IDEAS home Printed from https://ideas.repec.org/p/fth/michet/89-08.html
   My bibliography  Save this paper

The Founding Of The Fed And The Destabilization Of The Post-1914 Economy

Author

Listed:
  • MIRON, J.A.

Abstract

A standard assumption in the literature on optimal monetary policy is that the proper goal of policy is the reduction of the variation in output around its natural rate level. The stabilization of output has not always been accepted as the primary goal of policy, however. This paper argues that neither the founders of the Federal Reserve System nor the central bankers in charge during the first twenty-five years of the Fed's existence viewed the elimination of short term movements in output as an important objective for policy. Instead, the framers of the Federal Reserve System and the early practitioners of central banking in the United States apparently thought that "stabilization" of asset markets was the crucial task for the monetary authority. The paper compares the performance of the United States economy during the twenty-five year periods before and after 1914 and shows that after the founding of the Fed the variance of both the rate of growth of output and of the inflation rate increased significantly, while the average rate of growth of output fell, and real stock prices became substantially more volatile. The remainder of the paper then suggests that the deterioration in the performance of the economy after 1914 can be attributed directly to the actions of the Fed.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Miron, J.A., 1988. "The Founding Of The Fed And The Destabilization Of The Post-1914 Economy," Papers 89-08, Michigan - Center for Research on Economic & Social Theory.
  • Handle: RePEc:fth:michet:89-08
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Christina D, 1986. "Is the Stabilization of the Postwar Economy a Figment of the Data?," American Economic Review, American Economic Association, vol. 76(3), pages 314-334, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael D. Bordo & Christopher M. Meissner, 2015. "Growing Up to Stability? Financial Globalization, Financial Development and Financial Crises," NBER Working Papers 21287, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    monetary policy ; banks;

    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:fth:michet:89-08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.