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Menová politika Federálneho rezervného systému v rokoch 1929-1933
[The Federal Reserve Monetary Policy 1929-1933]

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  • Miroslav Titze

Abstract

The paper discusses Federal reserve's monetary policy during banking crisis interim 1929 - 1933. Main goal of the paper is to discuss the monetary policy implementation problems during 1930s based on Real-bills and Riefler-Burgess doctrine. First part of the paper reveals possible conflict between FED's monetary tools and targets arising from gold exchange standard. Expansionary monetary policy during banking crisis was potentially strongly limited by conflict among U.S. financial stability and sustainability of the gold standard. The second part describes monetary policy implementation during 1920s. The third part discusses FED's open market operations during the banking crisis and the fourth part explains the behavior of the interest rates. Finally, the work concludes that FED managed liquidity of U.S. banking system inappropriately and caused many bank deposit suspensions. FED considered monetary condition to be easy and sufficient to cover needs of production. Money interest rates responded very moderately to shortage of banking system's liquidity. We can find the origin of quantitative easing in 1932 when FED first bought large quantities of government securities. This policy was insufficient because of short term duration and the gold outflow neutralizations.

Suggested Citation

  • Miroslav Titze, 2014. "Menová politika Federálneho rezervného systému v rokoch 1929-1933 [The Federal Reserve Monetary Policy 1929-1933]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(5), pages 701-719.
  • Handle: RePEc:prg:jnlpol:v:2014:y:2014:i:5:id:977:p:701-719
    DOI: 10.18267/j.polek.977
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    References listed on IDEAS

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    1. Price Fishback, 2010. "US monetary and fiscal policy in the 1930s," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 385-413, Autumn.
    2. Elmus R. Wicker, 1965. "Federal Reserve Monetary Policy, 1922-33: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 73, pages 325-325.
    3. Miron, Jeffrey A, 1986. "Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed," American Economic Review, American Economic Association, vol. 76(1), pages 125-140, March.
    4. Wheelock, David C, 1990. "Member Bank Borrowing and the Fed's Contractionary Monetary Policy during the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(4), pages 409-426, November.
    5. Friedman, Benjamin M. & Kuttner, Kenneth N., 2010. "Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 24, pages 1345-1438, Elsevier.
    6. Karl Brunner & Allan H. Meltzer, 1968. "What Did We Learn from the Monetary Experience of the United States in the Great Depression?," Canadian Journal of Economics, Canadian Economics Association, vol. 1(2), pages 334-348, May.
    7. Hsieh, Chang-Tai & Romer, Christina D., 2006. "Was the Federal Reserve Constrained by the Gold Standard During the Great Depression? Evidence from the 1932 Open Market Purchase Program," The Journal of Economic History, Cambridge University Press, vol. 66(1), pages 140-176, March.
    8. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, March.
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    More about this item

    Keywords

    interest rates; open market operations; monetary policy implementation; FED; banking crisis;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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