IDEAS home Printed from https://ideas.repec.org/p/fip/fedcwq/93876.html
   My bibliography  Save this paper

Federal Reserve Structure and Economic Ideas

Author

Listed:
  • Michael D. Bordo
  • Edward Simpson Prescott

Abstract

This essay was written in memory of Marvin Goodfriend for a Federal Reserve Bank of Richmond book called Essays in Honor of Marvin Goodfriend: Economist and Central Banker. We discuss his Carnegie-Rochester conference paper titled "The Role of a Regional Bank in a System of Central Banks." In that paper, Marvin argued that the Federal Reserve's decentralized structure allowed for competing ideas about monetary and banking policy to develop with the central bank. In our essay, we describe how Marvin demonstrated this argument during his long career at the Federal Reserve Bank of Richmond. We also describe the institutional developments that led to this competition, including reforms that Chairman William McChesney Martin made to the operation of the Federal Open Market Committee in the 1950s and the introduction of monetary policy ideas such as monetarism and rational expectations by the Reserve Banks.

Suggested Citation

  • Michael D. Bordo & Edward Simpson Prescott, 2022. "Federal Reserve Structure and Economic Ideas," Working Papers 22-08, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:93876
    DOI: 10.26509/frbc-wp-202208
    as

    Download full text from publisher

    File URL: https://doi.org/10.26509/frbc-wp-202208
    File Function: Full Text
    Download Restriction: no
    File URL: https://libkey.io/10.26509/frbc-wp-202208?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-162, May.
    2. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
    3. Robert L. Hetzel & Ralph F. Leach, 2001. "After the accord : reminiscences on the birth of the modern Fed," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 57-64.
    4. Michael D. Bordo & Edward Simpson Prescott, 2019. "Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy," Working Papers 19-13, Federal Reserve Bank of Cleveland.
    5. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
    6. Marvin Goodfriend, 1999. "The role of a regional bank in a system of central banks. 1999 annual report of the Federal Reserve Bank of Richmond," Annual Report, Federal Reserve Bank of Richmond.
    7. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael D. Bordo & Edward S. Prescott, 2023. "Federal Reserve Structure and the Production of Monetary Policy Ideas," NBER Working Papers 31915, National Bureau of Economic Research, Inc.
    2. Josh Ryan-Collins, 2015. "Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935-75," Economics Working Paper Archive wp_848, Levy Economics Institute.
    3. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    4. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    5. Michael D. Bordo & Edward S. Prescott, 2019. "Federal Reserve Structure, Economic Ideas, and Monetary and Financial Policy," NBER Working Papers 26098, National Bureau of Economic Research, Inc.
    6. Elmar Mertens, 2016. "Managing Beliefs about Monetary Policy under Discretion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 661-698, June.
    7. James Forder, 2022. "The fallacies of central bank independence," Economic Affairs, Wiley Blackwell, vol. 42(3), pages 549-558, October.
    8. P Arestis & A Mihailov, 2009. "Flexible Rules cum Constrained Discretion: A New Consensus in Monetary Policy," Economic Issues Journal Articles, Economic Issues, vol. 14(2), pages 27-54, September.
    9. Peter Howells & Iris Biefang-Frisancho Mariscal, 2003. "Central Bank Transparency: A Market Indicator," Working Papers 0305, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    10. Frederic S. Mishkin, 2006. "Monetary Policy Strategy: How Did We Get Here?," NBER Working Papers 12515, National Bureau of Economic Research, Inc.
    11. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 47-68, Fall.
    12. Marc Bassoni & André Cartapanis, 1995. "Autonomie des banques centrales et performances macro-économiques : Un réexamen," Revue Économique, Programme National Persée, vol. 46(2), pages 415-432.
    13. Price, Simon, 1997. "Political Business Cycles and Macroeconomic Credibility: A Survey," Public Choice, Springer, vol. 92(3-4), pages 407-427, September.
    14. Kwabi, Frank O. & Boateng, Agyenim & Du, Min, 2020. "Impact of central bank independence and transparency on international equity portfolio allocation: A cross-country analysis," International Review of Financial Analysis, Elsevier, vol. 69(C).
    15. Robert L. Hetzel, 2008. "What is the monetary standard, or, how did the Volcker-Greenspan FOMCs tame inflation?," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 94(Spr), pages 147-171.
    16. Dumitriu, Ramona & Stefanescu, Răzvan, 2013. "Decizii strategice ale politicii monetare [Strategic decisions of the Monetary Policy]," MPRA Paper 51242, University Library of Munich, Germany, revised 05 Nov 2013.
    17. Joe Peek & Eric Rosengren & Geoffrey M. B. Tootell, 1997. "Is banking supervision central to central banking?," Working Papers 97-3, Federal Reserve Bank of Boston.
    18. Ronny Mazzocchi, 2013. "Intertemporal Coordination Failure and Monetary Policy," DEM Discussion Papers 2013/15, Department of Economics and Management.
    19. Kui-Wai Li, 2013. "The US monetary performance prior to the 2008 crisis," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3450-3461, August.
    20. Hwang, Chiun-Lin, 1989. "Optimal monetary policy in an open macroeconomic model with rational expectation," ISU General Staff Papers 1989010108000010197, Iowa State University, Department of Economics.

    More about this item

    Keywords

    Federal Reserve structure; monetary policy; governance; Marvin Goodfriend;
    All these keywords.

    JEL classification:

    • B0 - Schools of Economic Thought and Methodology - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H1 - Public Economics - - Structure and Scope of Government

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedcwq:93876. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: 4D Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbclus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.