal financing in World War II and its aftermath, to a strong anti-inflation focus from the late 1970s, and then back to greater emphasis on financial stability since the Great Contraction. Yet, as the Fed's mandate has expanded in recent years, its range of instruments has narrowed, partly based on a misguided belief in the inherent stability of financial markets. We briefly discuss the active use in an earlier era of multiple instruments, including reserve requirements, credit controls and interest rate ceilings.

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  • Carmen M. Reinhart & Kenneth S. Rogoff, 2013. "Shifting Mandates: The Federal Reserve's First Centennial," NBER Working Papers 18888, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18888
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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    2. Enrique G. Mendoza & Marco E. Terrones, 2014. "An Anatomy of Credit Booms and their Demise," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 6, pages 165-204, Central Bank of Chile.
    3. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    4. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 121-184, National Bureau of Economic Research, Inc.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    6. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
    7. Moritz Schularick & Alan M. Taylor, 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008," American Economic Review, American Economic Association, vol. 102(2), pages 1029-1061, April.
    8. repec:ucp:bkecon:9780226519999 is not listed on IDEAS
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    Cited by:

    1. Michael D. Bordo & Pierre L. Siklos, 2015. "Central Bank Credibility: An Historical and Quantitative Exploration," NBER Working Papers 20824, National Bureau of Economic Research, Inc.
    2. Douglas J. Elliott & Greg Feldberg & Andreas Lehnert, 2013. "The history of cyclical macroprudential policy in the United States," Finance and Economics Discussion Series 2013-29, Board of Governors of the Federal Reserve System (U.S.).
    3. Klingelhöfer, Jan & Sun, Rongrong, 2019. "Macroprudential policy, central banks and financial stability: Evidence from China," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 19-41.
    4. Niall Ferguson & Andreas Schaab & Moritz Schularick, 2015. "Central Bank Balance Sheets: Expansion and Reduction since 1900," CESifo Working Paper Series 5379, CESifo.
    5. Ryota Nakatani, 2016. "Twin Banking and Currency Crises and Monetary Policy," Open Economies Review, Springer, vol. 27(4), pages 747-767, September.
    6. Barry Eichengreen, 2013. "Does the Federal Reserve Care about the Rest of the World?," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 87-104, Fall.
    7. Kelber, A. & Monnet, E., 2014. "Macroprudential policy and quantitative instruments: a European historical perspective," Financial Stability Review, Banque de France, issue 18, pages 151-160, April.
    8. John Taylor, 2013. "International Monetary Policy Coordination: Past, Present and Future," Discussion Papers 12-034, Stanford Institute for Economic Policy Research.
    9. van Eeghen, Piet-Hein, 2021. "Funding money-creating banks: Cash funding, balance sheet funding and the moral hazard of currency elasticity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    10. Goodhart, Lucy, 2015. "Brave new world? Macro prudential policy and the new political economy of The Federal Reserve," LSE Research Online Documents on Economics 60952, London School of Economics and Political Science, LSE Library.
    11. Glocker, Christian & Towbin, Pascal, 2015. "Reserve requirements as a macroprudential instrument – Empirical evidence from Brazil," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 158-176.
    12. Jose Luis Nicolini Llosa, 2015. "Renta financiera y solvencia mundial," Ensayos de Economía 14143, Universidad Nacional de Colombia Sede Medellín.
    13. Douglas J. Elliott & Greg Feldberg & Andreas Lehnert, 2013. "The History of Cyclical Macroprudential Policy in the United States," Working Papers 13-08, Office of Financial Research, US Department of the Treasury.
    14. Gordon L. Clark, 2015. "The geography of the European Central Bank: form, functions and legitimacy," Journal of Economic Geography, Oxford University Press, vol. 15(5), pages 855-881.
    15. Martin Komrska, 2015. "Rakouská teorie hospodářského cyklu: VAR analýza pro USA v letech 1978-2013 [The Austrian Business Cycle Theory: VAR Analysis for USA between 1978-2013]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(1), pages 57-73.
    16. Rocheteau, Guillaume & Rodriguez-Lopez, Antonio, 2014. "Liquidity provision, interest rates, and unemployment," Journal of Monetary Economics, Elsevier, vol. 65(C), pages 80-101.
    17. Christopher Weber, 2017. "The Collateral Policy of Central Banks - An Analysis Focusing on the Eurosystem," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 72.
    18. Clément Fontan Fontan & Emmanuel Carré & Guillaume L'Oeillet, 2018. "Theoretical perspectives on the new era of central banking," Post-Print halshs-01866838, HAL.
    19. Muneesh Kapur & Rakesh Mohan, 2014. "India’s Recent Macroeconomic Performance: An Assessment and Way Forward," IMF Working Papers 2014/068, International Monetary Fund.
    20. Donato Masciandaro, 2018. "Central Banking and Macroeconomic Ideas: Economics, Politics and History," BAFFI CAREFIN Working Papers 1858, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N2 - Economic History - - Financial Markets and Institutions

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