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Interest Rate Controls: The United States in the 1940s

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  • Toma, Mark

Abstract

In 1942 the U.S. Treasury and the Federal Reserve agreed to keep the interest rate on long-term government bonds below a ceiling of 2.5 percent. Assuming rational expectations, the ceiling on long-term interest rates can be viewed as a government commitment to low long-run inflation. The Fed also agreed to buy and sell short-term government bonds at a below-market rate of 3/8 percent. This policy did not result in long-run inflation because it was narrowly confined to 3-month Treasury bills.

Suggested Citation

  • Toma, Mark, 1992. "Interest Rate Controls: The United States in the 1940s," The Journal of Economic History, Cambridge University Press, vol. 52(3), pages 631-650, September.
    • Handle: RePEc:cup:jechis:v:52:y:1992:i:03:p:631-650_01
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    Cited by:

    1. Etienne Farvaque & Antoine Parent & Piotr Stanek, 2018. "Debates and dissident inside the FOMC during WW2," Post-Print hal-03567133, HAL.
    2. repec:hal:spmain:info:hdl:2441/2cuu3uj58199fphtovctj05ish is not listed on IDEAS
    3. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
    4. David Lucca & Jonathan H. Wright, 2022. "The Narrow Channel of Quantitative Easing: Evidence from YCC Down Under," NBER Working Papers 29971, National Bureau of Economic Research, Inc.
    5. Kotaro Ishi & Mr. Kenji Fujita & Mr. Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far," IMF Working Papers 2011/145, International Monetary Fund.
    6. Kenneth D. Garbade, 2020. "Managing the Treasury Yield Curve in the 1940s," Staff Reports 913, Federal Reserve Bank of New York.

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