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Has the Fed Been a Failure?

83 Pages Posted: 25 Nov 2010 Last revised: 8 Mar 2013

George Selgin

University of Georgia

William D. Lastrapes

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Lawrence H. White

George Mason University - Department of Economics

Date Written: December 1, 2010

Abstract

As the one-hundredth anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation’s experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed’s full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment. (2) While the Fed’s performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.

JEL Classification: E30, E42, E52, E58

Suggested Citation

Selgin, George and Lastrapes, William D. and White, Lawrence H., Has the Fed Been a Failure? (December 1, 2010). Journal of Macroeconomics, Vol. 34, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=1713755 or http://dx.doi.org/10.2139/ssrn.1713755

George Selgin (Contact Author)

University of Georgia ( email )

Athens, GA 30602
United States
706-542-2734 (Phone)

William D. Lastrapes

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Terry College of Business
Athens, GA 30602-6254
United States
706-542-3569 (Phone)
706-542-3376 (Fax)

Lawrence H. White

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

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