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The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act

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Listed:
  • Small David H.

    (Board of Governors of the Federal Reserve System)

  • Clouse James

    (Board of Governors of the Federal Reserve System)

Abstract

The Federal Reserve Act authorizes the Federal Reserve to undertake various types of discount window loans and open market operations. While the Federal Reserve generally has not found it necessary to use all types of such authority, there could be circumstances in which the Federal Reserve might need to consider utilizing its statutory authority more broadly than it has in the past.We examine the limits imposed by the Federal Reserve Act along two dimensions: those types of counterparties and financial instruments with which the Federal Reserve may conduct monetary policy. In doing so, we develop a theme not commonly pursued in the literature -- the ways and extent to which the Federal Reserve Act limits the Federal Reserve from taking credit risk onto its balance sheet.We also provide some historical perspective on how the current powers of the Federal Reserve came to be authorized.

Suggested Citation

  • Small David H. & Clouse James, 2005. "The Scope of Monetary Policy Actions Authorized Under the Federal Reserve Act," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-43, April.
    • Handle: RePEc:bpj:bejmac:v:topics.5:y:2005:i:1:n:6
    DOI: 10.2202/1534-5998.1255
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    References listed on IDEAS

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    Cited by:

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    2. Daniel L. Thornton, 2009. "The Fed, liquidity, and credit allocation," Review, Federal Reserve Bank of St. Louis, vol. 91(Jan), pages 13-22.
    3. John V. Duca, 2013. "The Money Market Meltdown of the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2-3), pages 493-504, March.
    4. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
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    6. Mark A. Carlson & Burcu Duygan-Bump, 2018. "“Unconventional” Monetary Policy as Conventional Monetary Policy : A Perspective from the U.S. in the 1920s," Finance and Economics Discussion Series 2018-019, Board of Governors of the Federal Reserve System (U.S.).

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