Federal Reserve Independence: A Centennial Review

The Journal of Prices & Markets 1(1): 2013: 31-48

GMU Working Paper in Economics

18 Pages Posted: 25 Aug 2012 Last revised: 25 Jan 2017

Peter J. Boettke

George Mason University - Department of Economics

Daniel J. Smith

Troy University

Date Written: August 23, 2012

Abstract

Implicit in monetary models and policy prescriptions is the assumption that the Fed is independent of political and bureaucratic influence. We challenge this assumption. We consider three channels through which the independence of the Fed has been compromised over its 100-year history; debt accommodation, political influence, and the bureaucratic structure of the Fed. Future research needs to address how these separate influences have become operational, the mechanism of their operation, and their interaction. We argue that contextualized anecdotal histories are necessary to corroborate the existing empirical studies and to inform future studies.

Keywords: Federal Reserve, central bank independence, monetary policy, robust political economy

JEL Classification: E58, E61, P16, P26

Suggested Citation

Boettke, Peter J. and Smith, Daniel J., Federal Reserve Independence: A Centennial Review (August 23, 2012). The Journal of Prices & Markets 1(1): 2013: 31-48; GMU Working Paper in Economics. Available at SSRN: https://ssrn.com/abstract=2135232 or http://dx.doi.org/10.2139/ssrn.2135232

Peter J. Boettke

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-1149 (Phone)
703-993-1133 (Fax)

Daniel J. Smith (Contact Author)

Troy University ( email )

Bibb Graves Hall 137F
Troy, AL 36082
United States
334-808-6485 (Phone)

HOME PAGE: http://www.danieljosephsmith.com/

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